The Trend Is Your Friend
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
market’s opening. Therefore, overnight events may alter the
outcome of these observations.
On Tuesday, the Nasdaq lapped lower on the open (a) and
after chopping around for a bit, sold off to close poorly (b).
This action creates a low-level “micro” double
top (c). Therefore, 3,000, or thereabouts, will likely continue to provide
resistance with the old lows remaining a downside target.
The recent sharp rally from lows is impressive but that’s what happens in bear
markets. As I said on Monday night, once we get about the 50-day moving average
and stabilize, then, there may be cause to get bullish on the first
pullback. Till then, I’d remain cautious, especially in light of the fact that
the market continues to be held hostage by the election fiasco.
Looking to potential
setups, May Department Stores
(
MAY |
Quote |
Chart |
News |
PowerRating), mentioned Monday night on the Pullbacks
Off Highs List, began rallying out of a pullback on Tuesday. This action
suggests its uptrend remains intact. WalMart
(
WMT |
Quote |
Chart |
News |
PowerRating), another retailer on the
same list, looks like it has the potential to rally out of a loosely formed
low-level cup-and-handle.
On the short side
and for you breakout players, Sealed Air Corp.
(
SEE |
Quote |
Chart |
News |
PowerRating),
mentioned forever, finally broke out to the downside.
In spite of all my
“pay-per-viewing,” Echostar Communications
(
DISH |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, looks poised to make another leg lower.
Random Thoughts
Several of you have emailed me concerned about
the fact that you have missed some of the melt-ups from lows (e.g., SNDK, CHKP,
etc.). Forget about trying to pick bottoms. I have never been a good top or bottom-picker, nor do I want to learn. As a momentum swing trader, I believe in 1)
identifying a trend, and 2) finding a way to enter that trend (usually on a
pullback) to capture a 2 to 7-day move. Of the many stock market adages, “The
trend is your friend” is the truest.
Best
of luck with your trading on Wednesday!Â
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!
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