Wait For Bounce, Then Short
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
Friday, the Nasdaq gapped and traded lower. It was able to find its low by
mid-morning and mount a decent rally but this gave way to late afternoon
selling. This action has it closing poorly.
Looking to the weekly chart,
1500 still looks like the next support zone.
Obviously, Friday’s
continuation to the downside in this oversold environment leaves the market more
oversold. However, as you know, “more oversold” can easily become
“even more oversold”.
So what do we do? I think I’m going to give my “way
oversold speech”: This is one of those damned if you do and damned if you
don’t situations. If you get short, then the market will bounce from oversold.
If you try to buy in here, the market will continue lower. Therefore, no matter
what side you trade, you should keep it light. I’m think I’m going to wait
patiently for a retrace from lows before I get excited about shorting this
market again.
Looking to potential setups, Sigma-Aldrich
(
SIAL |
Quote |
Chart |
News |
PowerRating),
mentioned recently, still looks like it has the potential to rally out of a
pullback.
Merrill Lynch
(
MER |
Quote |
Chart |
News |
PowerRating), in the
weak broker/dealer sector (see Friday’s Option Outlook) and on the Pullbacks
Off Lows List, gapped up into the area of its recent breakdown (a) but
reversed to close poorly. This suggests its downtrend remains intact.
Ballard Power Systems
(
BLDP |
Quote |
Chart |
News |
PowerRating),
also on the Pullbacks
Off Lows List, appears to be stalling out in its pullback from lows.
Other
I’m still amazed at the amount of people still trying to
pick a bottom in here. At the risk of preaching, don’t do this!
I can assure you that this trend following moron will be
wrong on the last pullback from lows, but so far, that hasn’t been a problem.
Best
of luck with your trading on Monday!
P.S. Reminder:
Protective stops on every trade!
“….very
clear, concise and easy to work with…..”
Mark F.
No risk, 30-day, money
back guarantee.