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On Wednesday, the Nasdaq gapped higher and initially
continued higher but quickly found its high and began to sell off. Then after
some sideways chopping back and forth, it resumed its sell off.
The S&P also tailed higher but reversed to close
poorly.
So what do we do? The fact that the indices tailed above
their 50-day moving averages but reversed to close poorly suggests that
the longer-term downtrend (i.e., big blue arrow) remains intact. Therefore,
look to play the short side but don’t bet the farm until we see some more
conviction. On the long side, stick with issues such as the golds that can trade
contra to the indices.
Looking to potential setups (wait, did I say setups?, it’s
been while), gold and silver
(
$XAU.X |
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PowerRating) gapped lower but reversed to close
well. This action suggests its uptrend from its August lows remains intact With
that said, Meridian Gold
(
MDG |
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PowerRating) looks like it has the potential to resume its
uptrend out of a pullback.
The semis
(
$SOX.X |
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PowerRating) tailed higher but reversed to
close poorly. This action suggests that its longer-term downtrend remains intact
vs. the formation of a big-picture double bottom.
Considering the above Varian Semiconductor
(
VSEA |
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PowerRating)
looks like it has the potential to resume its downtrend out of a pullback from
lows.
Best of luck with
your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!