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.
One of the things I like to look for after days like today are stocks that traded much higher while the rest of the market sold off. Tonight, I did not have to look far as the Proprietary Momentum List had winners all over the place. Among them were Exodus [EXDS>EXDS] up 14 7/8, Boston Scientific [BSX>BSX] up 3 and American Online [AOL>AOL] up 3 1/8. Keep an eye on these stocks early next week, especially if the market turns higher as these are the names that are attracting cash.
As would be expected after a day like today, the Market Bias signals are pointing lower for Monday. Please be aware that the June Dow Futures [DJM9>DJM9] closed 46 points below Fair Value, indicating traders are expecting a lower opening on Monday morning.
As you know, The Trading Where The Action Is List (TWTA) contains the most volatile stocks thereby creating large opportunity for gains with the tradeoff of added risk. Notice tonight that Knight/Trimark [NITE>NITE] has made both the Cup and Handle List and the TWTA list. This combines a highly volatile stock with price pattern. Be warned though, stocks on the TWTA list are only for the most aggressive traders.
NITE
On the Pullback List two stocks look interesting to me: Sepracor [SEPR>SEPR] as it closed well in spite of a poor market and INSP [INSP>INSP] which formed a high level pennant.
On the short side, Avid Technology [AVID>AVID], on the Implosion 10 Technology List, appears to be collapsing out of a rounded top formation and Quintilies Transational [QTRN>QTRN], on the Proprietary Implosion List, appears to be breaking down out of a low level consolidation.
In my live forum on Cups and Handles, I was asked about profit targets for the pattern. Normally, the first target I use is the top of the handle (right side of the cup). This is where likely selling may occur as those who bought at the top of the handle might be looking to get out at break even. If the stock can clear this level it has the potential for extraordinary gains. At Home [ATHM>ATHM], a stock I pointed out on 3/15/99 that “appears poised to challenge the top of its handle around the 126 to 128 areaâ€, provides a good example. After a 3 day rally, the stock sliced through those levels today gaining over 9 points. Referring to the chart below, notice that on 3/15/99 the handle appeared to be complete (after 4 days in the making and the stock closed well). My initial target of 126-128 was based on a return rally back to the top where the handle began (see (A)).
ATHM closes well after forming a Cup and Handle on 3/15/99. The first profit target was the left side of the cup or the beginning of the handle(A). If a stock can exceed these levels it often leads to extraordinary gains.
Best of luck with your trading on Monday!
Dave Landry
Director of Research
TradingMarkets.com