Why the late week market action is important
On Friday, the Nasdaq sold off hard in early trading, drifted
sideways throughout mid-day, sold off again in late afternoon trading, and then
it bounced slightly going into the close. This action has it closing
poorly and it gives back much of the Tuesday’s big rally.
The Ps rallied early but gave up all of those gains to end flat .
So what do we do? On Tuesday, everybody
and their brother (and sister, mother, and….) had to own stocks. But what has
happen since then? Not much. We haven’t seen any meaningful follow through. In
fact, the Nasdaq has now given back much of those gains. This is yet another
example of why I am not a breakout trader–because breakouts are prone to
failure. So where does this action leave us? And, why have I become "that
guy" who asks questions and then answers them? Well, as usual, follow
through is key. On the short side, if the Nasdaq continues to slide, we could
see a plethora of transitional (early trend) shorts setting up in technology.
For now, focus on areas in downtrends such as the REITS and biotech.
Outside of strongly trending commodities, avoid the long side unless the market
breaks out and "sticks."
No setups tonight.
Other
There have been some interesting developments from a money and position
management standpoint in Allegheny Technologies
(
ATI |
Quote |
Chart |
News |
PowerRating) (mentioned recently).
I began writing a lesson about it for this column but I soon realized that can be
best explained through an audio/visual (A/V). Therefore, I’ll follow up on this
one in my Wednesday interactive lesson. Email me if you need instructions on how to join (the same each week) or if you would like the archives for the prior year (covering topics such as money & position management, scanning, picking the best setups, sectors, longer-term trend following and a plethora of other stuff).
Best of luck with your trading on Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. If you would like a free
trial to my trading service, click
here.