Bears and bulls were locked in battle last week, each trying to gain advantage. This tug of war produced very volatile, sharp bounces, as the market stair-stepped up from the low on Monday. Those bounces created great opportunities for momentum traders.

Follow the Bouncing Nasdaq Loosen those stops when sharp intraday corrections occur in an up market

Take a look at the Nasdaq chart above. Notice the sharp intraday corrections as it climbed. When this type of market action occurs in an up market, it is best to give yourself just a bit more wiggle room and loosen your stops. Otherwise, you will find yourself stopped out of more trades than usual. Here are a few trades I attempted last week.

On Jan. 8, I was watching a basket of stocks in the premarket that seemed to be moving to the same rhythm: COR Therapeutics (CORR:Nasdaq - news - boards), Ciena (CIEN:Nasdaq - news - boards), Juniper Networks (JNPR:Nasdaq - news - boards) and Cisco Systems (CSCO:Nasdaq - news - boards). The trend had been for stocks to drop at the open, but just before the opening bell, a short burst of buying pressure came in. Because these stocks were moving together in the premarket, my plan was to identify which stock was leading the pack and short one or all of the others following it as soon as they hit their first highs. My exit point would be as soon as the first one started to bottom.

Follow Me, Cisco Tells Pack Hold on for a bumpy ride

After the open, my group of stocks all climbed immediately, with Cisco in the lead. Take a look at the Cisco chart, and you can see it opened at $35.69, climbed to a high of $35.75, where it quickly changed directions at 9:31 a.m. EST. I turned my attention toward the remaining three stocks to see if they were following Cisco.

A Top for Ciena A loss in altitude

The next stock to top out was Ciena, just moments later at 9:32 a.m. As you can see from its chart, Ciena also quickly dropped from a high of $72.38.

Juniper in the Same Universe The momentum trader missed this top

I missed the top of Juniper as it topped out at the same time as Ciena did, so I moved on to my last stock in the basket, COR Therapeutics. I was confident it would follow suit, because these four stocks moved together in the premarket and during the initial move.

I'm Right Behind You, Guys COR Therapeutics in tow

As you can see from the COR Therapeutics chart, it followed Cisco, Ciena and Juniper almost exactly at the open, as expected. It opened at $30.69, climbed immediately to a high of $32.50, then started to drop. I entered a short position at 9:33 a.m. at $32. Notice the stair-stepping down on the other three, but COR Therapeutics was an almost vertical drop. I held, as the others bounced a few times on the way down, because the general market was dumping at the time.

I covered my short position at 9:52 a.m. at $30.50 for a 1 1/2-point profit, because all three stocks were showing signs of a bottom just moments before. I contemplated going long at my exit point, but the buying was mixed, with too much selling for my taste, and I remained out of the trade. As you can see from the chart above, I would have been shaken out of the trade as it bounced around at this low for the next hour.

On Jan. 9, I was searching for another basket of stocks that were moving together with the same type of leader-follower play. With the exception of Juniper and Ariba (ARBA:Nasdaq - news - boards), I was either looking at the wrong group of stocks or they simply were not following each other. These two were more or less following each other in the premarket, so I decided to concentrate on them at the open. My plan was to short Ariba after Juniper topped out.

Timberrrrrrr!! Juniper storms out of gate, then falls off cliff

As you can see from the Juniper chart, it opened up at $118.63, climbed immediately to a high of $120 at 9:34 a.m., then started a rapid descent. I missed the short on Ariba, as the lead time was too small. I decided to concentrate on identifying the bottom on Juniper and buy Ariba if it followed suit. Juniper put in a relatively slow bottom at 9:44 a.m., when it bounced off $114.

Follow the Leader Ariba stays with its brethren

As you can see from the Ariba chart, it opened at $39.50, followed Juniper up, and then down. When Juniper bottomed, I noticed Ariba's selling dry up and buying come in, where I entered a long position at $37.38. I continued to watch Juniper to give me an indication when Ariba would top out.

At 9:51 a.m., Ariba stalled after the buying momentum dried up, and some selling came in. One minute later, I exited Ariba at $38.75 for a 1 3/8-point gain, when it quickly changed direction and selling picked up considerably. The rest of my plays this week were similar in tactic, as the market's volatility was consistent.

If you read my previous articles, you can see that with a few exceptions, my tactics change from week to week. When I first started trading, trends and tactics would work for weeks and even months before the market would change. Now they change on a daily basis. In my opinion, failure to change tactics in a changing market is one of the main reasons newer traders fail. If you don't modify your tactics when the market changes, you are playing today's market with yesterday's tools.