Survivor
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.
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Well, it looks like we got a Zippy Chippy* market on Tuesday. The Nasdaq gapped lower
but stabilized by mid-morning. Then, after choppy sideways action for much of
the day, it resumed its sell-off to close poorly (a).
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complaining about my being too cautious towards the markets. Can the market
rally with poor internals? Sure. The market can do whatever it wants. If the
internals suggest that the market should be going one direction and it
goes the other, then you have to believe and trade in what you see. However, it
doesn’t hurt to become selective in your setups and take smaller positions–at
least until the internals improve. Yes, you might not make as much as you would
with full positions but you also won’t be hurt as bad if things don’t work
out. The name of the game is long-term survival. And you don’t want other
traders “voting” you off the markets.
I think a few corrective days would be healthy
for the markets. It seems in my unofficial survey of emails and traders,
everyone was a little too bullish over the last week or so.
Looking to potential setups, Vitesse Semiconductor
(
VTSS |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, is a pattern I call a Trend Pivot Pullback. This is where a
market in an uptrend pulls back and has a one-day false rally. This draws
in, and subsequently shakes out the weak hands and often clears the way for the
stock to trade higher–especially if it can take out the pivot high (a).
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LightPath Technologies
(
LPTH |
Quote |
Chart |
News |
PowerRating), also on
the Pullbacks
Off Highs List, is forming a pennant after a fast move higher. Just wait
for follow-through to the upside here as it did close poorly on Tuesday.
For you breakout players, Tidewater
(
TDW |
Quote |
Chart |
News |
PowerRating),
mentioned Friday night, rallied nicely on Tuesday and is just shy of taking out its recent highs.
Homestore.com
(
HOMS |
Quote |
Chart |
News |
PowerRating), on the Internet
Fab 5 List, is forming a narrow consolidation at high levels and looks
poised to break higher.
Best
of luck with your trading on Wednesday!
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!
*Congratulations
to Carolina Smith for being the first to identify Zippy Chippy as a thoroughbred
gelding that holds the record for most horse races lost. Thanks to everyone else
for the interesting facts. It appears that the ole’ Zipster even lost to a
human.