Why Fight It?
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 lapped lower on the open (a) on a bad employment number (Is
bad now bad? I thought bad was good.). Then, after mostly choppy trading,
the index sold off to close lower. However, it did manage bounce off its lows
going into the close–short covering in front of the weekend? Possibly.
It’s funny, many
of yesterday’s bulls were hard to find on Friday. As I said last night,
“it’s just one day up.” I’m glad I’m not alone. Read Gary’s
column for Friday. I think he puts things in perspective. Nice job
Gary.
I know I’ve been kidding around quite a bit about being a
trend following moron, but there’s a serious message in all this silliness.
Long-time readers of this column know that I believe that trading is not
rocket science. I’m not trying to imply that it’s easy. It takes discipline,
experience, and hard work. However, you don’t have to make it any more complex
than it already is by trying to outsmart the market. With that said, the trend,
especially when it’s easily identified*, is your friend. Why fight it?
So what do we do? If you just look at the daily
charts, it looks like the shorts are a lay up. However, it may be a little
choppier intra-day than the daily charts suggest. At least that’s what I
observed on Friday. Therefore, focus on the short side but keep it light as it
looks like we’re in for a bumpy ride.
Looking to potential setups, several stocks on the Pullbacks
Off Lows List look like they have potential.
Cerner Corp.
(
CERN |
Quote |
Chart |
News |
PowerRating) is
bumping up against the area of its recent breakdown. If it stalls out in here, a
trip to its old lows is likely. Just a quick note, if you have a low tolerance
for pain, this one is better left alone as it can get squirrelly.
Telebras Holding Co.
(
TBH |
Quote |
Chart |
News |
PowerRating)
looks poised to resume its downtrend out of a simple three-bar pullback from
lows.
Checkfree
(
CKFR |
Quote |
Chart |
News |
PowerRating) and
Cooper Industries
(
CBE |
Quote |
Chart |
News |
PowerRating) are two more that look poised to resume their strong
downtrends out of pullbacks from lows.
TFM Update
Thanks for the numerous emails on the ongoing TFM saga.
This was my favorite:
” I had much rather be a trend-following moron than a
moron-following moron (referring to the majority of investors/traders
who appear to follow the statements of morons like stock analysts & stock
cheerleaders like J. Battipaglia, T. Galvin, A. J. Cohen, etc.)”
Be A Student
On Friday, I recently received the following email:
“You know what impresses me most about you guys at TM?
You all are still willing to learn. You, Haggerty, Connors, and Goran are all going
to Chicago to hear Tony.
I like learning from teachers who are students of the market and not
gurus.”
Mark
My reply follows:
Mark,
I agree. Years ago, I remember reading Larry Connors’
Professional Traders Journal. In one issue, he discussed a trading book he had
just finished.
I remember thinking “why would someone at Connors’ level bother reading a
book on trading?” I now know that we’re all students of the market.
There’s no one point when we “graduate.” Everyday we learn something new
through experience, observation and/or others. Those who are students and stay
students survive long-term.
Best
of luck with your trading on Monday!
P.S. Reminder:
Protective stops on every trade!
*My two favorite techniques for determining trend
are the big blue arrows and asking a 6-year old kid. If these two methods fail
to determine a trend, then it’s probably not a trend.
“…..I’ve
read your book, the strategies are simple, easy to understand, and greatly
appreciated….”
Jimmy H.
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