Looks like I missed quite a week while on my Hollywood vacation. I was on an airplane for Tuesdays craziness and then only participated in a minimal way the rest of the week. I have to admit, I took a few small failed stabs at an oversold reversal leading into the reversal day, before finally catching the bounce. Overall all, the trades were near a scratch, and we are now back in no mans land. What I call no man’s land is where the markets could easily go in either direction quickly, thus offering poor risk versus reward. The markets had a steep drop leaving a price void above, and have now bounced sharply leaving a void below. While I do believe the markets will likely come back for at least a retest of last weeks lows, we can easily see the bounce continue in the near term as many traders are looking to short into this bounce. It’s always worth questioning when everyone is trying to do the same thing.

However, after sitting down and reviewing over 500 stocks tonight, I really still found very little to like on the long side. It’s tough to be buying stocks after an almost 10% move from last weeks lows while keeping your risk to a minimum. And it’s likely still early to really get aggressive shorting stocks. So my plan is to continue waiting and slowly wading back in. One of the only ideas I did find was a short setup in Cardiovascular Systems, Inc. (Public, NASDAQ:CSII) - $CSII .

$CSII has actually been a pretty strong stock recently, refusing to break down when the markets fell apart. And while it hasn’t actually broken down, it has yet to participate in the markets strength the past few days. In fact, after failing to break out on 7/21 it has been under distribution. It staved off a complete breakdown after a nasty drop a few days later by managing to hold support near the bottom of its base. However, after the initial sharp bounce, $CSII has been unable to stay above its 20 and 50-day moving averages and has been trading in the lower half of itse for the past two weeks. $CSII is in danger of breaking down here and would likely need to get back over $14.50-$15.00 to avert a breakdown. Any weakness in the next day or two would likely lead to a trip towards $11.50 and $CSII’s 200-day moving average.

Good Trading,

Joey