How to trade the ‘Meat Loaf’ setup
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
If you would like a free trial to Dave’s Nightly Swing Trading Alerts Report
On Tuesday, the Nasdaq opened strong and initially continued higher but then traded back-and-forth throughout the rest of the day. It was able to hold on to lion’s share of its gains though.Â
height=”311″>The S&P traded back and forth but did close in the plus column.Â
height=”311″>So What Do We Do? Notice above that the S&P is right on its 50-day moving average. Although this in and of itself isn’t a big deal, notice that if it trades any lower, it will be below its prior trading range. This would become a level where investors may be looking to get out at breakeven–for your technical folk, this is known as overhead resistance. Obviously, if this happens, it would not bode well for the overall market. Therefore, use caution on the long side. Savvy traders might want to continue to keep an eye out for transitional (i.e. early trend) shorts.  Â
As far as setups, Novellus
(
NVLS |
Quote |
Chart |
News |
PowerRating) looks like it has the potential to resume its uptrend out of an Explosion Gap Pivot (as usual, email me if you need the rules). You may be wondering, if I’m so worried about the market, then why am I showing a buy side trade? Well, this is what I call a “Meat Loaf” setup (there’s a joke in there somewhere): Ideally you want market/sector/stock all moving in the same direction. In this case, the stock is moving higher and the sector, so far, still remains in an uptrend. However, the market remains a big question market. So, I guess “2 out of 3 ain’t bad.” Seriously, in a case like this, you either ignore the possible setup or trade at a reduced size. I’ll walk through this one in Wednesday’s presentation (scroll down to the bottom for more info–sort of reminds me of people who run out of room on a piece of paper and put “over” at the bottom).
height=”311″>Weekly Interactive Presentation
Tune in tomorrow—Same bat time and same bat channel (dang, I’m actually old enough to remember this!!!):Â
I’ll be doing my weekly  interactive A/V presentation on Wednesday
01/26/06 at 11:00 AM EST. Who knows, I might even dress as Batman this week.
Anyway, I plan on covering market/sector conditions and what to do when a market may be rolling over. I’ll also cover what worked and what didn’t. Futher, I’ll continue to harp on recent themes such as not micromanaging, sticking with swing trades for long-term gains, making fun of carnival barkers, Arnold imitations etc. As usually, admission is free but seating is limited by the software. Email me for instructions (the same each week).
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free trial to my trading service, click
here.