Why You Still Need To Watch For Transitional Shorts
On Monday, the Nasdaq opened strong and initially rallied but
soon found its high and began to sell off hard. It rallied around mid-day but
turned back down and sold off once again in late-afternoon trading. This action has it closing
poorly and suggests that it may challenge its 1600 support level once again.
The S&P put in a similar performance but was stronger
mid-day (in other words, it was all over the place). It closed poorly and
remains at minor support.
Looking to the sectors, most ended lower. Those that have been rolling over lately such as biotech continued lower. Others that
could be rolling over such as semis and broker/dealer ended flat but still look
questionable. The homebuilders, one of the last areas of longer-term strength,
were hit hard. This action takes out support and moves them over to the
“potential rollover” column. Telecom remains stronger longer-term but
has been weakening/trading mostly sideways as of late. Restaurants continued
higher and remain one of the strongest groups.
 So what do we do? The fact that the
indices turned back down after two intra-day fake outs suggests that they remain
vulnerable. Another concern is that they have essentially gone nowhere in over a
month (notice the horizontal line drawn in the S&P above). In the sectors,
as mentioned above, many still look like they have the potential to roll over.
Further, I’m having a hard time getting excited when restaurants are the best
looking group out there. Therefore, probably the best course of action is to
continue to look to nibble on the short side. And, once again, because these
stocks have “further to fall”, transitional patterns will probably offer the best opportunities (vs. stocks in established
downtrends).Â
Looking to potential setups, on the short side, Garmin
(
GRMN |
Quote |
Chart |
News |
PowerRating)
looks poised to resume its rollover out of a Bow Tie/Inverted Cup and Handle (as
usual, email me if you need rules to anything mentioned in this column).Â
Best of luck with your trading on Tuesday!
Dave Landry
P.S. Reminder: Protective stops on
every trade!
“….. I still feel that your book is the best book on the subject and
offers me the best methodology for swing trading. In short, your method is outstanding….”
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