Fairly Common Pattern

of trading on a day like today looks like the crude drawing below. The market gaps higher, experiences a little shakeout, continues to rally and then churns midday. The midday churn sucks in a lot of short sellers, particularly on a 1-1:30 pullback below the daily VWAP. If the market rallies back above VWAP there is often a strong continuation into the close as short sellers scramble to repurchase shares they sold lower.

This is not meant to be a blueprint of how to trade today, it is just one scenario which I have noticed on these type of days. LISTEN TO THE MARKET and manage risk, the primary trends are still lower.


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.


Tickers:

Comments are closed.

In partnership with CNN Money Part of the CNN Network