I’m Feeling Good

On Thursday, the Nasdaq opened flat and proceeded to sell
off. It found its low early in the morning and began to rally. However, it
stalled out by mid-day and sold off to make new lows. This action has it closing
poorly.

 

The S&P held up better on a relative basis. It stopped
just short of Wednesday’s low.

 

So what do we do? Tonight, I’d like to discuss my
“feel good” index. I have finally learned that when I feel really good
in the markets, I usually get whacked. And lately, I’ve been feeling really good
about playing the short side. In fact, I can’t keep my eyes off of my portfolio
page. It is at these times, when I’m feeling most bulletproof, that I have to
force myself to take profits and tighten stops because the end of the cycle is
near. On a more quantitative note, the market is very oversold. I’m basing this
on the stretched VIX readings, the oversold McClellan Oscillator, the recently
high three-day average TRIN readings, and price itself. Therefore, I think we
are getting closer to a bounce. With that said, look to nibble on the
long side but stick with the strongest issues in the strongest sectors. 

Looking to potential setups, Coach Inc. (COH),
in the strong consumer non-durable sectors, looks like it has the potential to
resume its strong uptrend out of a deep pullback.

 

Walk Through

Lately, I have been mentioning Techne Corp. (TECH)
as a potential short. As you can see, based on today’s performance, it can be
worthwhile to stalk a setup even if it doesn’t work out right away. 

With today’s down move, let’s assume the protective stop
will be lowered to just above recent highs (a). This area is not too far away
from breakeven. Therefore, barring overnight gaps, the worst outcome of this
trade would be a scratch.

 

Best of luck with your trading
on Friday!

Dave Landry

sentivetradingco@prodigy.net

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

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