Setup By Setup

February 5, 2001
Dave Landry

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.

The Nasdaq gapped lower on
Monday’s open (a), chopped around a bit, appearing to be in a solid trend day
lower, but mounted a
decent comeback late in the day.

This
action has it closing well and above the open, near its 50-day moving average
(b).

Even though we
were down on the day, I’m scoring it as a positive based on the reversal and
because support at 2600 (or thereabouts) held.

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So what do we do?
I think it’s a setup-by-setup market. I’m seeing pockets of strength here
and there that are tradable. I’m especially interested in first pullbacks since
major rallies from lows in these issues. However, I do think its choppy enough
to keep position sizes small.

Power Integrations
(
POWI |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, is in its first three-bar pullback since more than doubling from
lows.

Computer Associates
(
CA |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, appears to be finding support near the area of its recent
breakout. This action suggests that its uptrend remains intact.

Art Technology Group
(
ARTG |
Quote |
Chart |
News |
PowerRating), mentioned recently, appears to be rallying
out of a low-level cup and handle/first pullback.

Peregrine Systems
(
PRGN |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, sold off earlier in the day but
was able to rally off of its lows. This suggests that its correction may
be over.