Tradable Correction?

  • November 8, 2001
  • Dave Landry

 

On Thursday, the Nasdaq lapped higher and rallied early. It
then chopped and drifted by mid-day and began to sell off in earnest by early
afternoon. This action has it closing poorly and forms a bearish outside day
down.

 

The S&P tailed higher but reversed to close poorly.

 

So what do we do? The market
remains overbought based on price, high McClellan Oscillator readings, high five-day
average NYSE advance minus decline levels (A.K.A. CHADTP) and relatively low three-day
average NYSE TRIN readings. Combine this with VIX reversal signals and other
market timing signals that I follow and it suggests that the correction has
begun. Therefore, continue to look to pick up a few shorts and continue to scale
out and tighten stops on longs. I don’t think this is the end of the world, but
it sure looks like a trading opportunity.

Looking to potential setups, on the short side, Washington
Mutual (WM),
mentioned recently, still looks poised to continue its downtrend. Also, as
mentioned recently, recent resistance (circa 32) looks like a good area for a
protective stop.  One last point, the S&Ls look like they are in pretty
bad shape. If you are looking for shorts here, check out tonight’s on the Pullbacks
Off Lows List. There you’ll find a plethora of these stocks. Take your pick.

 

Trail ’em If You Got ’em–Continued

Lately, I have been showing where a two-bar trailing stop
could be used on Immunex (IMNX),
a stock mentioned recently (see archives). Once again, I have updated the chart. 

 

Best of luck with your trading
on Friday!

Dave Landry

sentivetradingco@prodigy.net

P.S. Reminder: Protective stops on every trade!

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