FDO gapped down and then made a sharp downmove on the open. I caught some of the downmove with a Momentum Trade. But then the momentum short was over and I had a decision. Do I look to trade $FDO for a bounce or for a continuation move? I chose the former and will explain w1hy.
The market has been strong of late. Even before Congress passed its bill averting the Fiscal Cliff the market has shown great signs of strength. When we are in a strong market stocks are more likely to bounce. When we are in a strong market REAL STOCKS are more likely to bounce. FDO is a real company, a real stock. Also when stocks make sharp moves to the downside right off the open, steep downmoves, they can be more likely to bounce. Further when the intraday downtrend is broken a stock is more likely to reverse. We had all of this with FDO.
Let’s take a look at the chart.
Normally I would have been heavily short near the 55.50 level. I would have shorted pops into the stock for a move to the new low. I would have certainly shorted around 57 for a move to the new low when we saw weakness on the tape there.
Instead I started getting long into the consolidation around 56. I added when we busted above that consolidation to new highs. I did take some off into the weakness at 57 and held a smaller core with a stop below 56.50. The market strength, the Big Picture, influenced my trade.
The market has been strong and I will play these opportunities more on the long side until the market changes.
Trade well!
Mike Bellafiore
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