Stick With The Plan

March 3, 2003
Dave Landry

On Monday, the Nasdaq opened firmer
but quickly found its
high and began to sell off. Then, after some sideways drifting, it resumed its
sell off in the afternoon. This action has it stalling out right at the two-week
high/50-day moving average(a).

The S&P also sold off to close poorly after testing its
two-week highs.

So what do we do? The fact that the indices reversed
right at minor resistance suggests that they remain vulnerable. Therefore, I
think the game plan remains essentially the same: Continue to
focus on the short side but keep it light due to recent choppy action and the
fact that we remain in a fickle news-driven environment. On the long side, stick
with selected areas of energy (e.g., independent oil & gas) since they can trade contra to the overall market.
And, once again, continue to use the news to your advantage: On the rallies, look for potential candidates to short.
On the sell offs, look to lock in profits and tighten stops on existing shorts.

Looking to potential setups, Ecana
Corp.
(
ECA |
Quote |
Chart |
News |
PowerRating),
mentioned recently and in the
strong independent oil sector (a), sold off fairly hard on Monday but still looks like it has the potential to continue
higher out of its first pullback since breaking out of a high-level base.
However, wait for entries (or an intraday reversal for the aggressive) in light
of the above.

On the short side, CBRL Group
(
CBRL |
Quote |
Chart |
News |
PowerRating), in the generally
weak restaurant sector (a), still looks like it has the potential to continue its sharp
transition down out of a pullback.