Choppy

January 9, 2001
Dave Landry

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
market’s opening. Therefore, overnight events may alter the
outcome of these observations.

On
Tuesday, the Nasdaq gapped slightly higher (a) and chopped around most of the
day. It finished off of its high but held above its open. I
suppose we’ll score it as a positive, based on the point gain. However,
this really isn’t the amount of follow-through one would expect after a reversal
day.

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The S&P 500 also failed
at any meaningful follow-through. It tailed off from the high.

So what do we do? At the risk of being redundant, the trend
remains down and the market choppy, at best. Therefore, keep it light
until we get a clearer picture.

Follow Up

Last week we looked at Amerada Hess
(
AHC |
Quote |
Chart |
News |
PowerRating)
as a setup/money management example. We showed where the entry could
have been (a), where the initial protective stop could have been placed (b),
where half of the profits could have been taken (c), and how the stop could have
been moved to breakeven on the remaining shares (a)–the same as the
entry. Notice that on Tuesday the stock sold off to below the area of the entry (d), creating a scratch on the remaining shares.

Duke Heberlein is going to use this example
for the “Trade Of The Week” on Beginning Trader.com. Why would he use such
a mediocre trade? Because money management is vitally important, and without it,
this would have been a losing trade. Take care of the losers (and occasionally
profit from them through partial profit taking), and the winners will take care
of themselves.