Pop Up
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
Thursday, the Nasdaq had a pop-up opening (a) not far from its high, drifted and
then sold off to close poorly (b).Â
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Thursday’s action is disappointing to say the
least. This continued lack of follow-through makes positioning difficult. With
that said, I see no need to get too excited about the market at this juncture.
I received several e-mails asking me to
describe “second entries” (mentioned on Wednesday night). When a
market “pops up,” you should watch and wait to see if the rally
sticks. Often these openings can be the high or near the high of the day.Â
If you rush in and buy the market on the open, you’ll often end up with the high
tick for your fill. Therefore, unless we’re in a rip roaring trend (and believe
me, we’re not!), when the market gaps open you are often better off waiting.
Then, if the rally does hold, you can look to enter. Otherwise, you avoid the
stock until it can get back above the open. For example, suppose your entry on a
stock is 50 and the stock gaps open to 51. Rather than jump in on the
open, you wait and see if the stock falters. If it does, then you avoid
the “first entry” and look to take a “second entry” if, and
only if, it can rally back above the opening (to say, 51 1/16).
face=”Arial, Helvetica”>Looking to potential setups, on the Pullbacks
Off Highs List, PP&L Resources
(
PPL |
Quote |
Chart |
News |
PowerRating) and Reliant Energy
(
REI |
Quote |
Chart |
News |
PowerRating), both
in the hot utility sector (I never dreamed I would use the words “hot”
and “utility” together), are in
three-bar pullbacks of a strong trend.
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On the short side, Elan Corp.
(
ELN |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to resume its meltdown. UPS
(
UPS |
Quote |
Chart |
News |
PowerRating), on
the same list, is stalling out in its rally from lows.
Looking ahead, Plantronics
(
PLT |
Quote |
Chart |
News |
PowerRating), on the Proprietary
Implosion List, appears to be in serious trouble. The stock may set up over
the next few days.Â
Best
of luck with your trading on Friday!
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!