Parting the Red sea

As many of us stare at our trading system screens, it is clear today that we are in the midst of a RED day for most stocks. It can certainly be frustrating to see positions in the red, with rays of goodness here and there as some positions are surviving the selling pressure.

One of the real challenges for traders is to accept the reality of the day, and yet still be able to focus on new setup opportunities (at least for those that have cash to put to work). I found myself this morning with a nice list of 20 or so setups, but with a plan to execute that did not call for a down market. Although I did have several short setups in the list, the majority of the stocks on the setup list were for long positions. Now what?

There are certainly several options to traders on days like today. Here are a few:

• One could just decide to stay out of the market altogether, nothing wrong with that.
• One could decide to only trade options on any dip buys that look attractive.
• Another option is to just dig in and really push yourself to find the most opportunistic setups. This will certainly take more work than usual with a market that is taking it on the chin.

I chose SPRD (Spreadtrum Communications Ads) and APKT (Acme Packet) as moving average bounce buys. SPRD was in play right out of the gate, but APKT took quite some time this morning to finally work its way to a bounce price area. Here is a chart of SPRD posted on February 20, 2011 that shows what I was looking for in terms of a move:

For APKT, I had to have a lot more patience today as this settled down just above the 68 level this morning. This my chart from earlier in the day:

I ultimately took the 22 print on SPRD to close the long position as it appeared to stall. I remain in APKT as it tries to hold the 69 level, with a stop at the LOD (low of day).