Guy Cohen

How the Pros Suckered the Amateurs in Last Friday's Lunch Hour!

by Guy Cohen 16. June 2017 11:06

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! 

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!  

ndq 2017.06.15.jpg

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. 

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 shortlived, 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. 

I’ll see you over the weekend with a market review!