Light At The End Of The Tunnel?
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
market’s opening. Therefore, overnight events may alter the
outcome of these observations.
Heads up! Yahoo
(
YHOO |
Quote |
Chart |
News |
PowerRating) announced after the close that it had earnings in line with
estimates but made negative comments in its conference call. The stock is down
five and change in early after-hours trading.
On
Wednesday, the Nasdaq gapped lower (a) on what looked like the makings of a
crummy day (at least for the longs). However, it quickly found a low and proceeded to rally nearly 150
points but it gave up over half of those gains before recovering to set new
highs. This action has it closing on its high (b) and forms a bullish outside
day.
Tonight (Wednesday), I’m noticing under the surface that
things are beginning to improve. The index futures, although down slightly in
overnight trading, so far, seem to be taking the Yahoo news in stride*. The
semis seem to be holding up well at and slightly above low-level bases. And, the
ADX readings on our Pullbacks
Off Highs List are at their highest levels in months (a sign of momentum).
True, the list contains mostly interest-sensitive stocks such as banks
(
$BKX.X |
Quote |
Chart |
News |
PowerRating)
and cyclicals
(
$CYC.X |
Quote |
Chart |
News |
PowerRating), but hey, we’ll take what we can get.
As I’ve been preaching, there’s still no need to call a
bottom or bet the farm. The Yahoo after-hours news exemplifies the amount of
potential bad news that still looms. Also, the intra-day action on the Nasdaq
exemplifies how the market still lacks direction and will gladly take out stops
on both longs and shorts.
Looking to potential setups, Caterpillar
(
CAT |
Quote |
Chart |
News |
PowerRating),
mentioned Tuesday night and on the Pullbacks
Off Highs List, still looks like it has the potential to rally out a pullback.
Lear Corp.
(
LEA |
Quote |
Chart |
News |
PowerRating), also on the Pullbacks
Off Highs List, has formed a Bow
Tie/first pullback.
US Bancorp
(
USB |
Quote |
Chart |
News |
PowerRating) looks poised to rally out of a simple
four-bar pullback from highs.
On the short side, Mylan Labs
(
MYL |
Quote |
Chart |
News |
PowerRating) and Schering-Plough
(
SGP |
Quote |
Chart |
News |
PowerRating), both mentioned last
night, still look vulnerable.
Looking Ahead
Level 3
Communications
(
LVLT |
Quote |
Chart |
News |
PowerRating), on the New
60-day Highs on Double-Volume List, appears to be breaking out of a
low-level base on good range and volume. The stock may be worthy on its
first pullback.
Best
of luck with your trading on Thursday!
P.S. Reminder:
Protective stops on every trade!
*It’s a good thing when a bear market stops going
down on bad news.