Pullback or Bull Trap?
A consolidation action, or renewal of
a downtrend? Time will tell. Volume behind Friday’s downside was substantial.
For intermediate-term traders, this is the time to pull in one’s horns until
volume and price unite in a clear direction.
The Internet-focused exchange-traded
funds led the tradable funds lower. The Dow Jones Internet iShares
(
IYV |
Quote |
Chart |
News |
PowerRating)
fell 10.9%, the day’s biggest loss among the ETFs.
The B2B Internet HOLDR
(
BHH |
Quote |
Chart |
News |
PowerRating) slid
10.8%, the Internet Infrastructure HOLDR
(
IIH |
Quote |
Chart |
News |
PowerRating) 9.7%, the Broadband HOLDR
(
BDH |
Quote |
Chart |
News |
PowerRating)
8.6%, the Internet Architecture HOLDR
(
IAH |
Quote |
Chart |
News |
PowerRating) 8.2%, the Nasdaq 100 Tracking
Stock
(
SMH |
Quote |
Chart |
News |
PowerRating) 7.8%, the Dow Jones Technology iShares
(
IYW |
Quote |
Chart |
News |
PowerRating) 6.7%, the
Internet HOLDR
(
HHH |
Quote |
Chart |
News |
PowerRating) 6.0%, the Semiconductor HOLDR
(
SMH |
Quote |
Chart |
News |
PowerRating) 6.0%.
The Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) fell 9.5%.
Let’s take a longer view of the
Biotech HOLDR. Note the break below support at 150, the recording of the
basket’s lowest close in seven months and a close near the bottom of the range.
A spike in volume lends further authority to the price move. Also see that the
relative strength line is confirming the move with a break to a new six-month
low.
The rate-sensitive stocks softened,
the Dow Jones Financial Services iShares
(
IYG |
Quote |
Chart |
News |
PowerRating) by 3.1%, the Dow Jones Financial
SPDR
(
IYF |
Quote |
Chart |
News |
PowerRating) 2.5%, the Financial SPDR
(
XLF |
Quote |
Chart |
News |
PowerRating) 2.1%. For my chart analysis of
financial stocks, see my
The News commentary.
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.
If you’re new to exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab.Â
You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with
Average Crossovers. I also recommend newcomers read my tutorial,
HOLDRs: Unique Opportunity And Risk.