Panic Buying
On Wednesday, the Nasdaq gapped higher and kept on going.
Then, after taking a long lunch break, resumed its rally. This massive rally has
it closing well above 2000 and puts it at multi-month highs.
The S&P was nothing less than spectacular.
So what do we do? Wednesday
felt like panic buying as it seemed that many were rushing into stocks for fear
of being left behind. No matter how you spin it, it was nice. This action does
put the market back into overbought territory though. However, I see no need to
fight the tape just yet. You probably want to trail stops and "smoke ’em if
you got ’em" (take partial profits). We could get a tradable correction
soon, but for now, there’s no need to swim against the tide.
Looking to potential setups,
Cephalon
(
CEPH |
Quote |
Chart |
News |
PowerRating) gapped lower (a) but recovered to close fairly well. This
action suggests that its uptrend remains intact.
Should I Stay Or Should I Go
Continued / A New Set Up?
When we last left off (see
archives), I was
discussing whether you should exit or wait for your
stop to get hit on trades that don’t work right away. I was using Boston
Scientific
(
BSX |
Quote |
Chart |
News |
PowerRating) as a real time example. Well, someone forgot to tell BSX
that we had a massive rally today. This action is disapointing. This stock is
now at a critical juncture. A break below the the base would suggests that
the stock is in trouble and should be exited.
I also have been discussing the
fact that BSX is set up as a low volatility situation. And, based on trend and
pattern, that it had the potential to break higher. So far, it remains a
low volatility situation, but the move (especially when you consider the overall
market) remains questionable. For the nimble, you might want to consider a
reversal play if the stock first breaks lower and then reverses.
Other
I’m still checking answers from the recent contest and hope
to pick from the winners on Thursday night.
Best of luck with
your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
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Dave F.
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