No Momo

Momo plays are taking a back seat for the time being, as money isn’t chasing price at the current market juncture.  This however is an excellent trading environment if you shorten your timeframe and focus your attention to mean reversion trades.  Seeing as we’re below the midpoint of our range, you want to consider beaten down names whose price has room for some upside reversion.

One of the names on my watch list is RAX.  It’s working on putting in a higher low today so you’re not catching a knife and the risk is easy to manage while still having some upside room.  If I take the position I’m targeting $47.00 for my first scale, likely a half scale.

I like to take ½ positions with mean reversion trades as the risk is a bit higher then trading a momo pullback.  That way you can get the second half on should it be necessary 5-10% lower, depending on your risk definition.  Good practice is to also scale off your double down at the initial entry, thus lowering your basis.  Or you can take the full position as is.  Your choice, your risk.

Trade’em well…