Back To Blue Arrows

May 15, 2002
Dave Landry

On Wednesday, the Nasdaq opened lower but quickly found its
low and began to rally. However, it stalled out late in the day to give up much
of its gains. This action has it reversing just short of its 50-day moving
average.

The S&P also reversed after tailing higher. It closed
poorly and in the minus column.

The stalling action in the indices suggests that they have
the potential to turn back into the direction of the big blue arrows.

So what do we do? Many of the technology sectors tailed
higher before reversing to close poorly. This action sets up pullbacks from lows
and suggests that they will resume their longer-term downtrends. Therefore, on
the short side, look for opportunities in technology. On the long side, I think
I’m going to continue to play it close to the vest–stick with issues that have
done well before the last down leg and/or those that can contra to the overall
indices (e.g., golds).

Looking to potential setups, Biogen
(
BGEN |
Quote |
Chart |
News |
PowerRating) in the weak
biotechs, tailed higher but reversed to close poorly. This action sets up a
pullback/Trend Knockout and suggests that its poised to resume its downtrend.