What’s Up With That?
On Monday, the Nasdaq opened flat and chopped
around. Then, late in the morning, it gained footing and rallied for a
solid trend day higher. This action has it closing well.
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The S&P really put on a good show. It
finished up nicely.
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So what do we do? Well, you’ll notice the return
of the blue arrows. This is because the market is trading well below
its major moving averages and quite frankly, looks like it’s in a
downtrend. This, combined with the fact that very few sectors are in
meaningful uptrends (namely, the homebuilders, consumer non-durables
and retail) and many sectors, (most of technology and banks) are
setting up as pullbacks from lows. In the face of the strong tape,
there’s no need to fight it though. Watch your potential shorts and
wait patiently for entries. On the long side, stick with the strongest
stocks in the strongest sectors and above all, take partial profits
and trail your stops.
Looking to potential setups, once again, the
large “money center” banks such as Bank One (ONE)
still look poised to continue their rollovers out of Bow Ties.
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Walk Throughs
Last Thursday, I discussed that a good place for
a stop on Techne (TECH)
(a stock mentioned recently) would be right above its recent highs.
For Tuesday, let’s assume that stop remains in place. This will give
us (barring overnight gaps) at worst a small loss on the trade.
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Coach Inc. (COH),
also mentioned Thursday night, was up nicely on Monday. Let’s assume
that on such a big move, that half of the profits were taken and the
protective stop was moved to breakeven plus (a). This way, barring
overnight gaps, you will have a small profit on the remaining shares
with the potential for a home run.
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What’s Up With That?????
Dear Dave:
I notice that you love to talk
about your winners, but make no mention of your
frequent losers. What’s up with that???? What about MMM? What about
TOL?
Ray
I assume that everyone heeds my warning in my
P.S. nightly. And, as you know, in general a protective stop usually
goes below the low of the setup for longs or high of the setup for
shorts. Therefore, it becomes a passive decision. I could bore
you to death and show each and every example that gets stopped but I
think most get the point. I will show the next obvious loser though.
Now, as far as showing winners, managing a position is an active decision.
Therein lies the art. It takes discretion based on the market’s
action. You have to trail stops and take partial profits when they are
large enough. You also have to take partial profits on parabolic
moves. Further, in positions that are showing some longer-term
potential, you might want to trail stops a little further behind–for
example, at prior pullbacks/bases. So, as you can see, the management
of the successful trade requires much more action than the management
of a losing trade.Â
Other
I was unaware until after the fact that they were
not videoing my Trading Markets 2001 presentation. However, I noticed
that someone there was making a personal copy. I would love a copy for
my own viewing (I’ll explain in further detail why if you contact me).
I would be happy to pay any costs incurred to duplicate/ship the tape
(and throw in a book and/or a few months of my trading service for
your troubles). Please contact me via email if you have this or might
know who does. Thanks!
Best of luck with
your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“……passing
on Dave Landry on Swing Trading because of its price tag would be a
mistake. It’s a detailed and understandable trading strategy
book…..”
Active
Trader Magazine, February
2002 issue.
No risk,
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