Don’t Fight With A Dead Cat

On Friday, the Nasdaq popped open but proceeded
to sell off. It found its low by early afternoon and rallied to close
well.

 

The S&P also put in a solid performance late
in the day.

 

So what do we do? Friday’s reversal is important
since the market was very oversold and some of my market timing
signals were buys. This action suggests that the “dead cat”
bounce has begun. Don’t fight it, look to nibble on the long side,
tighten your stops on existing shorts and possibly take partial
profits if you have them.

Looking to potential setups, Ryland Group (RYL),
in the strong homebuilders, looks poised to rally out of a pullback.

 

On the short side, the banks looked poised to
continue their rollover (soon) out of a Bow Tie. Don’t fight the tape
though — wait for entries. The large “money center” banks
such as Bank One (ONE)
look the most vulnerable.

 

Walk Throughs

On Thursday, I discussed that a good place for a
stop on Techne (TECH)
(a stock mentioned recently) would be right above its recent highs.
For Monday, we’ll leave this stop in place (a).

 

Coach Inc. (COH),
mentioned Thursday night and in the strong consumer
non-durables, may also provide a good example. Notice that the stock
was up nicely on Friday. So, let’s assume that our protective stop is
just below the recent lows (a). This, barring overnight gaps, has now
reduced risk to about one point. 

 

 

Return Of The Blue Arrow?

I received several emails on Friday asking me
“where are the blue arrows?” and “the blue arrow is
down, why are you talking about a bounce?” First, yes, the blue
arrows are pointing down. You’ll notice that I put them in tonight’s
index charts. Second, I follow market timing systems (some mine, some
others) that have shown a 60-75% chance of predicting the market over
the next 3-7 days. When these trigger buys, especially in an oversold
environment, I know that there is a good chance to play the bounce
(and tighten stops/take profits on shorts). Remember though,
“bounce” is the key word in the prior sentence.

Other

I was unaware until after the fact that they were
not videoing my Trading Markets 2001 presentation. However, I noticed
that someone there was making a personal copy. I would love a copy for
my own viewing (I’ll explain in further detail why if you contact me).
I would be happy to pay any costs incurred to duplicate/ship the tape
(and throw in a book and/or a few months of my trading service for
your troubles). Please contact me via email if you have this or might
know who does. Thanks!

Best of luck with
your trading on Monday!

Dave Landry

sentivetradingco@prodigy.net

P.S. Reminder: Protective stops on
every trade!

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really congratulate you on having written one of the clearest, most
concise books on trading that I’ve ever read…..a superb contribution
to the trading literature……”

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