Real Deal Or False Breakout?
On Wednesday, the Nasdaq opened flat but quickly began to
rally and continued to rally for a solid trend day higher. This action has it
closing well and just below the 1425 resistance level.
The S&P also put in a solid day.
The VIX stretched away from its 10-day moving average to
hit multi-month lows (a).
So what do we do? Wednesday’s action changes the potential
“double top” of many tech sectors (see Tuesday’s commentary) back to
breakout mode. However, I still remain cautious. Since the resistance level on
the Nasdaq is so close, it will likely be challenged. And, if it doesn’t
“stick,” it has the potential to quickly reverse. Said alternatively,
watch for a false breakout. Also of concern is the aforementioned action in the
VIX. It suggests that we are getting close to another correction. I guess what
I’m trying to say is that the risk is too high to play this potential breakout.
Therefore, for now, keep it light on the long side. If this if it is the
“real deal,” there will be plenty of opportunities along the way. On
the short side, continue to look for opportunities in the weaker sectors such as
the hospitals.
Looking to potential setups, in the “beat a dead horse” department, hospitals still
look poised to resume their meltdown. With that said Community Health Systems
(
CYH |
Quote |
Chart |
News |
PowerRating),
mentioned forever*, still looks like it has the potential to resume its
downtrend out of a pullback.
Best of luck with
your trading on Thursday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*No position here, just pride.
“…It was super book and helped me quite a bit orchestrate many of the individual tools and rules I had been reading about into an integrated trading strategy. Anyhow, thanks for great book and great web
site..”.
Marty
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