A Possible Play For An Unsure Market
On Friday, the Nasdaq opened flat and then generally
worked its way lower in a choppy fashion throughout the day. It did bounce late
in the day, but this wasn’t enough to keep it out of the minus column. This
action has it hitting and closing at multi-month lows. It also puts it below a
tremendous amount of overhead resistance and has it nearing its 200-day moving
average.
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The S&P dipped below its recent lows but did manage to
recoup some of those loses.Â
So what do we do? I still remain bearish for
those reasons given lately: The leaders have been commodity related. This is not
what a bull market is made of. And now that those issues are beginning to break
down, it’s vital that new leaders emerge (so far, that hasn’t happened). The
Nasdaq remains in a sideways trading range and now could be breaking down. Most
of tech has formed a similar pattern. About the only good thing I can gleam is
the fact that the indices are oversold and due for a bounce. However, this in and of itself isn’t
reason enough to go long. Therefore, if you are a trader, you might look to play
this bounce in the index shares (vs. individual issues). On the short side, since the market is due to
bounce, you might want trade in those issues that can trade independently of
the indices. With that said, commodity related stocks still look like they could
be in the early phases of forming a top. Use caution though since trading
transition patterns is like being a pioneer-sometimes the reward is huge (you
catch a top early) but other times you end up with a (big blue) arrow in your
back.Â
As far as setups, Petroleo Brasileiro
(
PBR |
Quote |
Chart |
News |
PowerRating),
in energy, looks like it has the potential to continue its slide out of aÂ
First Thrust (as usual, email me if you need the
rules).Â
Best of luck with your trading on Monday!Â
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.
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