The market has sold off pretty hard over the last four trading days. The Dow is the only major average that hasn't broken its 50 day MA...at least not yet! The market is in a position where it could bounce a bit...maybe tomorrow...maybe in a few more days. If it bounces up tomorrow, you should use that as an opportunity to get out of any recent bullish trades where the stock has broken below its 50 day MA. In other words, it may provide a second chance for you to stop yourself out of a trade. If we don't bounce tomorrow, I think it would be risky to continue to hold those losing trades in the hopes that there will be a rally to bail you out. Don't plan on a rally to bail you out! We may get a rally, but it probably won't be big enough to bail you out...just possibly lower the loss. If we do get a rally tomorrow (or within the next few days), look for possible put option trading opportunities. Ideally the market would rally up in smaller increments over a few days. This would create an ideal pattern for another move down. If we rally back hard...like a 200 point rise in the DOW...then I would be hesitant to buy puts out of fear that the recent break below the 50 day MA could be a false breakout. In other words, we want to watch the price movement over the next few days. If we get a choppy and rising price action, we will very likely head lower. I don't see any patterns that I like right now. I don't trust any bullish trades right now...not even the ones with nice bullish ABC patterns. I'm not ready to recommend bearish patterns just yet, but it could be soon if the price action sets it up. Remember to watch for the trend characteristics that I taught you in the course (lesson 3). These are the clues as to what could happen next.
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