Possible Trade Setups

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Trade Setups for the Week of Monday March 10th,

The Counter-Trend Trade

1) Possible short position in Oil and Gas stocks or Energy Index Futures. Reasons are as follows- A declining market has pushed retail investors into transferring funds into "whats working". This sudden surge of capital has forced a big-time well known trader (and smaller traders) to cover their short positions. This short covering fools people into thinking there is additional support at these higher levels and as a result attracts "weak longs".
These people who "buy high, and sell higher" OFTEN use tight sell stops to limit risk and as a result, the instrument they obtain a position in becomes vulnerable to a sharp and drastic decline. If these sell stops push prices below specific levels then "Automated Basket Trading Sell Programs" can turn on, and spread the decline to all stocks within the specific sector. It is recommended that this type of trade be executed during a downward momentum phase of the instrument preferably after prices close below the speculative "sell" zone. Remember, we are looking for a specific level to be broken on a specific index. If this level acts as support then avoid loss and cover position.

The Day Trade & Swing Trade

2) Possibility of HUGE Short covering rally in MEDIA STOCKS. .. Again, buyers can only push this one so far, we need shorts to cover. There is currently additional risk associated with long positions for day & swing traders because the trend is arguably down. *Remember you should not consider buying stock in companies who's price is declining unless the decline in value is a correction.