Not That Smart
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
market’s opening. Therefore, overnight events may alter the
outcome of these observations.
On
Tuesday, the Nasdaq opened on its high (a) and began to sell off and after some mid-day
drifting, resumed selling-off and closed near its lows
(b).
The prior lows,
a target we’ve been discussing, were tested (c). The good news is that the index
didn’t slice right through them. The bad news is that with late-day selling and
a poor close, it might get another chance.
It looks like a
market is going to go where a market is going to go, no matter what anyone
thinks. After years of trying to
outsmart the market, I’ve learned that I’m not that smart. That’s why I’ve come
to rely on simple techniques, such as identifying a trend and trading it. Late last
week, the pundits were claiming that as soon as the tax-loss selling was over,
the market would rally. Fast forward to today. The argument for today’s selling
was tax profit taking. That’s a new one to me. I wish they would have told us
there was such an excuse last Friday! Don’ t try to figure it out or reason, the trend is your
friend. Period.
So what do we do? I’m not too excited about entering new
positions in such an oversold market. If you try to play a bounce in here, the
oversold condition could become more oversold as the trend continues. If you try
to initiate new shorts, then, guess what–you’ll get that bounce. Therefore, if you’ve been taking shorts
recommended lately, manage those
positions through partial profit taking and trailing stops (see my articles on
money management under Trader’s Lessons
for more information here).
Considering the above, here are a few stocks of interest.
Bank United
(
BNKU |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, looks like it has the potential to resume its strong
uptrend. Just wait for follow-through to the upside because it did close poorly.
Beckman Instruments
(
BEC |
Quote |
Chart |
News |
PowerRating), on the Momentum
10 Technology List, sold off earlier on Tuesday but recovered to close well.
This suggests it has the potential to rally out of a high level micro cup-and-handle-like formation.
On the short side, NVIDIA
(
NVDA |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, appears to be resuming its strong downtrend.
Aurora Biosciences
(
ASBC |
Quote |
Chart |
News |
PowerRating), also on the Pullbacks
Off Lows List, looks like it has the potential to resume its strong
downtrend out of a low-level micro double top.
Best
of luck with your trading on Wednesday!
face=”Arial, Helvetica”>Dave Landry
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Protective stops on every trade!
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