Heads Up
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 .70 points lower and the Bond Market Futures are trading up 2 ticks.
Heads up, tomorrow the Employment Cost Index (ECI) is scheduled for release. Due to the recent focus on the Fed and inflation, this will likely cause extreme volatility in both the stock and bond markets in early trading.
Last night, I mentioned Ditech Communications [DITC>DITC] as a possible pullback candidate. Tonight the stock still looks interesting as it has formed a Trend Pivot Pullback pattern. This is when a strongly trending has a one day false rally (forming a pivot point-a high surrounded by two lower highs). The theory behind this pattern is that the false rally draws in and subsequently shakes out the “fast moneyâ€-those with very little patience and/or buying power. This often clears the way for the stock to trade higher especially when it takes out the pivot high (a).
Proxicom [PXCM>PXCM], on the Pullbacks List, closed well and looks poised to rally out of its pullback.
Covad Communications [COVD>COVD], on the Internet Fab 5 List, has formed a saucer and may beginning to form a handle. Watch for a breakout here.
On the short side, IBM [IBM>IBM], mentioned last night, looks poised to challenge its old lows (around 89). Dana Corp. [DCN>DCN], on the Pullbacks From Lows List, looks poised to resume its meltdown. And finally, Unisis [UIS>UIS], on the Implosion 10 Technology List, looks like it already has resumed its meltdown.
BTW, don’t forget to sign up for Connors / Boucher Stock Market and Mutual Fund Timing Course (free to members of TradingMarkets.com). I have worked closely with Larry over the past 2 years and have recently gotten to know Mark. Both of these guys are incredible on the research front and even better as traders. I can’t wait to see what they are going to provide (they won’t give us a peak but rumor has it that it’s pretty awesome).
Best of luck with your trading on Thursday!
Dave Landry
PS – Reminder: Protective stops on every trade!