Smoke ’em If You Got ’em
On Monday, the Nasdaq open flat, chopped around and then
headed south for a fairly solid trend day lower.
This action has it closing poorly and suggests the recent
gap will be closed.Â

The S&P also sold off to
close poorly. This action suggests that the recent lows, circa 1170, are a
possibility.

So what do we do? This is one case where listening to the
database (see Friday’s commentary) versus the bullish media paid off. The charts
don’t lie. The only problem with a good day (see below) is the fact that the
next day you often don’t have setups. Very rarely do you get a chance to
“double dip”. With that said, there’s not too much to look at tonight.
Manage what you have and wait for things to set up again. If you feel like you
must initiate new positions, the index tracking stocks, Spydrs
(
SPY |
Quote |
Chart |
News |
PowerRating),
Diamonds
(
DIA |
Quote |
Chart |
News |
PowerRating) and Q’s
(
QQQ |
Quote |
Chart |
News |
PowerRating) look like the have the potential to
challenge their recent lows.
Smoke ’em If you got ’em
We saw some nice moves on
Monday in those stocks mentioned Friday: NVIDIA
(
NVDA |
Quote |
Chart |
News |
PowerRating), Protein
Design Labs
(
PDLI |
Quote |
Chart |
News |
PowerRating) and Abgenix
(
ABGX |
Quote |
Chart |
News |
PowerRating).
When you catch such moves, make sure you lock in profits on a piece.Â
Remember, the idea is to first generate income for your account and then
to trail stops for a potential home run.
Another
Walk Through
Speaking
of Abgenix
(
ABGX |
Quote |
Chart |
News |
PowerRating), this stock looks like it might provide a good example
for another walk through. On Monday, the stock triggered an entry by trading
below Friday’s low. A protective stop is immediately placed above the high of
the setup (a). The stock dropped and soon profits were greater than or
equal to initial risk (b)–(the protective stop minus the entry). At this point,
half of the shares could have been exited and the protective stop should have
been moved to breakeven–the same as the entry. The stock continued to slide to
close poorly. Therefore, we will ratchet the stop on the remaining shares down
to 30*. This will give the stock some room in case it bounces some before it
continues to fall and will ensure (barring overnight gaps) a profitable trade on
the remaining shares.

For more information on money management and position
management read my articles under Traders
Lessons.
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*I like to give stocks a little room once the
entire position is profitable. See my article “The
Myth Of Tight Stops” for more information here.
“…After reading about everything out there, I find your book to be the most concise, precise treatise on swing trading that exists.
Congratulations for a job well done. This book will exist long after we forget the ugly picture on the cover!…..”
Jill M.
North Carolina
No risk,
30-day, money back guarantee.
Â