Hedge Your Bets
Due to a
scheduling conflict, Dave Landry will be unable to write his
Stock Trading Outlook tonight. Tonight’s column is written
by TradersWire’s Duke Heberlein. Dave will be back on
Monday, June 26.
At the time this
is being published, the S&P Globex futures are trading
up 0.20 points.
After the Nasdaq
Composite made a 33% gain in four weeks, one would expect a
pullback. What you don’t like to see is volume increasing
during a pullback. On Thursday, the index opened at its
high, and after trending slightly downward over the first
two-thirds of the session, it encountered a waterfall of
selling in the final two hours. This puts the Nasdaq in an
outside day closing on its low (a), and not far from
the top level of its recent trading range.
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This
type of activity, when combined with the Dow’s longer-term
downtrend and its nearing the bottom of a triangle (b), does
not give the impression of a very strong market.
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However,
the market does not always behave like I, or any of the
other traders I spoke with today, think that it should. How
do we trade in a market that won’t really give us a
clear sign of which direction it wants to go? The answer is
to proceed with caution, honor your stops, and look to play
both sides of the market.
Looking
at potential setups, Cree Research
(
CREE |
Quote |
Chart |
News |
PowerRating), on the
List, has pulled back into a flag pattern and appears
poised to resume its uptrend; Modine Manufacturing
(
MODI |
Quote |
Chart |
News |
PowerRating),
on the
List, has retreated into a similar five-bar flag
pattern.
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CYTYC
Corp.
(
CYTC |
Quote |
Chart |
News |
PowerRating) has pulled back two consecutive days from
its highs and could resume its upward climb.
From
the
And Handle Patterns List, Micromuse
(
MUSE |
Quote |
Chart |
News |
PowerRating) and
Metalink
(
MTLK |
Quote |
Chart |
News |
PowerRating) both look like they have the potential
to rally out of their handles.
Eyeballing
the short side, Honeywell
(
HON |
Quote |
Chart |
News |
PowerRating), from the
List, is consolidating at its lows, and could fall even
farther. Fastenall
(
FAST |
Quote |
Chart |
News |
PowerRating), mentioned Wednesday night,
still appears to be resuming its meltdown.
Best
of luck with your trading on Friday!
Duke
Heberlein
P.S.
Reminder: Protective stops on every trade!