The Shakedown


Cash is King


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The market sharply plunged lower this week and you may have heard me screaming from the mountaintops that cash has been the best position in the past few newsletters, so I am just patiently watching this terrible action from the sidelines.

The reality of this trading environment is harsh moves both higher and lower. If you're a more active trader, cut down your size and be a bit quicker to take profit. Maybe take a bit more off at 2:1 risk/reward kicks than you would in a trending environment. Trading this market, you want to look for singles and doubles, because looking for home-runs you're going to give any profit you had back, trading from both the long and short side.

For me personally, I made some pretty easy money this year in the trending environment so I don't have a huge appetite for risk when the probability leaves my side. This month will unquestionably be the least amount of shares I've traded this year by a landslide. The reality in being a professional trader is that there are times you absolutely kill it and then there are times you step to the side and wait for conditions to align in your favor. So this is currently a waiting time for me.

From a long term perspective, the downward action is amazing for the opportunity it will provide down the road. The best winners come when the market turns.

Don't kill your mental capital day trading and losing on weak setups. 

1 Week Heat Map showcasing the weakness across the board

With the hardcore selling in the market, these become research times for me where I try to figure out where I want to put my money once the selling subsides (this is not the first time the world was ending).

While I don't necessarily think we'll see a huge reversal this week, I always try to find the best and strongest names so when the market turns I can really take advantage. I would rather stalk 15-20 names over a month period and crush them when they are ready than just toss my money around in 'less-than-satisfactory' setups that come along with trading as much as possible every single day. 

I've begun to map out some of my favorite earnings names as my earnings watchlist heavily grew this week (even with the crazy selling).  

Click for Q4 Earnings Watchlist


Strong earnings report out of TSCO equipped with a beautiful bull flag shaking off all market weakness. Take a look at the weekly chart on TSCO and see the big macro level it's working on. If market doesn't get too dramatic this week, this one should be good through $92. That hasn't been something to count on lately though, so we'll have to keep tight low-of-day stop in this one when it does trigger.

Trigger: $92

Stop: Low of Day

Target: $96-100+

Hope to see you in the chat Monday!


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