Reasons To Be Bullish
Looking to the indices, on Thursday, the Nasdaq opened
slightly firmer but soon began to sell off. It found its low early in the afternoon
and then rallied going into the close. This action has it closing fairly well after
“tailing” lower. Â
The S&P was stronger than the Nasdaq–it didn’t sell
off as much and managed to close in the plus
column. This action sets up a pullback from highs in a persistent uptrend
(my favorite pattern). Â
Looking to the sectors: Most, like S&P itself,
look constructive. Areas set up as pullbacks include (but not limited to)
financials, biotech, insurance, auto parts, telecom, and Internet. On the
downside, the semis continued their slide and remain questionable. Software also
sold off fairly hard and must stabilize soon in order to remain
constructive. Areas that appear to have topped include Metals &
mining, gold, silver, and the homebuilders. Areas losing momentum include
chemicals and selected energy. Overall though, I like the action in
sectors.Â
So what do we do? With the S&P set up as a
persistent pullback and most areas remaining constructive, I can’t help
be bullish. True, I sure would like to see areas like software and semis come
along, but hey, you can’t have everything.* Considering the above, focus on the
long side. If you can’t decide what to buy, consider a trade in the index shares
(the SPY’s look best) or ETFs that are set up as pullbacks from highs (see
below). However, as usual, wait for entries just in case. On the short side,
most areas remain too oversold to consider new positions. On a bounce, recent
favorites gold and the homebuilders could be an interesting play.Â
Looking to potential setups, the Nasdaq Biotech Ishares
(
IBB |
Quote |
Chart |
News |
PowerRating)
look like they have the potential to resume their persistent uptrend out of a
pullback.
Best of luck with your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S.
In February I’m having a small, exclusive three-day swing trading seminar and I would like you to attend.
Click
here.
*If you did, where would you put it?