Technical Picture - Market Slide Continues

The market slide continued today as the "buy the dip" mentality has suddenly disappeared in the face of institutional selling or distribution. The Nasdaq chart above clearly depicts strong selling over the last two sessions. However, we are close to breaching the lower BB and short-term capitulation selling would be an opportunity for a bounce.

On the flip-side we have huge gains in gold, silver and oil. I'm monitoring gold and silver for euphoric price/volume action as these sectors over-heat and in need of short-term corrections.

Copper is another commodity of interest, as we approach trendline support and the lower BB.

Last night we talked about the Ags for a potential oversold bounce as most of the widely held names were coming in for a test of support. Also featured in HCPG newsletter last couple of nights for added confidence. As depicted on the daily chart above, CF corrected well beyond the lower BB.

On the 15 min. chart below, we see that price/volume capitulated after breaching weekly S2 (tweeted at 12:12 if you were able to decipher the spelling error). The recovery was slow at first and normally, when stocks capitulate, I expect a V bottom. However, patience paid off, because once price manged to break above weekly S2, it went vertical. I took a partial as price approached the downsloping 50 SMA and exited the rest at the next resistance level.

Similar trade in POT in my swing account. Here I waited for price to form a base before jumping in. My target on the swing is the unfilled gap. I will add to the swing if we retrace some of today's gains. Stop at BE.

BTW, NYSE POT 3 for 1 split on Friday.

Ambush - Capitulation - Reversal: Cognizant Technology Solutions Corp. (Public, NASDAQ:CTSH)

CTSH was an earnings gap which was quickly faded. Price reversed and made a decisive move back to the ambush zone and stalled. I shorted CTSH as depicted on the chart above. Normally, on an ambush setup, I would target the 27% Fib. ext. and then the 62% level. But CTSH was a rip, so I decided to let the 2nd half go. It capitulated on a volume spike at $62.00 (daily support).

Ambush trades work best when the retracement into the ambush zone is decisive, but on lower volume than the preceding trend move. I look for smaller candles on the retracement than the preceding trend move to confirm it's not a trend change and a waste of time. CTSH met all of the ambush trade criteria perfectly and the result was awesome.

Capitulation signals the end of the move and can be traded for a partial retracement of the preceding move. CTSH started off slow, but eventually formed a cup & handle to which I doubled my size. As we can see from the chart below, the retracement was 62% of the entire day's range. Sweet!

I tried to do an ambush trade with AAPL, but the result was far from perfect. This brings home the point that we need a decisive move into the ambush zone in order to anticipate a really successful outcome. The only part of the AAPL move that was decisive was from $304.00 to $302.50. Anticipating this, I took a partial at $304.00. The balance of the trade was stopped out at $303.50.

It's easier for price to move through a non-congested area and that's why the criteria calls for a decisive move back to the ambush zone.

Capitulation - Bank of America Corporation (Public, NYSE:BAC)

The banks went into free fall amid rumors and speculation regarding the government's bank stability plan. In early afternoon they capitulated on huge volume. BAC carved out a morning star reversal pattern, so it appeared safe to get long.

Capitulation volume spikes foreshadow that a bottom is near. However, if not accompanied by a clear reversal pattern, size it accordingly. In other words, be prepared to average down.

For this particular trade, I placed my fibs from yesterday's close to today's low because I wanted to be conservative in my expectations. I took a partial as price approached the ORH and exit balance on gap fill.