{"id":4935,"date":"2017-03-22T05:27:44","date_gmt":"2017-03-22T09:27:44","guid":{"rendered":"http:\/\/www.morpheustrading.com\/blog\/?p=4935"},"modified":"2022-04-06T15:04:59","modified_gmt":"2022-04-06T19:04:59","slug":"sp500-selloff-march-21-2017","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/sp500-selloff-march-21-2017\/","title":{"rendered":"Here’s What To Look For After The S&P 500 Selloff"},"content":{"rendered":"

After three weeks of choppy, indecisive price action, the S&P 500 Index ($SPX) broke down below its range with a 1.2% plunge on Tuesday, March 21.<\/p>\n

But while the bears may have suddenly put a damper on overall market sentiment, the good news is that $SPX is now sitting near an important area of support.<\/p>\n

Specifically, the selloff caused the benchmark S&P 500 to close just above key support of its 10-week (and 50-day) moving average.<\/p>\n

Considering the index also closed near its session low, the S&P 500 will likely\u00a0undercut<\/a>\u00a0its 50-day moving average\u00a0within the next few days.<\/p>\n

If\/when it does, be on the lookout<\/strong> for\u00a0a fresh base of bullish consolidation<\/a> to start developing as the price of $SPX corrects by time.<\/p>\n

The ideal, hypothetical price action of $SPX is drawn on the weekly chart below, but this is obviously\u00a0just one scenario and anything<\/em> can happen:<\/p>\n

\"S&P<\/p>\n

Like the S&P 500, the near-term balance of power in the NASDAQ 100 and NASDAQ Composite has also shifted to the bears.<\/p>\n

The charts similarly suggest both NASDAQ indices\u00a0will likely need at least 4 to 5 weeks of sideways basing action before heading higher.<\/p>\n

Proactively Manage Your Positions<\/strong><\/h3>\n

Given current market conditions, it may be wise to sit on the sidelines to “wait and see” before entering new long positions.<\/p>\n

However, there’s no reason to start panic selling every stock in your account either.<\/p>\n

Rather, you simply need a clear plan of action to proactively manage your open positions.<\/p>\n

Here is ours…<\/em><\/p>\n

We are still giving\u00a0“breathing room” to Wagner Daily<\/em><\/a><\/strong> stock positions that showed relative strength\u00a0during the March 21 selloff.<\/p>\n

On the other hand, we have already tightened stops on stock positions that have cracked support of their 20-day exponential moving averages.<\/p>\n

If you have any big winners you’re still sitting on, consider locking in profits on partial share size, while keeping a loose stop on the rest.<\/p>\n

For example, we will sell half<\/em> the shares of\u00a0Applied Optoelectronics ($AAOI) on today’s open to lock in a gain of approximately 60%<\/a>.<\/p>\n

We plan to continue holding the remaining half of the position through any consolidation, as long as the price holds above the 50-day moving average.<\/p>\n