The Big Blue Arrow
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 drifted for most of day, ahead of the Fed. Then, after the
announcement (in case you live in a cave, they reduced rates by 1/2 point), it knee-jerked down, knee-jerked up and then mounted a solid sell off. This action
has it closing on its low (a).
For those
keeping score, this puts it at levels not seen since November of 1998.
I’m not surprised that the
market sold off on the announcement. After all, that big blue arrow above is
still pointing down. What does surprise me is that we didn’t see a short
covering bounce going into the close. This suggests that the shorts, who are slightly
more sophisticated than the average investor, were comfortable taking them
home. As one trader remarked when I suggested he cover for a piece:
“Why?” This negative sentiment suggests that we could have a gap down
opening on Wednesday. After that, it’s anybody’s guess but we could see a sharp
(short lived?) short covering rally. So, if your feeling smart ’cause your
short, you might want to lock in a piece on the open.
As you know, I’ve been waiting for a bounce to set up some
shorts. With just one day of bounce, followed by today’s slide, it really
doesn’t set us up to take full advantage of the short side.
So what do we do? Remember that oversold can easily
become more oversold, especially if you try to buy an oversold market. On the
other hand, oversold markets often bounce, especially if you try to short them.
With that said, you might want to wait to see if we get an early morning bounce
before trading in the direction of the big blue arrow above.
Looking to potential setups, Aviron
(
AVIR |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to resume its longer-term downtrend out of a
“simple” pullback from lows.
Andrx Corp.
(
ADRX |
Quote |
Chart |
News |
PowerRating), on the
Pullbacks
Off Lows List, looks poised to resume its
meltdown.
Broker/dealer
(
$XBD.X |
Quote |
Chart |
News |
PowerRating)
spiked higher (a) but reversed to close poorly (b). This suggests that its
downtrend remains intact.
Considering the above,
Merrill
Lynch
(
MER |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to make a trip back to its old lows.
Ballard Power Systems
(
BLDP |
Quote |
Chart |
News |
PowerRating), mentioned recently, still looks vulnerable.
Best
of luck with your trading on Wednesday!
P.S. Reminder:
Protective stops on every trade!
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