I planned to write more about the broken downtrend channel over the weekend but I just couldn’t find the time. But everything I wanted to say still applies. We’re now in overbought territory after a very V-ish move, but now that the NASDAQ is out of that downtrend channel, I’m no longer looking to short rallies. Now that the intermediate term trend is up again I’m now concerned with finding support at which to buy on a dip. (The intermediate term trend is where I like to operate. For simplicity let’s define that trend by the relationship to the 50-day moving average, although I actually use a different set of moving averages.) If I could make the market do my bidding, I’d have the NASDAQ pull back into Friday’s gap and at least touch its 50-day moving average. Of course that would be too perfect a scenario. Nonetheless, I want to see a bit of consolidation before I get really interested in buying stock here.
Normally, I go long towards the end of this week, the week before options. This week tends to be negative, and next week tends to be positive.
We’re getting a pullback, and looks like I’ll be employing that strategy yet again.
Interesting observation. This strategy may be amplified by the fact that people who want out before a 3-day weekend have or are selling and will have cash ready to put to work on Monday. However, if earnings do not cooperate, a Monday rally could be all we get and on to gap-filling we go….
The market usually presents a pre-options week buying opportunity sometime between wednesday and friday. Volatility is usually highest early in options week, and smoothes out as options week goes on. This strategy is often called the wed-to-wed options week rally.
There is usually a big pullback on one day during options week: tues, wed or thurs. This can provide a daytrade opp during next week.
Doesn’t always go according to plan, tho….
Well, we got *some* buying. The energy may last for one more morning before the options boyz go to work flattening things back out again…