A textbook bounce | stockbee


A textbook bounce

When panic takes over market and people start to lose their nerves, invariably the situation resolves to the upside in the short run. That is the nature of market and that is why most traders find it extremely difficult to trade such market. Bounce happen when everyone is shit scared to buy even a dollar worth of equity. Bargain hunters and veteran traders thrive on such situation.

Going by the emails and comments, one can make out how the emotions played during the day.I was fast asplep during the entire drama and was reading the report early morning. I suspect the intra day 65 day ratio reached extreme levels of 1600/200 yesterday by mid day. Many people were convinced there will be no bounce.

Those who kept their nerves caught the turn. This kind of game is for extremely nimble players. If you are asking what to buy now, you should just stand aside and watch the fun. You should have kept the buy list ready in anticipation much in advance. Such bounce in first phase invariably have the most oversold falling knives bouncing back.Heavily shorted stuff with extremely negative sentiment will bounce back 10% plus in a matter of hours in such bounce.

Such bounce have certain common characters: panic, series of bad news, bears dancing on the street, perma bears on first page of popular sites claiming what you have seen is just trailer and there is more downside ahead, break of some technical level like 200 day MA, high volume selling, and capitulation by many players. Traps in market are always at levels where majority will get trapped.

Expecting the bounce to play itself out for couple of days.


James said...

It sure should be a bounce for a couple of days as you say. Personally I think that this correction is unlike the one in February. The news are much worse today. As for the bounce, I would have expected the Asian markets to bounce too this morning after yesterday's huge loses. However to my surprise they are down even more than yesterday! Market in Europe and Asia are lost more ground that the US markets for now. The US market are resisting well.

Lee said...

The market in Asia took a huge dive just now.

Do not expect any bounces in the US market today.

asbestos_handkerchief said...

Regardless of how Asia fared, the US will bounce, maybe after a morning swandive to scare off the weak hands.

Lee said...

fed discount cut so we have our bounce

65Trader said...

'F' - when are you going to start a blog? You have alot of good calls.

If not, where else do you comment besides this blog?

Mkt swimmer said...

Market will go higher in the short term. Play attention to my new post, I will pick 1-2 whenever I have time to update my posting.


F. said...


I may put something together this fall. Hopefully, I would get Pradeep's support, but I bust his balls a lot.

I am liking the prospects of daytrading/swing trading stocks (as opposed to index futures right now) if the VIX stays relatively high in the years to come.

Mkt swimmer said...

My post "The Poker Game" is out, please check it out at


Mkt Swimmer

wimpyVO2max said...

With this market volatility it's a great time to trade the leveraged ETF's like QLD, QID, DXD, DDM -- double the QQQ's or double the Dow30.

I'm guessing the bounce will be stronger and last longer than many expect. That's what the market does, catches the crowd leaning the wrong way. I wouldn't be surprised if the bounce lasts several weeks and takes the Dow back to 14,000 and form a double top.