Set Up For Shorts
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.
As promised, from time to time I will walk through
potential entry and money management techniques for stocks mentioned in this
Outlook. As usual, this is for educational purposes only and is not intended to
be direct trading advice. With that said, Toll Brothers
(
TOL |
Quote |
Chart |
News |
PowerRating), last week’s
example, provided another example on Tuesday. Last Thursday, the stock was
mentioned as a “two step” pullback.Â
The entry, 1/16 above the
Thursday’s high, was triggered on Friday (a) at 39 1/16. An initial protective
stop was placed 1/16 below the low of the setup (b) at 37 3/8 for a risk of 1
11/16. This gave us a profit target of 40 3/4 (1 11/16 + 39 1/16). On Tuesday,
this target was hit (c) and we exited half of our position. We then moved our
stop to breakeven (d)–the same as our entry–on our remaining shares. For more
information, see last week’s archives (on the right side of this page) and refer to my
money management articles under Trader’s Lessons.
On
Tuesday, the Nasdaq opened flat-ish(a) and began to rally. However, this was
short lived as the index began to sell off–over 100 points from the early
morning high to the afternoon lows. Then, late in the day, it began to rally.
Although this late-day action was impressive, it wasn’t enough got get the index
back above its open.
The fact that
Friday’s rally stalled out suggests that the bounce from lows may be over.
So what do we do? First, watch the overall volume of the
market. Things can get pretty thin around the holidays. If it looks like things
are too thin, then tread lightly. Second, tonight I have numerous sell short
setups generated by the database. Therefore, stick with
strongest/defensive issues on the long side and consider a short or three.
IndyMac Bancorp
(
NDE |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, rallied nicely on Tuesday, reversing Friday’s sell off. This
action suggests that its uptrend remains intact.
On the short side, Extreme Networks
(
EXTR |
Quote |
Chart |
News |
PowerRating), on the Trading
Where The Action Is List, formed a bearish outside day down in a pullback on
Tuesday.
Amphenol Corp.
(
APH |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to resume its meltdown from a three-bar
consolidation/pullback from lows. Molex
(
MOLX |
Quote |
Chart |
News |
PowerRating), on the same list, also
looks vulnerable.
Jabil Circuit
(
JBL |
Quote |
Chart |
News |
PowerRating), mentioned Friday and on the Proprietary
Implosion List, looks poised to resume breakdown from a three-bar pullback
from lows.
Best
of luck with your trading on Wednesday!
Other:
Goran, the Chicken Ranch called me today. Why did you sign my name on your
credit card?
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!