Catch A Falling Knife?
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.
face=”Arial, Helvetica”>Join me, fellow TradingMarkets.com
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the Trading Markets 2000 conference at the Venetian Hotel
Resort and Casino in Las Vegas on October 13-15, 2000.
At
the time this is being published, the Globex S&P futures
are trading up 0.30 points and the bond market is trading up
1 tick.
face=”Arial, Helvetica”>Not a pretty day in Tech Land. On
Wednesday, the Nasdaq opened lower and kept on going. There
were a few countertrend rallies, but for the most part, the
trend was down. This action has the Nasdaq closing on its
low (a).
face=”Arial, Helvetica”>And, once again, the market
“fell on its own weight” (i.e., it sold off on
light volume).
face=”Arial, Helvetica”>The Nasdaq has already retraced more
than 50% of its recent move out of its consolidation. It’s
important for it to stabilize in this area and for the
psychologically important 4,000 level (b) to hold.
Otherwise, the bottom of the recent consolidation (c), which
roughly corresponds with the 50-day and 200-day moving
averages, will be the next likely target.
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So
what do we do? There’s no need to step in to catch a falling
knife. However, surprisingly, there are quite a few stocks
that are setting up on the long side tonight (Wednesday).
Therefore, on any stabilization in the overall market, these
stocks may be worth a look.
And
now for something completely different. By now, I’m sure
you’ve noticed that none of my picks from Tuesday night
worked out on Wednesday. In fact, stocks such as Portal
Software
(
PRSF |
Quote |
Chart |
News |
PowerRating) got creamed. Why am I pointing this
out? Because none of these stocks was able to rally above
the prior-day’s high (nor to drop below the prior-day’s low
for the sell-short recommendations). As you’ve heard me
preach before, you should always wait for follow-through
before attempting an entry. As you can see, a simple rule
like this often can keep you out of trouble.
Looking
to potential setups, 3 Com
(
COMS |
Quote |
Chart |
News |
PowerRating), mentioned recently
and on the
From Highs List, has now pulled back to about 50% of its
breakout bar, and it’s now at the do-or-die juncture. If it
can take out Wednesday’s high, it’s likely headed back to
its recent highs. Otherwise, you should avoid this stock.
Artesyn
Technologies
(
ATSN |
Quote |
Chart |
News |
PowerRating), also on the
From Highs List, rallied to close well, in spite of the
overall market. This suggests that its uptrend remains
intact. Interwoven Technologies
(
IWOV |
Quote |
Chart |
News |
PowerRating), on the same
list, sold off earlier on Wednesday, but recovered to close
well. This action may have shaken out the weak hands and
could clear the way for the stock to trade higher.
For
you breakout players, Sanmina
(
SANM |
Quote |
Chart |
News |
PowerRating), on the
Momentum List, managed to close at a new closing high
on Wednesday and looks poised to break higher.
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Believe
it or not, I had difficulty finding decent short setups on
Wednesday night. Many of the stocks that were already in
downtrends are even more oversold, and many of the
high-flyers are still in pullback mode.
Best
of luck with your trading on Thursday!
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!