Bounce Mode?

June 24, 2002
Dave Landry

On Monday, the Nasdaq opened lower and after a brief blip
up, continued lower in a choppy fashion. Then around mid-day, it gained its
footing and rallied nicely. Finally, going into the bell it pulled back but still
managed to close well.

The S&P also reversed after trading lower.

So what do we do? Recent buy signals (a TRIN Reversal on
Monday and a CVR III-Modified from Friday) combined with the intraday price
reversal from new lows suggests that we are in bounce mode. However, this
doesn’t mean that you should run out and pick bottoms in individual issues. If
you are nimble or feel you must try to catch the bounce, then stick with the
index shares. Just don’t overstay your welcome since the big blue arrows are
still pointing lower.

Due to a lack of meaningful setups, I am not showing any
charts again tonight.

Walk Through Continued

Lately, I have been following up on a Trend Knockout
setup in Novellus Systems
(
NVLS |
Quote |
Chart |
News |
PowerRating). When I last left off (if you haven’t
already done so, see recent archives before reading further), I was discussing
using a 2-bar trailing stop (a). On Monday, the stock rallied to make, and close
near, a two-bar high. In cases like this where the closing price is very close
to the trailing stop, you might consider giving the stock a little room (say an
extra point or so, provided that you will at least breakeven on the second loaf)
since the chance of the stop getting hit is likely. However, for purposes of
this walk through, I’ll drop the trailing stop down to just above the two-bar
high (b).Â