After The Correction

On Friday, the Nasdaq opened flat and began
to drop. It found its low by noon and then chopped around for the
remainder of the day. This action has it closing poorly and suggests
that the bottom of the recent range, circa 2100/ the 50-day moving
average will likely be tested.

 

The S&P sold off
to give up all of Thursday’s gains and then some. This suggests that
the 50-day moving average and 1240 support levels will likely be
challenged.

So what do we do? I feel better now that the
indices are doing what they should. My apologies to you if you are
long, but the market should not diverge too much away from the
sentiment indicators. Now that we have begun to correct in earnest, it
may be time to think about what you want to buy when it’s finished. As
I scan through my charts and sectors tonight (Friday), it looks like
biotech may be your best bet here. No need to be a hero though. Let
the correction continue to unfold. Patience is a virtue.

Speaking of biotechs
and looking to potential setups, Celgene (CELG),
on the  Pullbacks
Off Highs List, sold off hard earlier in the day (a) but recovered
to close fairly well (b). This action forms a Trend Knockout.

Rounding out the
biotechs are Protein Design Labs (PDLI)
and Enzon (ENZN).
Both have begun to pull back from strong trends and both look poised
to resume that trend.

On the short side, Sanmina (SANM),
mentioned recently as a Bow Tie, still looks vulnerable and is now a
low volatility situation.

 

More Feeling Good
Follow Up

Congratulations to
Eric B. who correctly identified last night’s lyrics as being by
Jennifer Trynin from her song “Better Than Nothing”.

Don’t worry Coop, I’m
not stealing ya gig!

Best of luck with
your trading on Monday!

Dave
Landry

P.S. Reminder: Protective stops on
every trade!

“…I
think you have put together a terrific resource to help swing traders.
I really appreciated your market analysis process….”

Rick
F.

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