Mixed Signals

May 1, 2001
Dave Landry

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
markets opening. Therefore, overnight events may alter the
outcome of these observations.

On Tuesday, the Nasdaq opened flat and dipped lower. Then,
after chopping around for most of the day, it mounted a solid rally. This action
has it closing well and tacking on another 2% plus.

src=”https://tradingmarkets.com/media/images/Landry4/otc050101.gif” width=”470″ height=”320″>

So what do we do? Tuesday’s price action combined with
overbought indicators (discussed recently) has the market “more”
overbought. You can’t completely ignore this fact but you also shouldn’t
fight the tape. Therefore, under such mixed signals, continue to focus on the
long side but keep it light on new positions and consider a short or two.
Probably the best thing to do is to manage existing longs (scale out and tighten
stops) mentioned recently such as NVDA, JNPR, VPHM, TQNT, CEPH (to those
new to this column see the archives on the side of this page for stocks
mentioned recently). Remember, in trading the results are skewed. The majority
of the profits come from the minority of the positions. Not only must
you control losses, you must also make sure you manage the winners.

Looking to potential setups, Shaw Group
(
SGR |
Quote |
Chart |
News |
PowerRating),
mentioned recently on the Pullbacks
Off Highs List, still looks like it has the potential to resume its strong
uptrend.

src=”https://tradingmarkets.com/media/images/Landry4/sgr050101.gif” width=”470″ height=”320″>

Harrah’s Entertainment
(
HET |
Quote |
Chart |
News |
PowerRating), mentioned Monday night,
looks like it has the potential to continue its rally out of its pullback.