Tug-of-War
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
market’s opening. Therefore, overnight events may alter the
outcome of these observations.
On
Monday, the Nasdaq gapped lower and began to sell off. Then after about 30
minutes of trading, it turned around and rallied to just above the psychological
4,000, which also corresponds to the 200-day moving average (a). This action
seemed to be to just enough to scare out some shorts and attract some bargain
hunters. Once these people were knocked out or trapped in respectively, the
market–being the perverse creature that it is–turned around and sold off. This
action has it closing near its lows (b).
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We’re oversold and due for a bounce, but this
isn’t reason enough for me to get bullish. The ease at which the indices
are getting jerked around lately has me concerned. It seems that there is a
tug-of-war going on in the index futures as the big boys are jockeying for
position. And when this is happening it’s easy to get lulled in and subsequently
stopped out of positions.
As I told a friend new to trading today,
remain patient, barring acts of God, we’ll be able to trade for years to come.
This is provided of course, we protect out capital during an unsure environment.
In other words, tread lightly.
face=”Arial, Helvetica”>Looking to potential setups, Quest Diagnostics
(
DGX |
Quote |
Chart |
News |
PowerRating),
mentioned recently on the Pullbacks
Off Highs List, still looks like it has the potential to resume its strong
uptrend. Just wait for follow-through to the upside as it did close poorly on
Monday.
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Free
Markets
(
FMKT |
Quote |
Chart |
News |
PowerRating), also on the Pullbacks
Off Highs List, looks poised to rally out of its first pullback since
forming a lengthy low level base. Just don’t overstay your welcome here as it
will likely hit overhead resistance at the 90 to 100 level.
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Netro
Corp.
(
NTRO |
Quote |
Chart |
News |
PowerRating), mentioned Friday, sold off earlier on Monday but reversed to
close well. This suggests its uptrend remains intact.
On the
short side, Proxicom
(
PXCM |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, appears to be stalling out in its rally from lows and
looks poised to resume its strong downtrend.
Best
of luck with your trading on Tuesday!
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!