Short Term Oversold

The market is oversold short term. Can it go lower? Of Course!

I am looking to take my first “long position” in YGE if the market bounces in this position. Below is my trade setup from January 8, 2008 when the stock was trading at $32.24. It closed at $25.17 yesterday.

Potential Trade Set-up:
Ideal Entry: $25.00
Risk is set at 1.0% of total portfolio or $1,000 of $100k
Stop Loss is 10% or $22.50
Number of Shares: 400
Position Size is $10,000
Risk is $2.50
Target is $44.00 (based on former peaks and bottoms)
Reward-to-Risk is 7.6-to-1 with ideal entry; less with current price

The first chart shows the NASDAQ filling my yellow gap within one day; the next stop looks to be 2,200 if it keeps falling.









  1. Chris,

    I know your an avid IBD reader and that you follow O’Neill’s principles pretty closely but why would you take a long position in this market with as many distribution days as we’ve seen? I’ve examined YGE’s chart and its showing a possible double bottom. The scary thing is that on the second leg down volume was extremely higher to the downside. 8 of the past 12 trading sessions for YGE have seen the stock go lower on above average volume.

  2. With the damage that has been done, wouldn’t be surprised if the $NAA200R (% above 200 day avg) traces out a similar pattern to the 2002 bottom in your chart – double bottom around 15 over a 1-3 month time frame.

  3. Chris,
    It’s a partial position (not full risk) and it’s a swing trade, not a longer term trend trade (no trend in this chart). We’ll see. Buy did trigger at $25 flat – this morning.

    We’ll see what happens. Risk/reward plays. Some work, some don’t. Who am I to guess what trades will work and which ones won’t. If you play opinions, you lose!

    Yes, the market is trading down, YGE has had distribution but the setup is there with low risk based on what I am trying to accomplish. i don’t have much to lose, especially with a partial position. Very low risk.

  4. Chris,

    I got into YGE today at under $25.00 When do you think it might hit $44.00? It was over $36.00 just last week. Any thiughts from other bloggers?

  5. Chris (Poston),
    I firmly believe that a good trader must have multiple trading strategies. While the IBD system is excellent, it performs better in certain types of markets. There’s no harm in deviating from ones core strategy, especially when risk is kept at a minimum.

    A lot of money can be made playing bounces, even in markets showing major distribution. In fact, these are the best markets to play bounces.

  6. “Short term oversold”

    Son, you don’t know the meaning of oversold!

  7. jimmyj,
    Be a wise guy elsewhere or expand on your one line statements (contribute or be gone). I never block comments that don’t agree with me but they must add to the community.

    BTW: no one is your “son” on this site.

  8. Chris,

    I see that YGE is down more than 15% this morning. Did you cut your loss/sell short/buy more?


  9. Chris, I did nothing. I anticipated the huge declines this morning. I don’t have hard stops due to be stopped out in mornings like this.

  10. Are you still in YGE? Maybe you have added more to your position at 21.00?

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