After The Fact
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
market’s opening. Therefore, overnight events may alter the
outcome of these observations.
The Nasdaq opened flat
on Tuesday, sold off, but reversed late in
the day to recoup most of its losses.
The market is fairly overbought based on a low three-day moving average of the NYSE TRIN, relatively low
VIX
readings, high average advance/decline readings (CHADTP), and the price action in
general. This may be the last pullback from lows, but we won’t know this until
after the fact; that is, we just have to
keep playing the downside momentum until it looks like it is going to change. Listening to my analysts*, they’re telling me that
the trend remains
down. This, and that decent-looking longs were difficult to find, suggest that the short side remains the logical play.
British Telecom
(
BTY |
Quote |
Chart |
News |
PowerRating) looks poised to rally out of a Bow
Tie.
Celgene
(
CELG |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to resume its downtrend out of a four-bar
“simple” pullback. Computer Sciences Corp.
(
CSC |
Quote |
Chart |
News |
PowerRating), on the
same list, has a somewhat similar pattern.
Teva Pharmaceuticals
(
TEVA |
Quote |
Chart |
News |
PowerRating) gapped higher
on the open but reversed to close poorly, suggesting that it has the
potential to resume its downtrend out of an inverted cup-and-handle.
Random Musings
On Money Management
Make sure you wait for entries. Notice
that Mylan Labs
(
MYL |
Quote |
Chart |
News |
PowerRating), mentioned as a potential short on Friday, blasted off
on
Tuesday. However, because the stock failed to follow through to the downside
(trade below the prior 1-2 bar lows) there was no entry. As you can see, the simple
rule of waiting for the follow-through can often keep you out of trouble. Read
in the Ten
Tenets Of Swing Trading, rule #2: No Tickie, No Tradie.
Remember our friend Schering-Plough
(
SGP |
Quote |
Chart |
News |
PowerRating)?
Without money management–protective stops and taking profits–this winning
trade would have been an overall loser. I’ll cover this in detail in an upcoming trading
lesson.
Best
of luck with your trading on Wednesday!
P.S. Reminder:
Protective stops on every trade!
*To those new to this column, I have a team of
6-year old analysts who are pretty good at determining the trend of a market.
“Dave,
I’m half way through your book and I’m thoroughly enjoying it. Your words
are clear and concise and easy to follow. I think the most important
aspect of the book is money management. This is where I think most people
stumble.”
Joe
No risk, 30-day, money
back guarantee.