The Return Of The Down Blue Arrows

June 20, 2002
Dave Landry

On Thursday, the Nasdaq opened flat and began to sell off.
It then drifted and chopped sideways throughout most of the day before resuming
its sell off into the close. This action has it closing poorly and suggests it
will challenge its recent lows.

The S&P put in a similar performance. It too looks like
it will challenge its recent lows.

So what do we do? Obviously, the trend remains down.
However, the market is quickly becoming oversold. Therefore, continue to focus
on the short side but keep it light. Probably the best thing to do is to look to
scale out of existing shorts and tighten your stops (see below).

No setups tonight, as mentioned above, I think it’s getting
a little late in this cycle to establish new shorts.

Back To The Basics

Novellus Systems
(
NVLS |
Quote |
Chart |
News |
PowerRating), mentioned Tuesday night and
in the weak semis, continued to sell off on Thursday. To review, below the low
of the highest bar in a pullback from lows is a good place for an entry (a) (the
stock must trade below this low for an entry–“no tickee, no tradee”).
Above the high of the pullback is usually a good place for a protective stop
(b). Once the stock begins to move in your favor, you want to take partial
profits and moveÂ your stop to breakeven (a)–the same as the entry.
Finally, you then want to trail a stop on the remainder (c). Let’s follow this
one over the next few days with a 2-bar trailing stop (above the highs) to see
how far it will take us.