Why I’m Still Bullish
“Love” Gap Openings
As you know, when stocks gap open, it can often be their
high or near high for the day as pent up demand can be quickly exhausted. Usually,
this is a good time to take partial profits. For example, notice that Apex Silver Mines
(
SIL |
Quote |
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PowerRating) gapped higher on the open but this turned out to be its exact high for
the day. When this occurs, as Lester Love Jr.* used to say (may he rest in
peace), “Let ’em have it!”–take partial profits and tighten your
protective stop on the remainder.
Looking to the indices, on Monday, the Nasdaq initially
rallied but quickly found its high and began to sell off. However, it reversed
late in the day and rallied to close well. This action has it tagging its 50-day
moving average (the red line below).
The S&P traded mostly sideways before rallying late in
the day. This action keeps it above its recent breakout levels and puts it just
shy of new highs for the year.
So what do we do? Positive action in all of
the indices is keeping me bullish. I have to admit, I was a little nervous with
software and retail earlier in the day (Monday) but both appear to have
stabilized. Therefore,
continue to focus on the long side. However, continue to stick with the strongest of the strongest
sectors such as homebuilders, health services, generic drugs, gold, silver and
metals & mining.
Looking to potential setups, Wellpoint Health Network
(
WLP |
Quote |
Chart |
News |
PowerRating),
in the strong health services-HMOs, looks poised to continue its longer-term
uptrend out of a pullback.
Pulte Homes
(
PHM |
Quote |
Chart |
News |
PowerRating), in the
strong homebuilders and mentioned recently, still looks poised to continue its uptrend out of a pullback.
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
P.P.S. Learn my best swing
trading strategy in my new interactive CD-ROM. Click
here now for details.
*Lester Love Jr. was a local celebrity (New
Orleans) made famous by being the “special man” in Franky and Johnny’s
commercials. His only lines were “Let ’em have it!” (when faced with
someone who wanted furniture but had poor credit).