Commentary:
Friday’s market action saw divergence between the S&P and the Nasdaq, with the S&P breaking and closing above Thursday’s highs, but the Nasdaq faltering a bit. However, even though the Nasdaq did not close above the previous day’s high, it consolidated near the highs and has formed a bullish ascending triangle that can be seen on the 60-min intraday chart below. If the Nasdaq breaks Friday’s highs, it will have broken the upper channel of a downtrend that has been in place on both the daily AND weekly charts since May 17 of this year. Additionally, it will have rallied above the declining 200 day MA on the 60-minute chart, which typically serves as major resistance.
If the volume picks up a bit and the Nasdaq breaks above Friday’s highs, a significant rally could follow. This is why the QQQ is a long pick for today if, and ONLY IF, it breaks above Friday’s high of 23.72. The Dow and the S&P are also poised to make another leg up, but both have already broken their short-term downtrends, unlike the Nasdaq.
Today’s watch list:
QQQ – Nasdaq 100 Index Tracking Stock (ETF)
Sector: n/a
Long
Trigger = 23.80
Target = 24.69
Stop = 23.40
Notes = See entry explanation above.
BLS – BellSouth
Sector: Telcom
Short
Trigger =
26.90
Target = 24.28
Stop = 27.80
Notes = Another Worldcom here? This stock can barely rally no matter how much the market does. I’m looking to short on a break of the 2-day low, which also would confirm a break of the bearish descending triangle.
Deron’s Report Card:
Closed everything out and went to cash going into the weekend. Details below:
Closed Positions:
- SPY long – bought 88.65, sold 90.20 (tightened stop hit on Friday’s open), out with + 1.55
LMT long – bought 65.20, sold 65.30 (tightened stop hit on Friday’s open), out with + 0.10
VZ short – shorted 29.37, covered 29.40 (took breakeven stop on second half of position on the open), out with (0.03)
Open Positions:
- (none)
Glossary and Notes:
Remember that opening gaps that cause stocks
to trigger immediately on the open carry a higher degree of risk because the
gaps (both up and down) often do not hold. Use caution if trading stocks with
large opening gaps.
Trigger = Exact price that stock must trade
through before I will enter the trade. If a long position, I will only enter the
stock if it trades at the trigger price or higher. For a short position, I will
only enter the stock if it trades at the trigger price or lower. It is really
important to only enter the position if the trigger price is hit, otherwise the
trade becomes riskier.
Target = The anticipated price I am
expecting the stock to go to. However, this does not mean that I will
always hold the stock to that price. If conditions warrant, I will sometimes
take profits before that price, in which case I will notify you of the
change.
Stop = The price at which I will have a physical stop
market order set. As a position becomes profitable, this stop price will often
be adjusted to lock in profits. Again, you will always be notified of such
changes in the next daily report or intraday if you subscribe to intraday
updates.
Closed P&L under Deron’s Report Card is based on the actual
price I closed my trade at, not just the theoretical target or stop price listed
for each stock. Open P&L is based on the closing prices of the most recent
trading day.
Unless otherwise noted, average holding time is 2 days to 2
weeks once a position is triggered. Updates on open positions are provided
daily.
Yours in success,
Deron M. Wagner