No video today, but today’s piece is super important! Last Friday (June 9th) the Nasdaq fell by almost 4% at its lowest, and closed over 2½% down on the day. But what’s really interesting about it was that the serious downdraft only started after 12pm! Check out Guy Cohen’s analysis of the last Friday’s market.
Guy Cohen Gives a Quick Rundown of Last Friday’s Freefall
Observe the chart …
1. Just past 11am the Nasdaq reaches a new high. This suckers new buyers into the market, but very soon the market starts to retrace.
2. This is the bar starting at 12pm. The retracement is getting a head of steam … this is where the proverbials starting hitting the fan!
3. This is the bar commencing at 1pm. It’s clear that the market has been caught completely cold and the early morning’s buyers are caught in a trap.
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4. From now on it’s panic stations for anyone that was caught unawares.
So, what was this all about?
It was all about the amateurs being strung along to buy buy buy in the morning as new highs were reached… and then the big boys cut them loose and sold for all they were worth.
And also notice the timing … The big sell off occurred over the lunch break (on a Friday) while fewer eyes would have been paying attention.
Truly, this was a cynical attack on unsuspecting long players, and it worked a treat. They bought willingly, expecting the retracement to be soft and short lived, as those in the know were selling all their worth to them … and handing them their a$$!
Now, don’t get paranoid because this really doesn’t happen often. And frankly, I prefer getting stopped out in this type of scenario than to an opening gap down, because with this scenario I can exit in an orderly fashion. With a gap down it’s more painful.
So those of us that were sitting on profits, we simply took lower profits that we’d anticipated and it wasn’t calamitous.
That’s the beauty of a sensible trading plan like mine.
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Bye for now,
Check out this video from FinancialBuzzMedia about last week’s Stock Market:
Now that’s how smart traders like Guy Cohen analyses the market. Just remember, always follow the sensible advice of real trades that always win!
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