I've been watching some key retracement levels all day and we haven't seen any "serious" further violations of some of these levels. With that observation I'm watching the Market Volatility Index (VIX.X) and have noticed a rather quick reversal in this indicator. This may be the first signs of some put positions being unwound. A move below 32 should have some traders locking in gains on those put/short positions that have a significant level of resistance far from current trading levels.
Market Volatility Index (VIX.X) Chart - 60-minute interval
Yesterday we covered some bullish percent data that showed some indexes and sectors at quantitative "oversold" levels. We can use that information along with the VIX.X to help give us hint when we should be locking in some of these gains from bearish trades (shorting and put options). A break below 32 on the VIX.X would be just one reason to be locking in some short-term gains.
Looking bullish on Redback Networks
OK, enough with the negativity, it's time to turn and start looking bullish. That's right, BULLISH. It's time to turn the tables and start looking for stocks that are close to some "support levels" where we can keep losses to a minimum. One stock I've been keeping an eye on and like what I see with its retracement bracket is Redback Networks (NASDAQ:RBAK). I'm setting up the trade now, but would not want to enter the stock until tomorrow morning. I don't want the exposure to any overnight news, but this stocks gives swing traders a nice entry point and the stock has been acting rather well compared to the broader NASDAQ Composite Index.
Redback Networks Chart - 60-minute interval.
I like to start looking bullish when some of my bullish percent charts are at "oversold" levels like they are currently. I also like to start looking bullish when the VIX is at a higher level and looks like it might be ready to lower like it does currently. Shares of RBAK provide the option and stock trader an attractive entry point and it looks like the stock is trying to form a short-term base. I've been monitoring the stock closely and from a market makers perspective, we could see a bullish target of $35 achieved short term. From current levels, that's a nice profit!