Why I Don’t Trade Breakouts
Smoke ’em If You Got ’em
The Biotech HOLDRs
(
BBH |
Quote |
Chart |
News |
PowerRating) have moved nicely lower since
recently mentioned. When blessed with a quick profit (especially in this market!)
make sure you take partial profits and trail a stop lower.
If you need more on money and position management, email me
and I’ll be happy to send you the primer section from my second book.
On Friday, the Nasdaq traded sideways throughout the
morning and then sold off throughout the afternoon. This action has it closing poorly and
puts it near the bottom of its trading range.
The S&P also sold off hard. This action has it closing
below its September lows.
Thursday gave hope to the breakout players but Friday took
it away. Areas such as software and Internet that made nice breakouts came right
back in today (Friday). This exemplifies why I don’t trade breakouts (not that
there’s anything wrong with that!).
So what do we do? The fact that the Nasdaq
and many tech sectors failed in their breakouts combined, with the S&P closing
at two-month lows is “not a good thing” (something rumored to be
the new quote of inmate number 55170-054). However, we’re a little oversold in here
so you might want to be careful in establishing new shorts. For the brave,
insurance might be a gold place to look for (shorting) opportunities. Another
play would be to trade (short) areas that can trade contra to the indices.
Metals & mining appear to be set up for another leg down in this category.
Aggressive traders might want to keep an eye on the energies which seem to be
stalling short of their old highs.
As far as setups, Phelps Dodge
(
PD |
Quote |
Chart |
News |
PowerRating), in the
aforementioned M&Ms, looks poised to resume its slide out of a Pullback.
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.