Making Money In A Rolling Correction
Looking to the indices, on Friday, the Nasdaq opened firmer
and initially rallied but soon found its high. It then generally worked its way
lower throughout most of the day but managed to bounce going into the
close–enough to put it back into the plus column.Â
The S&P put in similar performance but wasn’t able to
get back to the plus column.Â
So what do we do? Areas such as the
semis have been hit fairly hard as of late. Provided they stabilize, this is a
positive as it shakes out some of the market’s excesses. A “rolling”
correction if you will. I like this action (although I don’t like it rolling
over my stocks!). Therefore, continue to put together your buy list. A
good place to look would be strong tech areas such as Internet, telecom
and computer hardware (peripherals
& networking). However, you might want to wait a day or two for the dust to
settle in the aforementioned semis. Outside of tech, as represented by the
broader market indices, virtually all sectors remain in uptrends. These include,
to name a few, most financials (especially broker/dealer), insurance, and
health service. Continue to wait for entries though since we could still see
more corrective action–rolling or broader market. On the short
side, continue to avoid trying to pick a top in high flying areas. Rather, focus
on sectors that have shown
topping action and have recently pulled back. Gold and the homebuilders remain
two good examples of this action.Â
Looking to potential setups, Foundry Networks
(
FDRY |
Quote |
Chart |
News |
PowerRating),
mentioned Thursday and in the strong computer hardware–peripherals (a),
still looks like it has
the potential to resume its accelerating uptrend out of a pullback.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S.
In February I’m having a small, exclusive three-day swing trading seminar and I would like you to attend.
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