Between & Betwixt
If you trade the medium
term, these are days for watching and waiting. The market remains in a bear, and
I can find almost no high relative strength stocks setting up in sound bases.
There’s nothing to buy.
Neither am I finding much in
the way on the short side. With so much downside already behind the market, it’s
hard to find stocks winding up for the short sale. A review of today’s stocks
reporting negative news shows what I’m talking about. Corning
(
GLW |
Quote |
Chart |
News |
PowerRating), the No.
1 maker of fiber-optic cable, on Monday forecast 2001 pro forma earnings below
expectations and indicated more layoffs to bring the company in line with slower
spending by customers.
Yet the stock moved ahead
8.7%. When I short on negative news, I want the stock to move in the direction
of my trade. Chances are, the stock is headed lower, given the powerful prior
downtrend. But you lack any meaningful upside reaction or consolidation to clear
out the danger of short-covering rallies.
You have a similar story in Solectron
(
SLR |
Quote |
Chart |
News |
PowerRating), the world’s biggest contract electronics manufacturer. The company
said after Monday’s close that it probably would not meet its previous sales
forecast for the year. The stock certainly did not telegraph the bad news. It
rose 6.9% in Monday’s session.
In such a
between-and-betwixt market, cash is king for the intermediate-term momentum
trader. One of the few decent-looking base formers is Lincare Holdings
(
LNCR |
Quote |
Chart |
News |
PowerRating),
one of the nation’s largest providers of oxygen and other respiratory therapy
services to patients in the home. The stock has held up well in the market,
forming an upward-sloping relative strength line while forging a long base. But
again, the fact that such patterns are a rarity in the market is clear evidence
that this is not the intermediate-term momentum trader’s market. At minimum, we
could face many weeks, if not months, of watch and waiting before the RS crowd
multiplies sound bases.
