Watch For Setups Despite Dull Tape
Yesterday was a dull, trading range market that once again attempted to trend up around 12:30 PM. Early on, when the bonds went negative, the NDX joined in, but only to the tune of minus eight or nine points before getting back to break-even by 2:00 PM. It looked like the market might rally into the close, but just after 3:00 PM the market staged a “falling knife” sell-off, led by the techs and especially the internet stocks.
Volume was once again on the light side, and there were fewer than 15,000 institutional blocks; but breadth was good. No doubt there was some program selling because of expiration, as well as the real selling in the internet sector.
There are entry opportunities in many stocks, but not much follow-through. Dull markets force you to shorten your profit horizon. There’s no reason for institutions to chase stocks; they are content to scale down in this kind of tape. The momentum players and aggressive front-running accounts are not as active because the institutional buyers are not as enthusiastic. They won’t jump in and buy if they even sense a hint of an interest rate hike or shrinking valuations.
You must continue to prepare for each day regardless of how erratic the market is. Big moves usually come from this kind of tape, and you can’t gain if you don’t enter. Keep your stops tight.
Target Stocks Of The Day Some interesting setups taken from the Pullbacks From Highs List include Praxair [PX>PX], FMC Corp. [FMC>FMC], PMI Group [PMA>PMA], Grupo Televisa [TV>TV], Tel Mex [TMX>TMX], and Bowater [BOW>BOW]. These are strongly trending stocks with ADX readings of 40 or higher that have pulled back from their highs and are at or above their 20-day moving averages.
Other good setups trading above their 20-day moving averages are Navistar [NAV>NAV], VISX Inc. [VISX>VISX] and Cox Communications [COX>COX].
Program trading numbers Buy: 6.10. Sell: 2.00. Fair Value: 4.00.
Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.