Lighten Up?
On Thursday, the Nasdaq gapped sharply higher on the open
but quickly reversed. However, it then stabilized and chopped back and forth for
the remainder of the day.
The S&P put in a solid day. This action was enough to bring
it back to its 50-day moving average.
So what do we do? Up sharply one day, down sharply the
next. It’s getting a little dangerous out there. Probably the best course
of action is to back off until we’re done with earnings and get back more into a
“normal” market. Looking to the technicals, we are very overbought in
a longer-term downtrend. This suggests that there are still opportunities on the
downside, especially when you consider the sharp down moves made in sectors such
as retail-department stores and defense (see below). This does not mean that I
have completely forgotten about the long side. I am watching sectors such as
Internet, insurance and software that have had recent sharp thrusts off lows. If
these sectors can continue to follow through, we could see transitional setups
here soon.
Looking to potential setups, Borg Warner Automotive
(
BWA |
Quote |
Chart |
News |
PowerRating), mentioned recently, still
looks like it has the potential to resume its longer-term downtrend.
Smoke ‘Em On Windfalls
Northrop Grumman
(
NOC |
Quote |
Chart |
News |
PowerRating), mentioned recently as a Bow Tie
(see archives), was creamed on Thursday, opening sharply lower (a). When blessed
with such a nice quick windfall, make sure you lock in most of your profits.
It’s OK (and probably not a bad idea) to let a piece ride–just make sure you
book the majority of your gains.
Best of luck with
your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“…Your book is like an investing bible to
me…..thank you very much for writing in a simple straight forward style that even a novice like me can use…..
“
Cliff A.
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