Correction Complete?
On Wednesday, the Nasdaq gapped lower but found its low
fairly quickly in early trading. It then chopped back and forth for much of the
day. Then, late in the day, it began to mount an impressive rally. It did give
back some of these gains going into the close but still managed to close above
its open.
The S&P put in a somewhat similar performance.
So what do we do? Even though we saw some stalling action
going into the close, the fact that the market generally firmed late in the day
suggests that the correction may be over. Further, although the semis where hit
hard thanks to the talking heads (I guess they have to save their jobs by
yelling “SELL” every time a sector gets going!), they too (the semis,
not the talking heads) showed strength late in the day. Therefore, based on the
above, continue to look to get long technology but wait for signs of strength
before getting too bullish.
Looking to potential setups, Cymer
(
CYMI |
Quote |
Chart |
News |
PowerRating),
mentioned Tuesday night, still looks like it has the potential to resume its
strong uptrend.
Checkfree
(
CKFR |
Quote |
Chart |
News |
PowerRating), also mentioned Tuesday night, held
up well on Wednesday in spite of the market. This action suggests that it still
has the potential to rally out of a Double Top Knockout.
Other
Could you please walk me through the FFIV trade: Entry, Exit, etc… ?
Thank you.
Since tradehard.com reader–Bogdan.
Bogdan, in perfect 20/20 hindsight, one could have entered
above the high of the setup (a) and placed a protective stop below the swing low
(b) for about a 1-point risk.* When the profits were equal to or greater
than that initial risk (c), profits on half could have been taken and the
protective stop on the remainder could have been moved to breakeven (d)–the
same as the entry (a).
Keep in mind that this is a “marginal” example
and profits came and went fairly quickly. So, if you weren’t “on your
toes” these profits (or at the least, a trailing stop) could have been
missed (if you can’t watch a screen, you could consider a limit order for
partial profits).
Best of luck with
your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*The swing low can often be a target for market
makers. In this case, it is about a point away from the entry which is far
enough a way for a lower-priced stock. On higher-priced stocks, you might want
to use a looser stop. See my articles on money management under TM University
for suggestions on where stops can be placed.
“…Feel free to quote me, the book is fantastic. It is written for traders who want to know the real basis of
successful trading. No glory stuff. No hero tales. Plain old sound advice which is a rare commodity in this business….”
Mike Marlow
