New Ideas Thinning
The market is generating
fewer and fewer valid setups from my perspective. That’s a yellow
light, not a red light. It’s a sign that a trader should look to
partial profit-taking to lock in gains,
and become less aggressive until the market shows clear evidence of a
new leg up in the current rally.
PeopleSoft (PSFT)
perhaps isn’t the best example of what I’ve been seeing. I’ve warned
before in this column that the stock’s apparent base was too deep to
be
valid. Now the stock is acting weak in the handle area. This is
unhealthy price action.
However, The Keith Companies
(TKCI)
was building a valid base,
and ran into trouble Thursday. The stock can reset from here, but
seeing this kind of action across numerous stocks should put you on
your guard.
Metro One Telecommunications
(MTON)
tried to move into new high ground and got slapped back on heavy
volume.
Among the
exchange-traded funds, none of the ETFs managed gains of at least 1%.
On the downside, the Internet Infrastructure HOLDR (IIH)
fell 11.1%, the Dow Jones Internet iShares (IYV)
7.5%, the Software HOLDR (SWH)
6.2%, the B2B Internet HOLDR (BHH)
6.1%, the Semiconductor HOLDR (SMH)
5.7%, the Broadband HOLDR (BDH)
5.3%.
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.