Instant Sell-off Or Slow Drip, Sir?

  • August 6, 2002
  • Dave Floyd

That
pretty much explained yesterday’s price action
in the afternoon. Sure, we closed lower, but from an HVT standpoint, it was
pretty choppy. The morning session was the only time I saw and took
high-probability setups. If you were trading with a slightly longer time frame
and short, the market was perfect for that approach. This is becoming the theme
lately, each day, in fact a portion of each day is suited to someone’s style of
trading, learn to recognize when you are on stage, and give it al you have.

As of 5:30 AM PST, it looks as though
the S&Ps are going to make one hell of a move on the opening bell, up 15 points.
I do not know the reason, nor does it matter, but it sure is a sign of the
extreme speculation taking place in the market currently. As always, provided no
one gets hurt (physically), bring it on, this market has been a real treat for
the last few weeks. Additionally, we need a few days where the market makes some
moves higher, if not, downright apathy and extreme pessimism will set in, not
good characteristics for trading. Naturally a capitulation rather than the slow
death spiral would be better for the overall health of the market.

At this point the next two trades seem
a bit unlikely given the strength in the futures, but pay close attention to
IBM
(
IBM |
Quote |
Chart |
News |
PowerRating). It is currently hovering just
above critical support at $65.75. Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) is also sitting at support at $27.25.

Turning to some potential longer-term
set-ups, I am eyeing shares in Taiwan or more specifically the
Taiwan Fund
(
TWN |
Quote |
Chart |
News |
PowerRating). Yes, it has been
beaten-up pretty bad lately due to escalating tensions with China, but this is
common. These little spats have been going on for some time. Sure, a military
situation may develop, but I am looking for a quick trade based on it being
oversold due to emotions. Again, a protective trailing stop is required since
the situation could change at a moment’s notice.

The nice thing about the potential
rally today and follow-through in the days to come, is an opportunity to once
again put out some longer-term short positions. As mentioned in yesterday’s
piece, bear market rallies are ferocious and convincing, the ideal situation to
put out stock at higher prices. Over the next few days, if we maintain some
upward bias, I will be sharing with you potential longer-term short
setups. However, it is safe to say that that list will include many of the still
grossly inflated tech stocks. 

The one potential disaster lurking out
there for the hopeful bulls is Cisco’s
(
CSCO |
Quote |
Chart |
News |
PowerRating)
“off Broadway” earnings announcement tonight.  The actors and spin doctors are
in place, and it is rumored that Jim Morgan from
Applied Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating) is giving pointers on how to make any
earnings number look real nice. I will actually stick around for that
announcement for potential trading opportunities. The last announcement by Cisco
offered an incredible long side trade for 2 points in after hours. One can only
hope there is another big move tonight. 

Key Technical
Numbers: (futures)


S&Ps
Nasdaq

868 

 915-18

857   

 902

850.75  

 887-90
844 881.50
839.5 (key) 873.67
832.62  865.16
820.90  860.75
807.95  852

 

 

 

 

 

As always, feel free to send me your
comments and questions. See you in
TradersWire.


David