Still Chicken
On Friday, the Nasdaq lapped higher but quickly found its
high and sold off. It chopped around for most of the day but did manage to rally
late in the afternoon. This action put the index in the plus column but below its
open and recent high.
The S&P did well once again on an absolute and relative
basis. This action takes out its recent highs.
The VIX dropped on Friday. This action has it stretching
more than 10% away from its 10-day moving average (a). Research has shown that
when this occurs, the market usually sells off over the next few days.
This is the basis for the CVR III system that I co-created with Larry Connors.
So what do we do? The Nasdaq still looks like it’s stalling
while the S&P has managed to put in two decent days. The CVR III sell
signal, which tends to lead the market (sort of like an
“overbought”/”oversold” indicator), suggests we are due for
a sell off. Therefore, I suppose I’m going to stay chicken. On the long side,
look for stocks in sectors that have outperformed the market as of late such as
banks and healthcare–HMOs or issues such as gold which can trade contra to the
indices. On the short side, look for opportunities in technology sectorsÂ
that are in strong longer-term downtrends such as biotechs. No matter what you
do, you might want to keep it light and wait for entries because it’s choppy out
there.
Looking to potential setups, Idec Pharmaceuticals
(
IDPH |
Quote |
Chart |
News |
PowerRating), in the weak
biotechs, still looks poised to continue its sharp downtrend out of a pullback
from lows.
Best of luck with
your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….I liked how you treated the very important psychological factors related to investing success.Â
Many books talk about “how to trade” but don’t address how we traders sabotage themselves by
not being aware of the emotional side to investing. Again, thanks for a great book.
It has made a big impression on me and I expect to change my trading as a result.
I am recommending your book to my trading buddies and anyone who is serious about investing…..”
Richard D.
No risk,
30-day, money back guarantee.
Â