Trend Knockout
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 1.90 points higher and the bond market is trading up 1 tick.
On the Pullback List, there are several stocks of interest. Juniper Networks [JNPR>JNPR] is a pattern I call a Trend Knock Out. This is when a strongly trending stock sells off and takes out (at least) the prior two lows (a). This often knocks out the weak hands and clears the way for the security to trade higher. Just wait for it to re-assert itself before looking for an entry as it did close down for the day. Open Market [OMKT>OMKT] looks like it has the potential to resume its uptrend, especially if it can take out the prior 2-3 bar highs. Microcell Telecom [MICTF>MICTF], appears to be rallying out of a deep pullback. And finally, Vignette [VIGN>VIGN], mentioned last night, still looks interesting to me.
Sun Microsystems [SUNW>SUNW], on the Volatility Explosion List, has formed a narrow consolidation (a) inside a wide range day (b) and looks poised to break higher as volatility reverts back to its mean (see the 3 part series on volatility under the Traders Learning Section for an in depth explanation of the subject).
For you breakout players, Oracle [ORCL>ORCL], on the New 60-day Highs on Double-Volume List, broke to new highs out of a shallow pullback today.
On the short side, Nike [NKE>NKE], on the Proprietary Implosion List, is a loosely formed inverted cup and handle formation.
BTW, is it just me or are these markets crazy? Take a look at the Semiconductor Index [$SOX.X>$SOX.X] when you get a chance.
Best of luck with your trading on Friday!
Dave Landry
PS – Reminder: Protective stops on every trade!