No Follow Through

October 26, 2001
Dave Landry

On Friday, the Nasdaq stabbed slightly higher and
then closed lower. For the most part though, it just chopped around.

The S&P barely peeped its head above recent
resistance before dropping back.

So what do we do?Â
The lack of follow through in the indices combined with the failure of
the S&P to break decisively above resistance suggests that once
again, we can look to play both sides. However, as I always preach,
wait for entries. This alone will often help to keep you on the right
side of the market.

Example Time

As you know, large price moves often follow low
volatility situations as volatility reverts to its mean. The problem
is, you never know which direction the move will be. Therefore, it’s
important to incorporate other technicals into your analysis. With
that said, notice Blockbuster Entertainment (BBI)
has formed a high-level narrow base after a recent strong uptrend.
This action suggests that the breakout will be to the upside as
volatility reverts to its mean.