Weakness & Strength
Bad news mixed with broad selling
Monday to scare up more short candidates. Starbucks showed strength.
eBay
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EBAY |
Quote |
Chart |
News |
PowerRating) lost 8 15/16 to 34
1/2 on more than twice its usual trade. The sell-off was prompted by a Lehman
Brothers analyst who downgraded the stock to a “neutral” from
“buy” and said the company’s core business is slowing. For examples
of short-selling patterns that might fit eBay, check out the pullback and
Lizard sets up in my lesson Sell
‘Em Short: Three Patterns For Bears and my lesson on shorting down
gaps. If you use volume to interpret price action, any upside pullback in the short candidate should come on light volume.Â
All
charts in this commentary use a logarithmic price scale as well as 50-day moving
averages for price (red) and volume (blue). Some charts may also include a
200-day moving price average (in black).
So is there any strength in this
market? Some of the restaurant stocks look strong. Starbucks
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SBUX |
Quote |
Chart |
News |
PowerRating)
followed through nicely on Friday’s bullish engulfing pattern. The stock Monday
gained 1 15/16 to a new high of 49 7/8 on triple normal volume.
Remember that all stocks are
speculative and risky. On any trade, reduce your risk by limiting your position size to a percentage of your total
account and setting inviolable price stops. For an intro to combining stops with
position sizing, check out my lesson, Risky Business.