The Better Part Of Valor
Monday’s news movers told the same
story as the indexes: Intermediate-term traders, stay in cash. Even some of the
shorting opportunities are not working out as crisply. We lack a strong trend to
exploit. Unless you are an able day or swing trader, discretion is the better
part of valor.
Hewlett-Packard
(
HWP |
Quote |
Chart |
News |
PowerRating) reported fiscal
Q4 operating net of 41 cents a share, well off analyst estimates averaging 51 cents, according to First Call/Thomson Financial.
The Palo Alto, Calif.-based company also said it had terminated talks to buy the consulting
business of PricewaterhouseCoopers. The timing of the release caught many off
guard. Wall Street did not
expect the quarterly results until after Monday’s close.
Shares in the tech giant and Dow
component closed off 5 to 34 1/8 on nearly four times its usual trade. All
charts in this commentary use a logarithmic price scale as well as 50-day moving averages
for price (red) and volume (blue). Some charts may also include a 200-day
moving price average (in black). Chances are, Hewlett-Packard will move lower.
However, note that shares closed in the upper half of the day’s range. That’s a
sign that some institutions used the sell-off to stake positions. I would not
try to short this one.
Dell Computer
(
DELL |
Quote |
Chart |
News |
PowerRating), which
gapped down Friday after the company lowered its outlook, triggered a gap-down
short signal but ended higher. As I warned yesterday, as scary as this
market looks, it has discounted a lot of bad news in recent weeks. No one can
guarantee a bottom except in hindsight, but chances are we’re overdue for bouts
of bargain-hunting and short-covering, even if Mr. Bull remains on his back.
Attention, those of you who noticed the Nasdaq Composite put in an O’Neil
follow-through day on Oct. 31. Reset your count. On Monday, the Naz took
out the Oct. 18 low (see Point A in chart), invalidating the Oct. 31 follow-through day (Point B). So restart your count from Monday’s new low (assuming the Naz does not move lower). The FTD is one of the best indicators of nascent rallies. But no indicator is 100% accurate. As I’ve pointed out in recent weeks, you should
remain suspicious if a FTD is not accompanied with ample numbers of high performance stocks
completing bases.
Remember that all stocks are
speculative and risky. On any trade, reduce your risk by limiting your position size to a percentage of your total
account and setting inviolable price stops. For an intro to combining stops with
position sizing, check out my lesson, Risky Business.