The Best Trade Setup After A Big Down Day

I like to keep trading simple.

Sometimes the market really helps out, like it did yesterday.

Yesterday’s trade idea got off to a great start in a big down day, and expect today’s trade idea to do the same.

Click here to see both trade ideas.

First, a quick follow up on yesterday’s trade idea, CHD. Its breakout over $75.50 was impressive on a down day in the market.

Now that it has broken out, if you’re not in it, look for a pull back to the $75.50 level so you can use the same stop outlined yesterday.  

Today’s idea is a classic pattern, and it’s showing up at the perfect time – when the market has had a correction well below its 50-day average.

As you can see in the chart below, Ball Corp (BLL) has bounced off its 50-day average over the last two days. More impressive is that, it has happened as the market has had 2 weak days.

https://lh5.googleusercontent.com/xTtqB9V1n3XzULVeW98PuYvm9qodKFxHXvW_2GDwjWSbh4g_UFQlsVCYQ4n5vEEcCNgYWsRCngPBB6frc9h-Mif7jsP8S4j9V3WzO2ZlZnA0KGrTd5aBY3j-3i1NL6mYEwtOLQiJ

This is a very simple set up when everything lines up so nicely, and it’s very effective.

The best stop is under the retracement low and 50-day average, so under $60.

However, if you’d like to tighten your stop, under $60.80 is a good choice.

With that in mind, I would not want to pay more than $62.50.

And if it’s trading under 61.40, then it’s weaker than it should be so I would not buy below that level.

That means the trade setup is to enter between $61.40 and $62.50 with a stop under $60.80 or $60.00.

Nice and simple.

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily