Closer To A Bounce
On Monday, the Nasdaq opened flat and began to chop around.
It found its morning low late in the morning and began to rally. However, it
reversed early in the afternoon and worked its way lower all the way into the
close. This action has it closing poorly and at fresh 6-year lows, once again.
The S&P behaved in a similar manner. It looks poised to
test its old lows.
The VIX is beginning to stretch away from its 10-day moving
average and is closing in on relative highs
So what do we do? Obviously, the market became more
oversold on Monday. This, combined with the fact that the VIX is beginning to
stretch away from its moving average, suggests that we are getting closer to a bounce.
Therefore, probably the best thing to do scale out of existing short
positions and trail a protective stop on the remainder.
No setups tonight. Don’t worry though, they’ll be plenty
of stocks setting up on the next bounce.
Trail ‘Em
Lately, I have been discussing using a trailing stop on the
Software Holdrs
(
SWH |
Quote |
Chart |
News |
PowerRating), mentioned recently (see archives). I was discussing using
using either a 1.5 point stop or a 2-bar high. Going into Tuesday, let’s keep the stop at 1.5 points away from the close (a).
Speaking of trailing, Varian Semiconductor
(
VSEA |
Quote |
Chart |
News |
PowerRating),
Fannie Mae
(
FNM |
Quote |
Chart |
News |
PowerRating) and the Semi HOLDRs
(
SMH |
Quote |
Chart |
News |
PowerRating), all mentioned recently (see
archives), have made nice moves since first mentioned. Make sure you are
trailing a stop here too.
Best of luck with
your trading on =Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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