Biotech Boomtown
It was another trick
move this morning. Just yesterday I was speaking with several traders about all
of the fake-out moves in the first hour. Trading in the first hour is tricky,
even for daytraders. Momentum daytraders may not have as many problems with it
as, for example, swing traders.
Whenever you place
trades in the first hour, always watch for reversals. This morning we saw a gap
higher, a consolidation, and then a breakdown.
Index Check Up
Before we take a look at several of the potential setups for today, I want to
take a look at the biotechs.
At first I thought that we might be seeing a head-and-shoulders
pattern forming, but Friday’s action took us back above the right shoulder. The
support level just over 150, as well as the 50-day MA appears key.Â
Despite the crazy action in the biotech HOLDRS, many of the
individual issues are holding strong.
Today’s Watchlist:
(
GILD |
Quote |
Chart |
News |
PowerRating),
(
BAX |
Quote |
Chart |
News |
PowerRating),
(
ELN |
Quote |
Chart |
News |
PowerRating),
(
SUNW |
Quote |
Chart |
News |
PowerRating)
Gilead
(
GILD |
Quote |
Chart |
News |
PowerRating), which is moving lower on brokerage comments, broke out on
Thursday. Set your alerts near Thursday’s intraday high and watch for a
continuation move above the intraday high. The pullback that we are seeing on
Friday is on low-volume, which could be interpreted as a positive sign. Look for
a continuation move above this level to offer potential long opportunities.
I don’t think I need to remind anyone of the volatility of biotechs, so use
caution when trading them.
Baxter International
(
BAX |
Quote |
Chart |
News |
PowerRating) is also trading near a high. Like
Gilead, mentioned above, it’s formed a high-level cup. It tried to breakout on
Thursday, but failed. Daytraders should watch for an initial move above
resistance, while swing traders will want to watch for a closing breakout,
followed by a continuation move the following day. Friday is the third day of a
near-term consolidation, which may potentially continue for several days.
Elan
(
ELN |
Quote |
Chart |
News |
PowerRating) broke out from a high-level cup and then began to
consolidate. It’s currently in the fourth day of this pattern. Watch for ELN to
take out its all-time high for potential long opportunities. Should it continue
in its trading range, the former resistance level may act as support and the
current top may continue to provide resistance.
I remind you again that many breakouts have failed to show
continuation days. Thus, it would be safer to wait to see a successful
continuation day following a breakout. Don’t forget to use your protective
stops.
Sun Microsystems
(
SUNW |
Quote |
Chart |
News |
PowerRating) tested its recent highs as well on
Friday. What happened? I watched the stock hit 110, and simply pullback. I’m
glad to see that the intraday low has yet to take out 107. SUNW has been strong
recently, so traders are watching it. Again, daytraders may want to simply play
the initial breakout move, while swing traders might want to watch for another
leg higher following a new closing high.
When the market regains its strength, we’ll watch for leaders
like SUNW to power higher.
Until later,Â
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