Bear Update
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.
On
Friday, the Nasdaq gapped lower (a) and proceeded to sell off. Then, late in the
day, it bounced off of 2,600 and recovered to close fairly well (b) when
you consider that it could have been much worse.
It didn’t quite
reach old lows (c), our recent target to the downside, but it’s close enough to
call it a test of the old lows, especially when you factor in the late-day
reversal.
To
the upside, 3,000-ish and the 50-day simple moving average remain likely
resistance (d).
The fact that tech
bounced late in the day in the face of the Microsoft debacle de jour is a
positive. Also, the “throwing in the towel” on real stocks with real
assets and earnings suggests that we may be nearing the end of the bear (don’t
worry Bear, not you, at least not yet)* or, at least, the beginning of the end.
However, based on chart action alone, there is no sign that we should jump in
and bet the farm (I guess for me that has more literal meaning than for most of
you). We could likely see a bounce play sometime next week depending on
the Market Bias signals and other short-term market timing signals that I
follow.
So what do we do?
Most stocks are now very oversold, which makes shorting difficult. Surprisingly,
and as mentioned Thursday night, there are a few longs that are setting up.
Therefore, at the risk of being redundant, nibble only.
Looking to potential
setups, Met Live
(
MET |
Quote |
Chart |
News |
PowerRating), mentioned Thursday night and on the Pullbacks
Off Highs List, began rallying out of a pullback/flag (a) on Friday and looks poised to continue higher.
Scios
(
SCIO |
Quote |
Chart |
News |
PowerRating),
mentioned Thursday night and on the Pullbacks
Off Highs List, still looks like it has the potential to resume its
longer-term uptrend.
Toll Brothers
(
TOL |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, bounced off support (around 38) and rallied to close well.
Neuberger (not to be confused with hamburger, see below) Berman
(
NEU |
Quote |
Chart |
News |
PowerRating), also
on the Pullbacks
Off Highs List, sold off earlier in the day but reversed to close well. The
action in these stocks suggest that their uptrends remain intact.
On the short side,
Navistar
(
NAV |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to resume its meltdown.
Best
of luck with your trading on Monday!Â
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!
*Bear Update: Bear’s been a little
upset lately about finding a McDonald’s wrapper in the trash. He’s also a
little suspicious about why we are giving him so much corn and oats as of late.
Other than that, he’s doing great and is now big enough to pretty much care less about any harassment from
Tracy.Â
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.