Two Ways To Play This Market
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On Monday, the Nasdaq opened flat but soon began to
sell off. It found its low late in the morning and began to rally. However, it
stalled out around mid-day and then traded back and forth for the remainder of
the day. This action has it ending just about where it started after tagging its
200-day moving average. It remains below a tremendous amount of overhead
resistance (the trading range illustrated below between the blue lines).
The S&P dipped below its recent lows but did manage to
recoup some of those loses.
So what do we do? Nothing has changed (skip
this paragraph if you have been reading the latest columns). I still remain bearish for
those reasons given lately: The leaders have been commodity related. This is not
what a bull market is made of. And now that those issues are beginning to break
down, it’s vital that new leaders emerge (so far, that hasn’t happened). The
Nasdaq remains in a sideways trading range and has recently begun to break down.
Most
of tech has formed a similar pattern. About the only good thing I can glean is
the fact that the indices remain oversold and are due for a bounce (and the Nasdaq bounced off its 200-day moving average). However, (once again) this in and of itself isn’t
reason enough to go long individual issues. Therefore, if you are a trader, you might
want to continue to look to play
this bounce in the index shares. On the short side, since the market remains due
to
bounce, you might want trade in those issues that can trade independently of
the indices. With that said, commodity related stocks still look like they could
be in the early phases of forming a top. Use caution, though, since trading
transition patterns is like being a pioneer–sometimes the reward is huge (you
catch a top early) but other times you end up with a (big blue) arrow in your
back.
As far as setups, Petroleo Brasileiro
(
PBR |
Quote |
Chart |
News |
PowerRating), mentioned
recently and in energy, still looks like it has the potential to continue its slide out of a
First Thrust (as usual, email me if you need the
rules).
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
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