The Year Of The Six-Year Old
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.
I’d like to take this time to sincerely thank each and
every one of you for helping make 2000 a great year for me. You guys (and
girls) have kept me on my toes, made me think and forced me to follow my rules.
Looking ahead, through identifying trends (both up and down), waiting for setups
(and follow-through!) and using proper money management, 2001 should be another
great year for us!
On
Friday, the Nasdaq opened flat-ish (a) and after a brief minor rally, sold off
for a solid trend day lower. This has it closing on its lows (b).
The actions
confirm the pullback from lows we’ve been talking about and suggests that the
old lows (c) are a likely target.
So what do we do? My analysts* are telling me that the
trend remains down. Therefore, we should focus on the short side. In all
seriousness, the pullback in the overall market has set up many shorts with
patterns similar to the market itself.
Let’s look at a few.
Broadcom
(
BRCM |
Quote |
Chart |
News |
PowerRating), mentioned Thursday night, looks
poised to challenge its old lows.
JDS Uniphase
(
JDSU |
Quote |
Chart |
News |
PowerRating), on the Proprietary
Implosion List, appears to be breaking down out of a three-bar pullback from
lows
.
Redback Networks
(
RBAK |
Quote |
Chart |
News |
PowerRating),
not to be confused with my neighbor Bubba’s business “Redneck
Fireworks”–jeez I hope he doesn’t catch my house on fire again this year,
also appears to be resuming its strong downtrend.
The Technology SPDRS
(
XLK |
Quote |
Chart |
News |
PowerRating) and Aether Systems
(
AETH |
Quote |
Chart |
News |
PowerRating), both mentioned Thursday
night, still look
vulnerable.
Other
*Now that the year is coming to an end, I’d like to take
this opportunity to thank my team of 6-year old analysts. They have been
extremely helpful in identifying trends and keeping me on the right side of the
market. They know that if the right side of the
chart is lower than the left, then it’s a downtrend. They know that if the right side is
higher than the left, then it’s an uptrend. Oh, I’ve tried to outsmart
them on several occasions throughout the year, but, almost always, they’ve been
right. Hat’s off to you!
I received an email this morning asking me to explain why I
said the market was overbought in Thursday night’s commentary. My reasons were:Â
1) The S&P cash is up 6.4% (low to high) in 5 days. 2) The Nasdaq was up
over 12% in the same period. 3) The McCllean Oscillator was overbought 3)
The CHADTP was at its highest level this year and finally 4) The 3 and 5-day
simple averages of the NYSE TRIN were at very low levels on a relative basis.
Resolutions
For A Trader
1. I will use protective stops on
every trade.
2. I will believe in what I see and not in what
I believe.
3. I will stay friends with the trend.
4.
I will strive for consistent profitability, control risks and not try to hit
“home runs.”
5. I will stick with simple methods
that are conceptually correct.
Feel free to email me any
that you think I may have left out and I’ll publish them early next week.
Best
of luck with your trading on Tuesday!Â
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!
Book ships in a few days! After that,
the publisher goes to full price. I stand behind it 100% (as opposed to 80% in
pre-publication mode). 30-day money back guarantee, no questions asked.
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