Congratulations
If you’re an intermediate-term trader,
and you put on some pilot positions last week, you probably got stopped out this
week. If so, congratulate yourself! Success in trading means carrying out your plan,
including your protective stops, not in trying to impose your predictions on the
market.Â
The recent base builders continued to
turn into base failures. If the market did bottom on Nov. 30, it’s going to be a
while yet before the high relative strength crowd sets up in mass. We were
making progress last week, then the market rolled back my fledgling list of
names.
So lets go back to looking for stocks
showing resilience in the face of adverse conditions. One possibility is Tellabs
(
TLAB |
Quote |
Chart |
News |
PowerRating). The stock has undergone some recent distribution and churning, but
the pattern appears to be holding up. Ideally, volume should dry up and
volatility should contract while the stock’s relative strength line moves
higher.
Willing to kick a stock when its down?
Polaroid
(
PRD |
Quote |
Chart |
News |
PowerRating) gapped down on heavy volume after slashed its Q4 operating
profit forecast. For an introduction to short-selling
patterns, see my lessons Sell
‘Em Short: Three Patterns For Bears and Shorting
Down Gaps.Â
The top field of all charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. In the second field, a
blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
All stocks, of course, are risky. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
you’ll find extensive lessons in the Money
Management area of TradingMarkets’ Stocks Education section.