Dead Cat Bouncing
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.
On
Monday, the Nasdaq popped up on the open (a) but then slid in what looked like a
continuation of the bear (b). However, it managed to turn around and close on
its high (c). It wasn’t the smoothest intra-day trend from lows, but, we’ll take
what we can get in these markets.
The Vix began to implode on
Monday creating a CVR II signal. Further, the advance/decline numbers began to
improve which created a CHADTP buy signal. This, along with price action of
course, suggests that the dead cat bounce is now officially under way. And, when
you combine this with a McClellan Oscillator that remains oversold, it suggests
that the bounce has a few days left in it.
So what do we do? I think the
long side still remains the logical play. Now, before you go betting the farm
(which for me, has a literal meaning), keep in mind that this is a bounce play
only! I’m not calling for the low. I’m just reading the tea leaves from
combination of short-term systems which I am familiar.
Continue to use the Q’s
(
QQQ |
Quote |
Chart |
News |
PowerRating)
and the Spiders
(
SPY |
Quote |
Chart |
News |
PowerRating) if you are looking for a way to play this bounce in
the overall market. As always, use stops and should you be blessed with a
profit, lock in a piece.
LaBranche
(
LAB |
Quote |
Chart |
News |
PowerRating),
mentioned recently and on the Pullbacks
Off Highs List, still looks like it has the potential to resume its strong
uptrend.
Multex
(
MLTX |
Quote |
Chart |
News |
PowerRating), mentioned
Friday night, appears to be rallying out of its pullback. This suggests
that its uptrend remains.
Photronics
(
PLAB |
Quote |
Chart |
News |
PowerRating), mentioned recently on the Momentum
10 Technology List, still looks like it has the potential to rally out of a
high-level cup and handle.
Random Thoughts
I was surprised at the number of emails I
received about Friday’s “Random Thoughts”. You guys (and gals) pointed
out some really interesting facts involving pros/semi-pros, market makers,
“the-masses” and institutions. As always, thanks for making me think.
I’ll put together a summary of these emails over the next few days.
Best
of luck with your trading on Tuesday!
P.S. Reminder:
Protective stops on every trade!
“..Out of all the books on trading, I always come back to the same two books ( How to
Make Money in Stocks & Reminiscences Of A Stock Operator) and re-read them each and every year. I think that I will have to add “Dave Landry on swing trading” to that list….”
Thorne
R.
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