Negative Open, And After That?
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 began to rally in what appeared to be
a solid trend day higher. However, by early afternoon, the rally waned and the
index began to chop around.
This
action has it near the 50-day moving average and suggests that it may be setting
up a trading range.
Heads up! After the close,
Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating) announced worse-than-expected earnings. In spite of this, the
stock is actually holding up fairly well in early after-hours trading. What’s
concerning are its “sexy sisters” such as Juniper Networks
(
JNPR |
Quote |
Chart |
News |
PowerRating), Broadcom
(
BRCM |
Quote |
Chart |
News |
PowerRating), and Applied Microcircuits
(
AMCC |
Quote |
Chart |
News |
PowerRating), to name
a few, which are getting creamed. This will likely weigh heavy on stocks on
Wednesday’s open.
So what do we do? For
now, the Cisco news, or better yet, the reaction to the Cisco news
supercedes anything going on in the charts. So far, it appears that we’ll have a
negative open on Wednesday. Therefore, I’d avoid the open (on either side) and
wait to see if stocks can gain a footing. If so, this could set us up for a move to the upside. Otherwise, sit on you hands.
Computer Associates
(
CA |
Quote |
Chart |
News |
PowerRating), mentioned Monday night, appears to be resuming
its uptrend out of a pullback (a).
Electronics For Imaging
(
EFII |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, rallied nicely on Tuesday, reversing Monday’s sell off. This
suggests that its uptrend remains intact.
Coherent Technologies
(
COHR |
Quote |
Chart |
News |
PowerRating), also on the Pullbacks
Off Highs List, formed a bullish outside day in a pullback on Tuesday, also
suggesting that its uptrend remains intact.
International Rectifier
(
IRF |
Quote |
Chart |
News |
PowerRating) rallied earlier in the day but backed off
from highs. This one might still be worth watching for a second push.
Other
I received an email asking me
“How do you know when a setup like Peregrine (mentioned last night) is not
going to work….so you can get out before your stop is hit”. The answer
is, you don’t. Maybe, if you are watching a screen, and the indices, sector
and/or the stock began to stall, then maybe you might look to exit.
However, in trading, there’s always a trade off. Keep in mind that as swing
traders we are looking to capture a substantial two-to-seven day run. By
watching a screen so closely, many times noise alone will scare you out
intra-day. In this particular case, it looks like this may have been a
good thing. However, other times you’ll find yourself watching in frustration as
a stock resumes its trend. Trade on a time frame that makes most sense to you.
Best
of luck with your trading on Wednesday!
P.S. Reminder:
Protective stops on every trade!
“…just a quick note about your new
book:
FANTASTIC!”
Don S.
No risk, 30-day, money
back guarantee.