Trend-Following Moron
Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
markets opening. Therefore, overnight events may alter the
outcome of these observations.
On
Tuesday, the Nasdaq gapped higher (a) and rallied, but soon began to stall out. Then,
after chopping around and marginally taking out the morning highs,
it reversed again to closed poorly.
The fact that
the index failed to hold its earlier gains suggests that this rally from lows
is over.
Again, the complacency looms. I continue to be amazed at
the amount of bottom pickers out there. We’re only a few days off the recent
lows and everyone is ready to celebrate. Me? I dunno. Today, I was called a
“trend-following moron.” I resemble that remark. Yeah, I’m going to be
wrong when this market bounces and sticks. But, I’m willing to take that chance.
After it does “stick,” I’m then willing to start playing pullbacks to
the upside. Till then, this moron is doing what his six-year old analysts*
suggest.
So what do we do? As implied above, Tuesday’s rally sets up
many shorts. Therefore, I think the short side is still the logical play in
here. It is, however, still choppy enough to warrant taking it easy. So, at the risk of preaching, tread lightly!
Looking to potential setups,
JDS
Uniphase
(
JDSU |
Quote |
Chart |
News |
PowerRating), mentioned Monday night on
the Pullbacks
Off Lows List, looks poised to resume its strong downtrend. Any idiot–
sorry, moron–can see that.
Tellabs
(
TLAB |
Quote |
Chart |
News |
PowerRating), mentioned
recently and on the Proprietary
Implosion List, still looks vulnerable.
Charles Schwab
(
SCH |
Quote |
Chart |
News |
PowerRating), in the weak broker/dealer sector
[$XBD.XBD.X] and on the Pullbacks
Off Lows List, looks poised to make another leg down.
The broadband stocks
(
BDH |
Quote |
Chart |
News |
PowerRating), on the Pullbacks
Off Lows List, rallied earlier in the day but reversed to close poorly. This
suggests that their downtrend remains intact.
Best
of luck with your trading on Wednesday!
P.S. Reminder:
Protective stops on every trade!
*To those new to this column, when confused about
a trend, I ask my team of 6-year-old analysts.
“….I
appreciate the things you have in your book about trading psychology…..I have
found that the psych. part of this (trading) is a true challenge in overcoming
my own worst habits…..”
Randy M.
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back guarantee.