Play The Dead Cat?, Or…
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 lapped slightly higher (a) and after a brief blip lower,
began to rally. Then, after giving up most of it gains, it once again rallied
and managed to close on its high (b).
The fact that
the buying accelerated into the close suggests
that traders were willing to take positions home.
The VIX began to implode which sets up several CVR buy
signals combined with a day old CVR III on the Market
Bias Page.
The implosion in the NYSE
TRIN sets up a TRIN Reversal Buy signal.
Ok, by now I guess you figured out that I’m building a case
for a bounce out of here.
So what do we do? There’s two ways to play this: For
the nimble, play the bounce but have a chair ready for when the music stops -OR-
sit on the sidelines and wait for the shorts to set up after this dead cat has
had its day.
Looking to potential setups, Sigma-Aldrich
(
SIAL |
Quote |
Chart |
News |
PowerRating), on
the Proprietary
Momentum List, appears to be setting up as a pull back.
Englehard Corp.
(
EC |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, is in its first pullback since its recent base
breakout.
Phillip Morris
(
MO |
Quote |
Chart |
News |
PowerRating), also on
the Pullbacks
Off Highs List, looks poised to resume its strong uptrend out of a pullback.
Sorry Gor-man, nothing personal–I really DON’T want to see your buttocks.
Random Thoughts
It seems that more and more
analysts have caught on that we’re in a bear market. And, they’re only one year
too late! Several are now calling for a bounce from lows followed by a
resumption of the bear market. What scares me, is that this is exactly what I’m
thinking. This is probably a sign that we may have seen the lows for a
while. However, you know me, I’m not going to try to out think it. I’ll
play the trend until proven otherwise.
Best
of luck with your trading on Wednesday!
P.S. Reminder:
Protective stops on every trade!
“…After one spends years sifting through the clutter of indicators, software and complex methods it always amazes me that simple methods applied in a conceptually correct way are the money makers….”
Dave S.
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