Thursday’s Top Stocks
This is typical bear market action. I heard that expression more than a few
times today. Yes, it was an ugly day. Semiconductor, software, pharmaceutical,
biotech, selling pressure was strong and relentless. What should we do? Just
sell everything?
Looks are deceiving. I am talking about pattern failure. For example, I talked
about Xilinx (XLNX) yesterday. It was forming a double bottom, and it looked
ready to take out the July 13 high. The stock gapped this morning and quickly traded
above the July 13 high. But price immediately reversed and filled the morning gap.
When a pattern fails, traders obviously panic and causes violent price
movements. In another word, pattern failure gives us great trading
opportunities. let’s look at two stocks.
ImClone Systems (IMCL), triggered by downgrade, sold off sharply. Look at
the huge
volume! After forming a hammer on the 50-day moving average, the stock bounced
nicely yesterday. Many traders believed continuation of this upward move, but a
big gap destroyed the pattern. We may see more selling tomorrow.
Steel Dynamics (STLD) appeared ready to move out of a pullback and resume its
uptrend. It opened strongly, but quickly reversed and ended up forming a
bearish engulfing bar. It looks like the issue is heading to the 20-day moving
average.
If a pattern fails, don’t panic!
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