Trying Times
Since my last column a couple of weeks
ago, a few of the tech names I discussed not only broke out to new highs, but
actually followed through. Good action, despite fighting a downtrend in the
Nasdaq Composite that lasted the entire month of September.
But what about all that buying that
was supposed to come in from the “A” team returning from their
vacations after Labor Day? Wasn’t that supposed to prop the whole market? Am I
being cynical? Of course. But never believe the hype, just believe what you see.
Mercury Interactive
(
MERQ |
Quote |
Chart |
News |
PowerRating),
Network Appliance
(
NTAP |
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PowerRating), and BEA Systems
(
BEAS |
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Chart |
News |
PowerRating) broke free from their
long basing patterns, one by one, on heavy turnover. The only question now is
whether or not they can hold any pullback test to the breakout point or just
pilfer away small profits like many other breakout failures recently.
That likely rests on the shoulders of
the Nasdaq Composite itself.
Although the Naz gave every indication
that its four-week drop may have ended on Thursday’s heavy-volume price
reversal, Friday’s heavier-volume onslaught left a lot to be desired for the
intermediate-term trader. Then again, if you’ve been listening to the market and
closely watching the little nuances to the stocks still basing to make sure
every little wiggle and every little volume characteristic was just right, you
shouldn’t be too long anything at this point anyway.
Most ostensible basing patterns over
the past several weeks have been rife with faultiness. Either the patterns were
too “wedgy” just before breaking out, broke out on insufficient
volume, or recovered from patterns that were too deep. Sure stocks can break out
from deep basing patterns but chances are they won’t get too far before
failing. Can you trade them “out” into the breakout? Why not? Just so
you are aware, the odds of riding one of these for a big move is pretty remote.
By the time the stock actually breaks out to new highs, it’s already covered
quite a bit of distance.
Unfortunately, this is my last
column for Tradingmarkets.com. Sometimes in life we all come to a point where
something has to give–or “go” in this case. My hedge fund continues
to grow steadily and requires more and more of my attention.
I’ve had a great time sharing my
experience with you. I hope I’ve been able to touch at least someone’s life.
Otherwise this little venture of mine would be a complete failure in my eyes.
Always remember, the winners in the market make small mistakes, the losers make
disastrous ones. The most efficient way to live the life of a winner in the market is to always
stay attuned to what it’s doing.
Oh, one other thing: Leave that
ego we all carry (to one degree or another) at the door to your trading quarters.
No matter how successful you become in the market, stay humble–you’ll need
that more than anything else!
Good luck in your trading!