Friday, November 9, 2012

The Bottom Bounce Play

VVUS has been getting clobbered as of late, and I have been keeping an eye on it. The key with bottom bounce plays is not to try to predict the bounce, but to buy on the turn. That is exactly what InvestorsLive did today, and he banked $5,000.

Look for oversold stocks (RSI below 30)
The further it is from the EMA 8 the better
Wait for strong positive trading (one positive day for swing traders)
Cut losses quickly

I expect this to at least bounce back to the EMA 8. Furthermore, I expect this to enter what I call "the wheelhouse", (the space between the EMA 8 and EMA 13). It could go higher, and it could fail. Take profits along the way, and cut losses quickly.

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