Tread Lightly

January 16, 2002
Dave Landry

On Wednesday, the Nasdaq lapped lower on the
negative Intel news, bounced and then resumed its sell off. It chopped
during mid-day but resumed its sell off in earnest going into the
close.

This action has it closing poorly, and below its
50-day moving average. It’s important for the recent support, circa
1900, to hold.

The S&P put in a similar poor performance.
It’s important for the December lows, circa 1114, to hold here.

So what do we do?
Well, I was hoping for the market to shrug off the Intel news after a
knee jerk down but that didn’t happen. Wednesday’s action leaves the
market very oversold. About the only bright thing I could gleam from
this is that the sentiment is so bad you could cut it with a knife.
And, now that everyone and their brother is so bearish the market will
probably do the opposite. However, you can’t hang you hat on that. As
you know, these very oversold environments are "damned if you do
and damned if you don’t."
If you try to short, the market will bounce. If you try to go long,
oversold becomes even more oversold. Therefore, tread lightly no
matter what you attempt to do.

Looking to potential
setups, Siebel Systems (SEBL),
in the strong software sector (it was strong before today), looks like
it has the potential to resume its strong uptrend. Just wait for an
entry as it was down on Wednesday. OR, for the nimble daytrader, look
fade a opening gap down should it show signs of reversing. See my
recent article: How
To Add A Level Of Discretion To Your Swing Trades for more on this
subject.

Let It Ride On The
Trail

Abgenix (ABGX),
mentioned recently as a Bow Tie short, has now moved significantly
lower since then. When blessed with such a quick profit, make sure you
lock in a piece. Also, now that the position is profitable, you’re in
a position to give it some room with a trailing stop. In this
case, giving it two-points or so to "breath" (a) might allow
you to hold on for a larger gain. I’ll follow up over the next few
days.