Where To Look For Opportunities Now That The Indices May Be Breaking Down
Following Up On Healthnet
As promised, tonight (Tuesday), I am doing a follow up on
Healthnet
(
HNT |
Quote |
Chart |
News |
PowerRating), a stock mentioned recently (a) as a money management
example. See archives for more details. When we last left off, we were
discussing how a swing trade had the potential to become a longer-term trade
through the use of protective stops. We had raised the stop on a point basis (b)
as the stock moved in our favor. This area was just missed during a subsequent
sell off. Once the rally resumed, we kept the stop in this new support zone (c)
in attempt to capture a longer-term move. On Monday this area was taken out
(d)–(i.e. the stop was hit). It’s interesting that on Tuesday (e) the stock
continued to implode.Â
Unfortunately, the stock did not turn into a longer-term
gain. However, as you can see through the use of protective and trailing stops,
you can position yourself for when they do.Â
Looking to the indices, on Tuesday, the Nasdaq opened
weaker and continued lower in early trading. Then after trading sideways
throughout mid-day, the selling resumed (and never let up) throughout the rest
of the day.Â
This action has it closing poorly, below the low of its
recent trading range, and right at its 50-day moving average.Â
The S&P also sold off hard.Â
This action takes out the bottom if its recent trading
range and puts it well below its 50-day moving average.Â
So what do we do? The fact that the market
failed to follow through on Monday’s turnaround and VIX signals is concerning.
This is further confirmed by the fact that the indices are taking out the bottom
of their trading ranges. Therefore, unless they bounce back soon, they could be
“rollover mode”. Begin putting together a list of potential candidates
to short. Interest sensitive stocks such as financial related stocks,
homebuilders and utilities may be a good place to look. You might also consider
stocks in existing downtrends such as those in the energy sector. And finally,
areas of technology such as Internet and software that appear to be rolling over
might also provide opportunities.Â
Looking to potential setups, Patterson Energy
(
PTEN |
Quote |
Chart |
News |
PowerRating),
in the weak Oil & Gas Drillers (a), looks like it has the potential to
resume its downtrend out of a Trend Pivot Pullback (email me if you need the
rules).
Best of luck with your trading on Wednesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“…..And speaking of your book and articles, I have learned more from you than any other traders I have studied thru the years. Your writing is so easy to understand. And your setups actually make money!! I use your trend qualifiers, simple pullbacks, TKOs, trend pivot
pullbacks, and bow ties to trade the futures markets……. I’ve had your book for almost a year, and I still read it often.
….”
Lin S.Â
