Be Prepared
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 markets opening. Therefore, overnight events may alter the outcome of these observations.
At the time this is being published, the S&P Globex Futures are trading 2.30 points higher and the bond market is trading up 1 tick.
Recently, I received a call from a friend of mine (who’s new to trading) who was questioning my nightly Stock Market Outlook(s). He wanted to know “why I was wasting my time talking about stocks on the short sideâ€. I explained to him that, yes we are in a bull market but he must remember two points: bull markets don’t last forever and even bull markets have sharp sell offs. Therefore, if you want to make a long-term living as a trader you must be willing to trade both sides of the market.
Today, the cash S&P [$SPX.X>$SPX.X] hit new all-time highs (a), but reversed to close poorly (b). This is not the type of action you would expect at new highs. Therefore, you might want to consider tightening you stops on longs and considering some candidates on the short side, at least until these highs are taken out decisively.
Silknet Software [SILK>SILK], on the pullbacks list, has formed a high level cup with a pennant formation. Watch for a potential resumption of the longer term uptrend but wait for it to prove itself by taking out the prior 1-2 bar highs. Broadvision [BVSN>BVSN], also on the Pullbacks List, has formed a high level “micro†cup and handle.
For you breakout players, InfoSeek [SEEK>SEEK], on the New 60-day Highs on Double Volume List, appears to be breaking out of a low level loosely formed cup and handle. WorldGate Communications [WGAT>WGAT], on the Above 50-DEMA-DV list, is rallying out of a low level base on extremely high volume.
On the short side:
Stocks in fast moves down often only consolidate for a few days before heading lower. With that said, watch Lands End [LE>LE] over the next few days for a possible resumption of its downtrend. Unilever [UN>UN], on the Proprietary Implosion List, has formed a shallow pullback and looks poised to resume its meltdown.
Best of luck with your trading on Thursday!
PS – Reminder: Protective stops on every trade!