The Perfect Storm
On Thursday, the Nasdaq rallied early but then drifted for
much of the day. Then, late in the afternoon, it sold off to close poorly.
The S&P outperformed the Nasdaq on a relative
basis.
So what do we do? As illustrated above, the indices are set
up as pullbacks from lows. And, lately, I have had several of the market timing
signals I created/track trigger on the short side. These include the Oscillator
Swing System (02/14/2002), a CVR-III (02/13/2002) and a TRIN Reversal
(02/12/2002). Further, on Wednesday the VIX approached levels not seen since
last summer (see Wednesday’s commentary). Combine all of the above with the
Enron hangover and options expiration and it could make for a perfect storm for
a sell off. Therefore, look for shorting opportunities in the index shares
(provided they don’t pop down on the open) and in weak sectors such as biotechs.
Looking to potential setups, I’m sticking with my “money center” banks
remain vulnerable theme. I think the fact that they look like they have topped
could forecast bad news here (e.g., at the time this is being published there is
some late breaking news about banks exposure to the recent bankruptcies). With
that said, Goldman Sachs
(
GS |
Quote |
Chart |
News |
PowerRating), mentioned Wednesday night, still looks
vulnerable.
Sepracor
(
SEPR |
Quote |
Chart |
News |
PowerRating), mentioned recently and in the weak generic drugs,
still looks poised to continue its downtrend out of a pullback from lows.
Walk Through Continued
Recently, I had discussed that breakeven plus
would be a good place for a stop (after taking partial profits) on Coach Inc.
(
COH |
Quote |
Chart |
News |
PowerRating)
(see archives for more details). This way, barring overnight gaps, the worst you
could do was breakeven on the remaining shares. And, this allowed for a
potential “home run” on those shares. So far, this area has not been
hit (a). Therefore, let’s assume that the stop stands (a). Should the stock resume its rally, we will look to
tighten the stop to the level of support that appears to be building (b).
Other
I was unaware until after the fact that they were not
videoing my Trading Markets 2001 presentation. However, I noticed that someone
there was making a personal copy. I would love a copy for my own viewing (I’ll
explain in further detail why if you contact me). I would be happy to pay any
costs incurred to duplicate/ship the tape (and throw in a book and one
year of my trading service for your troubles). Please contact me via email if
you have this or might know who does. Thanks!
Best of luck with
your trading on Friday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“……passing
on Dave Landry on Swing Trading because of its price tag would be a mistake.
It’s a detailed and understandable trading strategy book…..”
Active Trader
Magazine, February
2002 issue.
No risk,
30-day, money back guarantee.
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