Still Markets and Swing Traders

Tuesday provided little in the way of turnaround as stocks ended the day mixed. Mildly overbought shifted to mildly oversold in the Nasdaq, while blue chips edged higher, but not so high as to provoke a selling response.

Writers write, fighters fight and traders trade, right? That kind of thinking can get traders into trouble if the proper discipline is not maintained. Talking with Dr. Alexander Elder, trader, trading coach and author of a number of widely-read books on trading, I remember him noting that the trading decision should not be a lengthy one. "If you are spending too much time deciding on a trade," he said, "it is probably not a good trade."

I think of this in the context of maintaining discipline – especially during times when the markets have relatively light volume and are listless. What makes a trading decision lengthy or not is not a matter of reflexes. It is a function of whether or not the trading method or system dictates a buying opportunity exists.

If it does, then the trader should recognize it and act. If it does not, then the trader should stand aside and do nothing. It may not be "easy" – when stocks are gapping up or plunging down and the talking heads on the cable financial networks are yammering away non-stop - but it is "simple."

Smart swing trading is as much as bout knowing when not to trade as when to trade. We are seeing fewer Short Term PowerRatings stocks at the extremes over the past few days. This means both fewer great pullbacks and fewer dangerous overextensions to the upside. And because these situations - strong stocks that become too oversold and weak stocks that become too overbought - are our stock in trade as swing traders, we wait as patiently as we can be until the market gives us what we need to work our "game," our discipline of buying pullbacks and selling into strength.

Here are a few stocks that, in spite of this, are moving more decisively lower and becoming more and more attractive as potential trades. As always, let the higher Short Term PowerRatings and the lower 2-period RSIs be your guide to the better opportunities.

Lydall Inc. (LDL | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 2.85
Badger Meter Inc. (BMI | Quote | Chart | News | PowerRating) Short Term PowerRating 9. RSI(2): 3.97
UIL Holding Corporation (UIL | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 0.667
Somanetics Corporation (SMTS | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 11.63
Grupo Simec S.A. (SIM | Quote | Chart | News | PowerRating) Short Term PowerRating 8. RSI(2): 8.48