One-Day Wonders Or A Start Of Something?
Due to my appearance on Bloomberg TV, tonight’s (Tuesday)
commentary is later than normal. I apologize for any inconvenience that this may
have caused.
On Tuesday, the Nasdaq gapped higher and after a brief
pullback, rallied nicely in early trading. It then generally worked its way
higher throughout the day. Finally, it sold off going into the close but still
managed to close well.
The S&P also put in a decent day.
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So what do we do? As you know, one day does not make a
bottom. The long-term trend still remains down. However, there’s no need to
fight it shorter-term–let’s see if it can follow through. This is not to say
that you should run out in pick bottoms in “one-day wonders”
such as the semis. Stick with the few issues that have performed well and appear
to be attempting to bottom. Biotech (see below) and to a lesser extent major
drugs (which many will need as this bear market continues to linger) are about
the only sectors that fit this category. As always, make sure you wait for
entries and trail a stop just in case.
Looking to potential setups, biotech reversed Monday’s sell
off. This action suggests its low-level cup and handle remains intact.
Therefore, continue to look to nibble in the Ishares (BBH or IBB).
Best of luck with
your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!