Bumping
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
markets opening. Therefore, overnight events may alter the
outcome of these observations.
On Monday, the Nasdaq gapped higher on the open and
continued higher–up 4% at its highs (a). However, it stalled out and began to
drift by mid-day. Then, it sold off for the remainder of the day and closed poorly (b).
Even with this poor afternoon performance, the index still managed to tack on
about 2%.
The S&P showed similar stalling action as it hit
resistance near the left side of its cup.
The fact that the Nasdaq and S&P reversed combined with
sell signals on the Market
Bias Page has me rethinking the overbought indicators mentioned on Friday.
These include an overbought McCllean Oscillator, low three-day average NYSE TRIN
readings, reversals in the VIX and high CHADTP readings.
So what do we do? The fact that we stalled out combined
with the indicators mentioned above has me somewhat concerned. I’m remaining constructive on the market but it looks like we might be bumping up against a
little selling pressure. Therefore, continue to take profits and trail
your stops on existing longs and wait for entries on any new long positions.
Further, for the nimble, you might consider a short or two.
Looking to potential setups, Shaw Group
(
SGR |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, looks like it has the potential to resume its strong
uptrend. Just wait for follow through to the upside as it did close poorly.
For those willing to gamble, Harrah’s Entertainment
(
HET |
Quote |
Chart |
News |
PowerRating),
on the Pullbacks
Off Highs List, appears to have stabilized from Friday’s correction and looks
poised to resume its melt up.
Applied Microcircuits
(
AMCC |
Quote |
Chart |
News |
PowerRating) looks poised to continue
its rally out of a low-level cup and handle.
On the short side, Ambak
(
ABK |
Quote |
Chart |
News |
PowerRating), mentioned recently,
still looks vulnerable.
Ecolab
(
ECL |
Quote |
Chart |
News |
PowerRating), on the Proprietary
Implosion List, looks poised to resume its melt down out of a pullback from
lows.
Other
For those new to this column, I focus mostly on momentum stocks that are in pullbacks
or variations thereof. Positions are held, on average, for two to seven days. If the stock fails to “trigger”–for
longs to trade above the prior day’s high (or where the setup suggests) then the setup is ignored.
Protective stops are always used and usually placed below the low of the setup (for longs). The protective stop is
moved to breakeven (and subsequently trailed) and partial profits are taken as soon as the profits exceed the
initial risk. Partial to full profits are also taken on parabolic moves. For more information on
my trading style see my numerous articles under Trader’s
Lessons or buy that wonderful book on swing trading that I refuse to plug.
Best
of luck with your trading on Tuesday!
P.S. Reminder:
Protective stops on every trade!
“..Congratulations on a well written, well charted, and easy to read trading manual…..”
Jonathan
G.
No risk, 30-day, money
back guarantee.