Trading Plan for Feb 25, 2011
Current Long Positions (stop-losses in parentheses): BGCP (8.69), NFLX (205.35), SRZ (8.73), TSL (28.55)
Current Short Positions (stop-losses in parentheses): None
BIAS: 25% Long
Economic Reports Due Out (Times are EST): GDP (8:30am), Consumer Sentiment (9:55am)
My Observations and What to Expect:
Futures are up very strong ahead of the market open.
Asian markets were up as much as 1.8% and European markets saw gains ranging from 0.2% to 1.5%.
While the markets tried to push lower yesterday, there was an afternoon recovery, that greatly improved the situation, forming a doji hammer on the daily S&P chart.
Strong possibility that today trends higher, recovering a good chunk of this week's losses.
It will be important for any rally today to see a significant amount of volume in comparison to the previous three days to determine whether the rally will carry into next week, or if it is just a dead cat bounce.
The long-term trend-line dating back to 9/1 on the S&P, the underside of which, will be a potential resistance barrier at around 1316, as will the 20-day moving average at the same price level. Clear that level, and the 10-day moving average is in play.
The market is short-term oversold - fitting nicely with this mornings early strength.
1300 on the S&P appears to be a strong support level for the bulls, bouncing off of it the last two days.
A new "lower-low" would come from a break of the 1/28 lows at 1275. If we break that level, we are in a confirmed downtrend.
For the bears - A bounce is inevitable - but to show the strength of this recent decline, bears need to keep the rally from wiping away Wednesday's losses.
For the bulls - Close above Wednesday's highs, and start working on the Tuesday losses. Reclaim the 20-day moving average.
My conclusion: As I stated yesterday, a bounce was inevitable. Too many people want to jump in on this dip. The key will be the strength of the bounce, and the volume that occurs. Fail in these two areas, and this rally should be shorted.
Here Are The Actions I Will Be Taking: