Big Picture Little Picture
With
the current market environment, it is tough to even fathom
a trade to hold on to for more than a few days. As I wrote before we
have to be selective on the trades that we take. Right now we should
be looking for momentum trades that we can play from both sides of the
market. At the same time we are also looking for stocks building
constructive price patterns that will allow us jump aboard when the
time is right. Similar to an Opportunistic Fund.
One thing that I have found
helpful is the use of the Market Bias Indicator page of the site. As
you know,
I have been speaking of a timing composite on a longer term basis to
look at the big picture. What I also use are the shorter term timing
models such as the CVR signals and the TRIN signals on the market bias
page. I particularly like to use these signals if I am looking to
enter a short term momentum trade.
So what I am trying to say
is to continue to monitor both the long and short term market
conditions by using timing models and bias indicators in multiple time
frames to find trading opportunities.
Something caught my eye this
afternoon with regard to one of the indexes. Call me an optimist but
take a look a the Semiconductor Index ($SOX.X).
The index is forming a broadening triangle which (correct me if I am
wrong Mr. Haggerty) indicates a potential short term bottom for the
index.
Not so ironic is the
Semiconductor HOLDRs (SMH)
are exhibiting similar price patterns.
Diagnostic Products (DP)
is scaled higher breaking out of a multi–week
base. The medical products company has showing some nice earnings
growth (35%, 36%, 30% and 36%). The company is relatively undiscovered
by institutions (24% institutional holdings), while management holds
the same amount.
SRI Surgical Express (STRC)
is scaling higher as it looks poised to tests its high made on July
23. STRC belongs in the Medical Wholesale Drug group and is showing a
5 year growth rate of 32% with good earnings growth over the last 4
quarters (25%, 213%, 120% and 33%). Note: STRC is forming an ascending
triangle on weekly chart.
Now looking at some Exchange
Traded Funds, the Consumer Staples Select Sector fund (XLP)
moved higher by 3.5%.
The Pharmaceutical HOLDRs (PPH)
climbed 2.2%
And the WEBS-Malaysia
Benchmark (EWM)
gained 1.8%.
In the red were the Internet
Infrastructure HOLDRs (IIH)
which slid 6.7%.
The B2B Internet HOLDRs (BHH)
fell 6.6%
While the Morgan Stanley
Internet Street Tracks (MII)
lost 6.5%
Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.
Greg