Why I Think You Should Start Putting Together A Buy List
On Monday, the Nasdaq opened weak and after a brief bounce,
sold off fairly hard. It found its morning lows in early trading and then
generally chopped and drifted most lower throughout the rest of the day. This
action has it closing poorly. However, so far, it only appears to be pulling
back (i.e., a Trend Knockout)..
The S&P put in a similar performance.Â
So what do we do? I like the fact that the market
is correcting. So far, I think this action is healthy. It’ll shake out some
nervous longs (including the recently mentioned Johnny-come-latelies) and sets
up patterns such as Trend Knockouts (in the indices and individual issues as
well). Don’t get me wrong though, this does not mean
you should run out and try to catch a falling knife. Rather, start putting
together a list a potential longs for when the market does turn around. On
the short side, trail a stop lower on your index shares.
Looking to potential setups, Devon Energy
(
DVN |
Quote |
Chart |
News |
PowerRating), mentioned Friday and in
the strong independent oil & gas sector (a), still looks like it has the potential to
resume its uptrend out of a pullback.Â
Tol Brothers
(
TOL |
Quote |
Chart |
News |
PowerRating), first mentioned in early May
(a)–see archives, and in the strong homebuilders (and let’s face it, who wants to live
in a weak home?), looks like it has the potential to resume its strong uptrend
out of a Trend Knockout.*
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
*As usual, email me if need the rules to this
pattern.
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