Still Defensive

  • August 6, 2001
  • Greg Che

 

No change yet in my timing
composite and indicators yet, which means we are still defensive in
our stock selection and trading …which
means I will not be looking to put on trades with the notion I will
not be holding onto the position as an intermediate hold.

Last week we had a
distribution day, so needless to say we are looking for a follow–through
day—unfortunately
today was not it. Selection has become scarce as stocks continue to
break
down
out of pseudo sound technical patterns. So what is a trader suppose to
do? Well a number of things…you can stay in cash, trade cautiously
adjusting position size and using open protective stops or take a
vacation (I am partial to the latter one).

Optimal Robotics (OPMR)
is creeping up the right side of its base 15+ month base. The stocks
is showing some nice earnings growth over the last three quarters.
Sales for the optical computer company have been increasing at a
fairly good pace.

Looking at the Exchange
Traded funds, the Telecomunicaoes Braileiras (TBH)
gained 2.7% The fund has been in a trading range over the last couple
of days. The weakness in the Relative Strength line leads me to
believe it could see some more downward movement.

WEBS-Belgium Benchmark (EWK)
edged higher 1.2% and the WEBS-Spain Benchmark (EWP)
closed up 0.9%.

Also gaining was the IShares
S&P Europe 350 Index (IEV)
as it closed up 0.5%. The overall trend for the fund is down as it
looks it s simple pull back off the lows.

The WEBS Malaysia Benchmark
(EWM)
slid 3.0% as it is creeping up the right side of a pseudo low level
cup.

The IShares DJ Utilities
Sector (IDU)
and the Utilities HOLDRs
Trust (UTH)
both lost ground after the headlines in this weeks Barron’s weighed on
the energy sector. IDU shares fell 2.8% while the UTH fund slipped
2.6%.

Remember that all securities
are risky. In any trade, you should always reduce your risk by
adjusting position size and placing open protective stops where
you will sell your long or cover your short in case the market turns
against you. For an introduction to combining price stops with
position sizing, see Loren’s lesson, Risky
Business.

Greg