Descending Triangle
We got additional evidence the easy
shorts in tech stocks are behind us Thursday as the Nasdaq Composite resisted
the wave of selling that over came the Dow industrials and NYSE Composite.Â
Anyone who follows my commentary knows
I feel this is a time to sit in cash. As an intermediate-term momentum trader,
stocks have extended so far as to make short sells for the medium term
vulnerable to short-covering and profit-taking. As for the long side, we need
convincing follow-through on one or more of the major indexes, sustained
accumulation days and a proliferation of high relative strength, high growth
stocks setting up in bases. Even if we get the first two criteria, the third is
unlikely to happen for weeks, if not months, given the deep damage in so many of
the growth names.
One possible short. ConAgra Foods
(
CAG |
Quote |
Chart |
News |
PowerRating),
a food-service manufacturer and retail supplier, reported Thursday that its Feb.
25 third quarter fell 31% to 19 cents a share from 30 cents a share a year
earlier. The company blamed energy cost increases and a slowing farm
economy.
The stock is forming a descending
triangle. A entry would be 1/8 point below the low of the pattern.Â
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,
check out the Money
Management area of TradingMarkets’ Stocks Education section.