How To Use The News To Your Advantage

February 27, 2003
Dave Landry

On Thursday, the Nasdaq opened firmer and after an initial
dip, rallied sharply in early morning trading. It then chopped sideways, dipped
and finally bounced going into the close. This action has it closing well.

Watch Tuesday’s pivot low as a potential support area. If
broken, it could likely test the February lows. On the upside, last week’s
high/the 50-day moving average remains potential resistance.

The S&P put in a somewhat similar performance.

Once again, the 50-day moving average (which also corresponds with the
bottom of a topping formation and trading range) could provide resistance
here. On the downside, watch Tuesday’s pivot low here too.

Thursday’s rally appears to be based on the fact that the
threat level was lowered from taupe to off-white (or was it to beige?). Credit
was also given toÂ Saddam Hussein saying, yeah, I’ll destroy the missiles,
that’s the ticket (remember the liar from Saturday Night Live?). Okay, I don’t
mean to make light of this serious situation. My point is that these rallies on
bogus news are questionable. Every tiny bit of news seems to jerk the market
around.Â

So what do we do?Â Even though the indices (and many
sectors) have made minor higher lows, so far, the direction still remains
down. However, as implied above, the market remains fickle. Therefore, use the
news to your advantage. On the rallies, look for potential candidates to short.
On the sell offs, look to lock in profits and tighten stops on existing shorts.

No setups tonight.Â

Smoke ’em If You Got ’em

Alliance Capital
(
AC |
Quote |
Chart |
News |
PowerRating) has generally worked its way lower
since mentioned recently. Further, on Thursday, it gapped lower (a) but reversed
to close well (b). Make sure you use these opportunities to lock in a piece and
trail a stop, especially in this give and take environment.