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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (43336)	5/23/2006 5:28:20 AM
From: Johnny Canuck	Read Replies (1) \| Respond to of 67845

TradingMarkets.com 3 ETFs That Look Set To Rally Thursday May 18, 12:03 pm ET By Rob Hanna Below is a chart of the Nasdaq 100 with the standard 20-period, 2 standard deviation Bollinger Bands. Since market tend to oscillate, a large majority of the time prices will close somewhere between these bands. In most cases a move near or through one of these bands will be quickly followed by a move in the opposite direction. The extremely sharp selloff the market has undergone in the last week has changed the picture dramatically. You'll notice that the NDX has now closed below its lower Bollinger Band for 5 days in a row. This has only happened 5 other times since the inception of the index. Those other times were 9/15/86, 7/27/88, 12/15/89, 3/30/94, and 9/21/01. In every case the market closed higher 1 week later. The rise over the next week ranged from 1.68% to 3.84% with 2.82% being the median. Does this mean we are guaranteed to get a nice bounce sometime in the next few days? No. I believe it is likely, though. I am therefore continuing to scale in to those areas that are most likely to bounce. Yesterday I published a list of 7 ETF's that were most primed for a short-term bounce. Some additions to that list would include (AMEX:IBB - News), (AMEX:XLB - News), and (AMEX:EFA - News). When looking to buy oversold sectors in anticipation of a bounce it is important to start with small positions and continue to scale in. Oversold can become very oversold and very oversold can lead to panic selling. You don't want to get creamed if your timing is early...for example... While the record of buying the NDX when it closes below its lower Bollinger Band 5 days in a row and selling a week later is perfect, 4 closes below it isn't nearly as good. This has happened 11 times. Seven were profitable. Of the 4 unprofitable, one included the Crash of 1987. I don't believe we are about to crash. I do think there are some very good short-term oversold opportunities out there, but proper position sizing is key. Intermediate-term, I think this market has quite a bit further to fall. The bounce I am anticipating I believe will be just be a respite before prices ultimately head lower. I've been warning for some time and now I believe the correction may be upon us. Intermediate-term traders should consider lightening up on any remaining positions when the market does bounce.