The Scene of the Crime

One of the long-standing issues for swing traders (meaning those market players who seek to hold trades anywhere from a few days to a few weeks) immediately buying back into corrective markets with any sort of size is that the major averages, and indeed many individual stocks, invariably run directly into potential resistance rather quickly into relief rallies. Thus, assessing a favorable risk/reward ratio to put on the swing trade in the first place seems to be more of the higher risk but also higher reward variety, considering how fast the relief rallies can move but then fall apart at an even more violent rate. 

A good example putting the above analysis into real-time focus would be the zoomed-out hourly chart of the QQQ, ETF for the top-weighted stocks in the Nasdaq Composite Index. We have looked at this zoomed-out timeframe in recent sessions for perspective.

And as you can see on the updated QQQ hourly, below, that $186.20 area carries significance dating back to June, if not beyond that. But there is no denying that this area likely marks the first major test of bulls' mettle during this bounce. Should we fail from these levels, in effect the scene of the crime from us spending plenty of time here in June as well as gapping free and clear below it this Monday, a rollover to fresh lows makes sense and ought not considered to be a surprise. 

Therefore, even with notable earnings winners like AMD ROKU STMP WW, and continued standouts like TWTR SNAP, I will be more amenable to putting longs back on for a swing timeframe if QQQ holds over this level into the afternoon and IWM can hold back over its 200-day moving average for more than a spirited morning relief bounce.