Good Morning, Traders. A very bearish week to say the least. Between Wednesday and Friday, the Dow registered three straight 100+ point losses. This is quite rare. More importantly, this spate of selling took the Dow below the 2006 open for the second time this year and closed us right at the swing lows of June. As annotated in the chart below, the 50ma weekly (red) was also breached again this week for the third time since the beginning of June. If there is to be a bounce this coming week, those aforementioned June lows could be the catalyst, although I think that it would probably be short lived at this point, due to overall volume patterns. Total turnover has been down relative to earlier in the year, but still rising as the selling accelerated later in the week. With three straight down days in the markets, I am not thinking of initiating any new short positions in Monday's trade. The best bet is to play for long reversals for short, sharp moves until the market consolidates a bit and new short entries can be found. I remain bearish on Homebuilders, Tech (all sectors), bullish on Gold, and bearish on most equities in general. Remember to time your shorts with the market for maximum gain and minimum pain.

Focus List

PMTR - Pemstar, Inc.
Industry - Electronics
Side - Long
Trigger - 3.63
Stop - 3.30
Target - 4.00+
Timeframe - 2 days to multiweek

Notes

• After a sharp move down, it sometimes makes sense to look at cheaper stocks that have held up well during the selloff or are showing relative strength
• Pullback to 20ma on dailies and hammer indicating support in this area
• Can play for longer term hold or short term bounce (1:1 risk reward) off of reversal pattern
• Be sure to trail stops as all longs in this market enviroment are against bias

EEFT - Euronet Worldwide, Inc.
Industry - Services (management)
Side - Long
Trigger - 35.61
Stop - 34.45
Target - 37.00+
Timeframe - 1-3 days

Notes

• Market bias is down currently, this is counter-trend
• Short term play off of hammer reversal
• Move stop up immediately after entry; "right or right out"
• Stop can either be under hammer on dailies (7/14) or low of breakout day over trendline

Peter Reznicek is the Chief Equity Strategist and a principal of the Prana Fund, a domestic hedge fund, and ShadowTrader, a subsidiary of thinkorswim which provides coaching and education to its clients on both intraday and swing trading of equities. For a free trial to the full version of The Big Picture or to learn about ShadowTrader's other services, visit shadowtrader.net or send an email to preznicek@shadowtrader.net.