This stock rallied 30% and here’s how it’s setting up again
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
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>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
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Her Name Is Still Rio
Remember back in mid-August when I recommended Companhia Vale Do Rio Doce
(
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PowerRating) (and I got you singing that old Duran Duran song)? Well, the
stock promptly triggered and after a day or two of false promise, it sold off to
hit the stop (based on the general rules of my swing trading primer–email me if
you need a copy). The stock then mounts the mother of all uptrends–rallying
nearly 30%.
Notice that the stock has pulled back and is set up again. Should this be
taken? After all, we have some painful memories here, don’t we? (and even more
painful memories from back in the 80s). Well, a stock does not care if you owned
it before. And since this sector–steel & iron–can trade independently of the
questionable indices (see below), I think it might be worth another shot. Of
course, that’s just my opinion. I could be wrong again (after all, this is
coming from a guy who wore his Crockett jacket long after the series was
cancelled).
I’ll follow up on this and many other examples
(some worked well and some failed miserably!) on Wednesday at 11:00
AM Eastern in my interactive presentation. Admission if free but limited by the
software. Email me if you need more information
(the same instructions to join each week). I also have the recorded
links for the prior year available (covering subjects such as
money management, position management, entries, damage control, scanning
etc..).
On Tuesday, the Nasdaq worked its way higher throughout most of
the they day. However, it found its high late in the day and then sold off hard.
This action has it stalling near its recent highs and reversing at its 50-day moving
average (not shown, I’ll walk through this on Wednesday).
The S&P traded back and forth throughout most of
the day before selling off hard late in the day. This action has it closing
poorly.
So what do we do? Lately, I’ve been concerned about the
longer-term trading ranges in the indices. Tuesday’s action suggests that they
will return to the bottom of these ranges. Therefore, I think the market remains
questionable at best. Considering this, on the long side, look for opportunities
in strong commodity related areas such as steel & iron that can trade independently of the indices. On the short side,
look for transitional (i.e. early trend) patterns in those areas that may be
rolling over (from higher levels) such as biotech.
As far as setups, the Biotech HOLDRS
(
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PowerRating), mentioned recently as a
possible short, tailed higher but stalled short of their hold
highs/overhead resistance. This action gives them a “Gatekeeper” look
(as usual, email me if you need rules).
Best of luck with your trading on
Wednesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.