The Fly In The Ointment
On Monday, the Nasdaq opened firmer but quickly found its morning high and sold off. However, it made a nice reversal around noon and
rallied to close well and in the plus column.
It appears to be setting up a low-level cup and
handle.
The S&P also tailed lower but reversed to close well.
So what do we do? I’m encouraged that the indices were able
to reverse on Monday after tagging/approaching their 50-day moving averages. I
also like the fact that they are setting up as pullback/cup-and-handle-like
formations. Further, I especially like the fact that many sectors appear to be
in their first pullbacks after forming bottoms (i.e., low-level cup and handles).
On the other hand (you knew it was coming), we remain slightly overbought, but
more importantly, it’s late-summer/pre-holiday trading. That could be, to quote
my compadre Joe Corona, the “fly in the ointment.” So, at the risk of
being redundant, honor your protective stops, wait for entries and continue to keep
it light.
Looking to potential setups, broker/dealer tailed lower but
reversed to close well. This action sets up a cup-and-handle-like/First
Thrust-like formation.
Considering the above, Bear Stearns
(
BSC |
Quote |
Chart |
News |
PowerRating), mentioned
recently, still looks like it
has the potential to rally out of a similar pattern.
Knocked Off The Trail, Get Back On The Horse?
When I last left off (see archives), I was discussing where
a trailing stop (a) could be placed on Medicis Pharmaceutica
(
MRX |
Quote |
Chart |
News |
PowerRating), a stock
mentioned recently. On Monday, this trailing stop was hit but the stock reversed
to close well. This action sets up a Trend Knockout (a) and suggests its uptrend
remain intact.
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!