Bounce From Oversold?

June 25, 2002
Dave Landry

Due to my appearence on Bloomberg TV, my commentary was delayed tonight (06/25/02). I apologize for any inconvenience this may have caused.

On Tuesday, the Nasdaq lapped higher but quickly found its
high. It then chopped around for much of the morning before selling off in
earnest.

The S&P also reversed after trading higher.

So what do we do? The fact that we are closing in on the
September lows, combined with recent buy signals, suggests that the market still
has the potential to bounce. However, this alone isn’t reason enough to run out
and buy this severely oversold environment. I think it’s a damned-if-you-do-and-damned-if-you-don’t situation (I’ll spare you the sermon tonight).

Due to a lack of meaningful setups, I am not showing any
charts again tonight. If
you are nimble or feel you must try to catch a bounce, then stick with the
index shares. Just don’t overstay your welcome since the big blue arrows are
still pointing lower.

Walk Through Continued

Lately, I have been following up on a Trend Knockout
setup in Novellus Systems
(
NVLS |
Quote |
Chart |
News |
PowerRating). If you haven’t
already done so, see recent archives before reading further. We I last left off, I was discussing
using a 2-bar trailing stop or giving the stock a little room. For purposes of
this walk though (and to help keep the nasty grams to a minimum), let’s assume
that the trailing two-bar stop was hit (a). There is more of a lesson here
though. Notice that the stock gapped open and only traded slightly higher (b)
before reversing (c). This is know as a “pop up” opening and is
fairly common. Therefore, for those who are willing to use discretion and can
watch a screen, you can often avoid being stopped and stay in positions or
“trade out” of them. For more on this, see my article Adding A Layer
Of Discretion To Your Swing Trades.