Still Testing
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.
On Tuesday, the Nasdaq opened lower but reversed and began to
rally, up over 2% from its morning low. However, it stalled out and lost 4% from
its morning high to afternoon low. This has it closing poorly, below its 50-day moving
average and below the level it was before the last rate cut.
Tuesday’s action has the index
right at the 2000 support level. Should it take out this level
decisively, we may have to reanalyze our first pullback scenario and go back to
the camp of the longer-term big blue arrow.
So what do we do? We’re still in first pullback test mode.
If the market can stabilize in here, it has the potential to rally out of that
pullback. Transition patterns such as Bow
Ties, that look like the market itself, remain your best bet. However,
remember to wait for entries as the market is still vulnerable. Further, always
use protective stops just in case the market reverses–Tuesday gave a good
example of why these concepts are necessary. One last point, keep positions
light as long as the market is in this transition mode.Â
Looking to potential setups, Minimed
(
MNMD |
Quote |
Chart |
News |
PowerRating), mentioned
Monday night, still looks like it has the potential to rally out of a cup and
handle/Bow Tie. Again, just don’t overstay your welcome here as there is overhead resistance in the
40-45 level.
Cephalon
(
CEPH |
Quote |
Chart |
News |
PowerRating) also looks poised to rally out of a
Bow Tie/cup and handle.
Computer Associates
(
CA |
Quote |
Chart |
News |
PowerRating), mentioned recently, still
looks like it has the potential to rally out of a cup and handle.
On the short side, Ambak
(
ABK |
Quote |
Chart |
News |
PowerRating),
on the Proprietary
Implosion List, looks poised to resume its meltdown out of a Bow Tie.
Best
of luck with your trading on Wednesday!Â
P.S. Reminder:
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