Test
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 Monday, the Nasdaq gapped lower on the open and sold off
for a solid trend day lower. This has it closing near its lows and right at its 50-day moving average.
It still looks like we are in
transition mode with the last two days being a correction of that first leg up.
This action is setting up a Bow Tie pattern in the index (a).
The gap near the 2000 level should be the next level of
support (b). If this is violated, it may suggest the market could return
to the old lows. For now though, it looks like we are in first pullback
mode.
So what do we do? Now’s the time to be on your toes. The
market is in transition mode and is up against its first test. This sets up many
first pullbacks and transition patterns such as Bow Ties (see below). Keep
building your watch list but wait for entries. If this thing does not follow
through, you might just get lucky and not get filled.
Looking to potential setups, Genzyme
(
GENZ |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, appears to be attempting to rally out of its first pullback
since rallying out of a lengthy base.
Johnson Controls
(
JCI |
Quote |
Chart |
News |
PowerRating), also on the Pullbacks
Off Highs List, looks poised to rally out of a shallow pullback.
Minimed
(
MNMD |
Quote |
Chart |
News |
PowerRating), not to be confused with
“Mini-Me,” has formed a cup and handle combined with a Bow Tie setup.
Just don’t overstay your welcome here as there is overhead resistance in the
40-45 level (not shown).
Computer Associates
(
CA |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Highs List, has also formed a Bowtie/cup and handle.
On the short side,
Procter and Gamble
(
PG |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to resume it long-term downtrend.
Listening To The Database
I often like to “listen” to
the database for what
it is telling me. Tonight, it spit out more Bow Tie buys than it has in months.
This confirms that we are in transition mode. Below is an unedited Bow Tie scan
for 04/23/01. For parameters, I used a minimum price of $15, a minimum average
volume of 25,000 shares, a minimum 50-day historical volatility of 40 and no
maximum volume. Obviously, you can’t trade each one of them nor would
you want to. Use bigger picture technical analysis such as overhead resistance,
cup and handles etc…. when culling through the list.
AC ADIC ADTN AFCO AHAA ALKS AMAT AMKR ANAD AOL APH ASF ASML ASYT BBOX CA CAMZ CCMP CCU CDWC COHU PWM CTXS CXR EBAY ENZ ESPD ETM EXAR EXPE FDS GE GILD GLC HELX HGSI HHH HON HRS IBM IMGN IRF JBL JKHY KEA KLAC LEH LSCC
LSI MEDC MONE MSCC NCR NOK NVLS ONIS PCAR PCS PHTN POWI PRGN PRSE PTEL PXLW QSFT RFMD RHI RTEC RYL SCI SEAC SFA SGMO SNDK SYMC TKLC TLGD TSM UTEK UVN VECO VIA
VIA-B VSTR WERN WMS
Other
Congratulations to Tony Saliba and traders Chris Hausman
and Joe Corona for putting on an excellent seminar. Also, I enjoyed speaking
with many of you as much as I did attending the seminar. The level of expertise of you guys (and
gals) have is amazing. I am humbled.
Special thanks to Duke Heberlein for filling in while I was
away. Nice job Duke!
Best
of luck with your trading on Tuesday!
P.S. Reminder:
Protective stops on every trade!
P.P.S. Thanks Bubba for house sitting while I was
away. Just remember, next time to drag the bodies inside the house after
you shoot them. Good thing you know the sheriff.
“..It is
overall one of the best trading books ….. and I have read a lot of them. You
provide very clear examples and explanations. I have read your book three times
so far and will recommend your chapters on psychology to anyone who is
interested in trading stock no matter their time frame…”
Cesar A.
Fellow TFM
No risk, 30-day, money
back guarantee.