chic,
While it is true that a draining market will take all the little boats down with it, your point that the TA is not as valid in wider timeframe does not hold up to even mild scrutiny. If you were to check the CFZ you would find many posts concerning issues that have held or bounced based on support.
The principal rule to apply here is to go with the prevailing market. So, if the market is heading down, then avoid something that will be fighting a support battle. You mention SUNW and say it did not bounce -- it's a good example. When it came down to its 1994 TL on March 12 it went sideway/up ($16.50-19.62, a range of 19%!) for 10 days before it began to breakdown again. When the breakdown began there was ample notice in CFZ posts. (Ditto SEBL, GE, BRCD, QCOM, BRCM ...)
JNPR did the same thing when it got to support at $49 and, btw, will probably do the same again here at $29.
The motivation here is not to predict the future, but rather, it is to find good risk:reward setups. A good setup is where an issue is at support and you want to buy it, or it's at resistance and you want to fade it. JNPR is at support here so it would be a good spot to take a shot at it, the rule above notwithstanding. If JNPR continues to go down then you can know very quickly that you were wrong and get out of the trade. The volatility in stocks makes this a little harder to do because you have to use wider stops and plan for overshoots, but it's a whole helluva lot better than trying to buy or sell crap that's in mid-air.
Does this address your post adequately? Cheers
(edit: They might push BEAS past $25, but it'll make a good short at $29 if they do.) |
