Upside-Down Cups Following Through
Don’t let Monday’s action in chips
excite you if you trade growth stocks for the intermediate term. Many of the
strongest growth stocks continue break down from bearish setups.
Note the breakdowns from inverted
cup-with-handles in Siebel Systems
(
SEBL |
Quote |
Chart |
News |
PowerRating), Newport
(
NEWP |
Quote |
Chart |
News |
PowerRating) and Check
Point Software Technologies
(
CHKP |
Quote |
Chart |
News |
PowerRating).
I don’t pick bottoms, but with this
kind of renewed damage in the Nasdaq, you’ve got to keep an eye over your
shoulder if you’re going long in any of the strong groups such as defense,
select retail and some of the finance names that have done well. If a climax
sell-off does come, we will get a wicked rotation. So keep a sharp eye on those
top-performing issues. American Eagle Outfitters
(
AEOS |
Quote |
Chart |
News |
PowerRating), after sending
clear danger signal, broke badly Monday. Among other names that should be the
select retailers on notice are Hot Topic
(
HOTT |
Quote |
Chart |
News |
PowerRating) and Chicos FAS
(
CHCS |
Quote |
Chart |
News |
PowerRating).
The top field of this chart 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 with a 50-day moving average in blue for volume.
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. For further treatment of these and related topics,
you’ll find extensive lessons in the Money
Management area of TradingMarkets’ Stocks Education section.