Forget The News, Trade What Is

Yesterday was quite an interesting day. The market jumped out of the gate, made a quick move to 10,000 on the Dow, and then immediately went south to hit the first low before 11:00 a.m. ET.

The bond market sold off and we proceeded to get a parade of jawboning from Fed Governor Ed Gramlich, who said, “It’s not so obvious that over a long period of time stocks will be a better investment than bonds.” Well Ed, if they’re not, we better sell everything we have right now, because it doesn’t work the other way.

Then, Treasury Secretary Bob Rubin said he sees “no threats to markets from protracted conflict in Yugoslavia.” Sounds like a hint, Bob.

The market entered a dull trading range from 11:00-2:30 p.m. ET, then got blown out by the S&P futures to close at the lows of the day. At one point, though, both the Dow and the S&P were in negative territory but most of the “Nifty 25-50” stocks were green. But most went red by the bell. (There were a few that stayed green throughout the day, which will appear in the target stocks section.)

Around 8:30 a.m., the S&P futures are up 7.5 points, and the Nasdaq leaders are up–exactly the same situation we had yesterday. Let’s hope the infamous “they”–whoever they are–have a different agenda today.

Target Stocks Of The Day  Here are a few high relative strength stocks showing good narrow-range patterns: Avon [AVP>AVP], Tricon Global Restaurants [YUM>YUM], Ameritrade [AMTD>AMTD], Tel Mex [TMX>TMX], and Network Solutions [NSOL>NSOL].

One continuation pattern in a stock that acted very well yesterday is Solectron [SLR>SLR]. It could accelerate on a breakout above a three-week symmetrical triangle.

The following stocks all finished up yesterday despite the futures and should be on your screens today for possible intraday entry (if the market gaps ups, look for the pullback): Schwab [SCH>SCH], America Online [AOL>AOL], Lucent [LU>LU], Ascend Communications [ASND>ASND], and American International [AIG>AIG]. These stocks could take off today if the market makes an up move.

Keep your stops tight. Next week we’ll get a better idea of the real agenda and what people really think is going on. Disregard the news, trade what is.

Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.