Trading Ideas
by Dave Landry, Director of Research
TradingMarkets.Com
August 6, 2002
On Monday, the Nasdaq opened flat and after a brief blip up, turned down and sold off. Then after some late-morning/early afternoon drifting, it resumed its sell off. This action has it closing poorly, at 5-year (closing) lows and within spitting distance of its recent lows.
The S&P, like the Nasdaq, continued to sell off hard out of a pullback from lows.
The low of the VIX is now above its 10-day moving and more than 10% away from its average. In other words, it's a CVR III buy signal. This signal, which tends to lead the market, suggests we could get a bounce within the next few days.
So what do we do? The market is becoming oversold as it continues to sell off out of a pullback from lows. However, it's now getting too late in the swing cycle to establish new short positions. Therefore, continue to tighten stops on existing shorts and continue to take partial profits. On the long side, (is it just me, or does that sound funny?), continue to watch the biotechs (see below).
Looking to potential setups, although biotech sold off fairly hard on Monday, they still appears to be "shaping up." Therefore, you might look to play the Ishares here (either the BBH or IBB). However, continue to wait for entries just in case, in light of the poor action in the market. |
