Does Friday’s Action Change Everything?
Looking to the indices, on Friday, the Nasdaq initially
traded in the plus column but quickly found its high and began to sell off. Then
after some mid-day drifting, it resumed its sell off in afternoon trading. This
action has it closing poorly.
The S&P put in a very similar performance.
So what do we do? I really hate to
flip flop on you, but I’m concerned that Friday could change everything. The
indices have now given back all of Wednesday’s rally. Although must sectors
still remain in uptrends, areas such as software, telecom, and Internet (and
other many other tech areas) are stalling below multiple tops. Further, some
recently very strong areas such as broker/dealer and to a lesser extent
homebuilders were hit fairly hard on Friday. Considering the above, on the long
side, I think a “show me” stance would be prudent–watch for
opportunities but only take them if the market/sector/stock shows signs of
turning back up. More patient traders may want to wait until the market makes it
back to old highs before looking to get in. On the short side, for the
aggressive, you might want to start watching for transitional setups in those
areas that are stalling below tops.
No setups tonight.
Other/Housekeeping
On Thursday, I mentioned that I would discuss price based
stops today. However, due to a scheduling conflict, I will now discuss this on
Monday. My apologies.
I’m a little backed up on emails but hope to catch up
soon.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
P.P.S. Learn my best swing
trading strategy in my new interactive CD-ROM. Click
here now for details.