Tradable Bounce Near?
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On
Thursday, the Nasdaq lapped higher (a) and began to slide. An early morning
rally was met with selling, as bad news flowed into the market. This action has
the index closing on its low (b) and just spitting distance from the June lows
(C).
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The VIX continued to spike higher (a), which suggests
continued panic.Â
Obviously. the market must stop going down
before it can start going up. And so far, it hasn’t stopped going down. Again,
it still appears that we will need a washout below the old lows before a
meaningful bottom can begin to form. Â
Based on VIX action and the incredibly
oversold nature of the broader market, there will likely be a tradable bounce
(for the nimble only!) in here over the next few days. Watch for a reversal in
the VIX, an improvement in the advance/declines and a peak in the three-day
average TRIN readings, and of course, positive price action before attempting
any entries on the long side.
As I normally do in this column, I’ve provided a few setups, which you’ll find below. However, I’d strongly consider taking the day off. Remember,
the markets will always be there. The name of the game is long-term survival. In
light of developing world events, positioning in front of a weekend is not
prudent. One last point, if you do trade, be skeptical of a pop-up opening.Â
Looking
to potential setups, SBC Communications, on the Pullbacks
Off Highs List, managed to close higher in spite of Thursday’s carnage and
looks poised to rally out of a three-bar pullback.
Continuing on the pullback theme, Dura
Pharmaceuticals
(
DURA |
Quote |
Chart |
News |
PowerRating), mentioned recently, still looks like it has the
potential to resume its uptrend. Just wait for follow-through, as it did close
poorly on Thursday.
On the short side, Getty Images
(
GETY |
Quote |
Chart |
News |
PowerRating),
mentioned recently, still looks vulnerable. And Merix
(
MERX |
Quote |
Chart |
News |
PowerRating), on the Trading
Where The Action Is List, is a Bow
Tie setup.
Best
of luck with your trading on Friday!
face=”Arial, Helvetica”>Dave Landry
P.S. Reminder:
Protective stops on every trade!
P.P.S. I’m on my way to Vegas for
Trading Markets 2000. Hope to see you there! My next column will be on
Wednesday, October 14th. My neighbor, Big Bubba Boudreaux, will be house
sitting. Feel free to stop by for a demonstration of his massive gun collection.
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