Why You Have To Pick A Style And Stick With It

September 16, 2003
Dave Landry

Looking to the indices, on Tuesday, the Nasdaq opened firmer
and rallied in early trading. However, its velocity slowed by mid-day as the
market went into Fed watch mode. Then, after some initially wiggling on the announcement, it
rallied again going into close. This action has it resuming its uptrend out of a
pullback. It also has it closing well and puts it near new highs for the
year.

The S&P put in a similar performance. This action puts it back above its prior breakout levels.

Looking to the sectors, like the market itself, the action
was overwhelmingly positive. Most of tech finished nicely higher. Areas in
longer-term uptrends such as the semis, Internet, and software were especially
strong. Telecom, especially areas such as equipment and wireless, also did well.
Biotech lagged a bit but still remains constructive. Outside of tech, the banks
blasted higher but still remain below overhead resistance. Gold finished
slightly higher. This action keeps it set up as a pullback. Other areas of
interest include the cyclicals which appear to be attempting to resume their
longer-term uptrend and major drugs which appear to be making a transition in trend (from
their longer-term downtrend to uptrend).

So what do we do? Tuesday provides a great
example of why you should trade with the trend. After a day like Monday (see
column archives), when every thing “faked out”, you probably felt like
throwing in the towel and shorting the market. However, you can’t fight the
longer-term trend and change styles just because you have a bad day. You have to
stick it out: good, bad or indifferent. Obviously, with the tape so strong, I
see no reason to fight it. Continue to focus on the long side, especially in
those stronger tech areas mentioned above.

Looking to potential setups, Open Text
(
OTEX |
Quote |
Chart |
News |
PowerRating), in the
strong Internet software adn services sub-sector (a), looks like it has the potential to resume its strong
uptrend from its August lows out of a a pullback.