I think this quote is relevant, for the current situation. Since 2009, people have become accustom to BTFD
Now the market is at the very least correcting, and on the cusp of a trend change. Longs are trapped, having bought stocks at higher prices, without a game plan if things don’t play out the way they have over the last 6 years. I will tell you that staring at your PNL (the scoreboard), instead of the price action (the playing field) will have you making horrible emotional decisions.
So you are trapped, and you want to get out, so you want to know what to do. The truth is, I don’t know. Everyone’s situation is different. You have to decide for yourself. The smartest thing to do, is to realize you didn’t have a plan, cut the loss and live to fight another day.
Here is what I am watching from a chart perspective. It looks to me that there is more downside for sure.
For one you have a H&S top (slanted) with a target between 248 and 260 (depending how you draw it). We closed at 310.24, so I see downside.
I am watching the 285-295 (maybe round number 300) for potential support. The reason for this is mainly the intersection of the longer term trend line. It would not shock me to see some support come in there, and a bounce to retest the neckline. That does not mean it will happen this way, it’s just from years and years of chart study, on all time frames, this is what my chart memory is thinking is a likely scenario.
We are also oversold on the stochastics, so could easily see one more flush and then an oversold bounce. Again, does not mean it will happen this way.
As far as long term, if the lower trendline breaks, that will trigger a bearish broadening wedge, and honestly, you don’t even want to know what the downside target on that is. YOU absolutely can not own these things below that wedge if it breaks In My Opinion.
Here is what that looks like on the weekly.
Here is daily, with 50 and 200 DMA avg. Notice declining 50DMA rejection and turning down. We have not seen that happen in the bull mkt. Last time it was declining, it blew right back through it. These are the things you have to keep your eyes out for. The swings highs and lows are #1 priority, MAs help confirm your decisions.
I hope this will help everyone plan. If you have questions, please comment or tweet on StockTwits, I will try to reply as best I can. Also, if you find it helpful, please retweet it. We are all a community working together to outpreform. Be careful out there. It appears right now as things are not exactly as they used to be.