Continue to Keep It Light
On Thursday, the Nasdaq gapped higher on the open but
quickly found its high and sold off. It then chopped sideways for most of the
day before selling off early in the afternoon. It did recover somewhat by the
close but still looks like the beginnings of a reversal, especially when you
consider that it failed to get through its 50- and 200-day moving averages
(circa 1900).
The S&P also showed some signs of reversing but did
manage to say above its 200-day moving average.
So what do we do? Even with Thursday’s signs of reversal, I
think it still remains a difficult environment. True, the market remains really
overbought, but this doesn’t mean it can’t become really, really* overbought.
However, if you do get long, the correction will continue. Therefore,
continue to keep it light, if this truly is a new bull, there will be many of
opportunities (i.e., pullbacks) along the way. On the long side, I’d stick with those issues that have outperformed
the market long before the rally and have the ability to rally contra to the
indices (e.g., consumer non-durables). On the short side, continue to focus on issues such as
Internet and software that really haven’t taken off with the rest of the
market. No matter what you do, just make sure you wait for entries and
honor your stops.
Looking to potential setups, Alberto-Culver
(
ACV |
Quote |
Chart |
News |
PowerRating),
mentioned Wednesday night and in
the strong aforementioned consumer non-durables, still looks like it has the potential
to resume its strong uptrend out of a pullback.
Storage Technology
(
STK |
Quote |
Chart |
News |
PowerRating), mentioned recently and in the weak computer hardware/storage sector,
still looks poised to resume its downtrend, especially if it takes out
Wednesday’s pivot low.
Best of luck with
your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*What character in Shrek said “really
really” first? What type of animal was he/she and what was his/her name? Just
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