A Lesson On Waiting For Entries
Wait For Entries
On Monday night, I pointed out that there were numerous stocks
setting up as pullbacks in retail. Further, I said that “When I see this, I often
consider a trade in the ETFs” and showed the Retail Holdrs
(
RTH |
Quote |
Chart |
News |
PowerRating) as a
setup. I could not have been more wrong. However, the good news is that the
stock (and many retail stocks) did not come close to triggering (a)–(i.e. did
not trade above prior day’s high). Wait for entries, especially in an overbought
environment (see Monday’s commentary for details).
Looking to the indices, on Tuesday, the Nasdaq opened
weaker and initially continued lower but found its low morning low fairly early
and began to rally. However, it then stalled out near yesterday’s high/close and
sold off again late in the day. Â
The S&P put in a somewhat similar performance.Â
So what do we do? Even though we finished
lower on Tuesday, the indices still remain overbought. Further, I’m concerned
about the fact that retail has begun to break down. The $64,000 question
becomes, will other sectors follow? Considering this, continue to keep
positions light on the long side until we see more corrective
action in the indices. And, if you do go long, at the risk of preaching, make
sure you wait for entries. On the short side, aggressive traders may look for a
trade in the weaker areas of retail such as apparel. Also, once again, the index
shares still could offer a trade as a hedge against existing longs.Â
No setups tonight.Â
 Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“…..I have read your book several times and I found it very empowering to me. My trading improved quite a lot….Grateful for your help…..”Â
George B.
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