Why I Think The Correction Has Started
On Monday, the Nasdaq gapped higher on the open (a) and
traded marginally higher but found its high by mid-day and sold off to close
poorly (b).Â
The S&P also reversed after trading higher.Â
So what do we do? The intra-day reversal in the indices has
likely caught the Johnny-come-lately bulls on the wrong side of the
market. These traders are now facing losses and could be scared out quickly.
This, combined with the continued overbought condition, recent sell signals and
late-breaking news on IBM
(
IBM |
Quote |
Chart |
News |
PowerRating) (icing for the cake) suggests that the
correction has begun. Therefore, if you haven’t already done so, you might
consider a contra-trend trade on the indices, especially if you remain very
long. Should you do decide to buy stocks, continue to focus on commodity related
or defensive issues since they can independently of the indices.Â
Looking to potential setups, Progress Energy
(
PGN |
Quote |
Chart |
News |
PowerRating),
mentioned Friday night and in the
strong electric utilities (a), still looks like it has the potential
to resume its accelerating uptrend out of a pullback/Trend Knockout.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….. thanks for writing your simple,
informative, and easy to understand swing trade book. It was very helpful to me in many ways…..
Larry S.
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