Sunday, October 24, 2004

Why are we still in a confirmed rally?

There are plenty of reasons. How about the nice cup and handle that SHFL broke out from on Thursday and Friday. SHFL is ranked #22 on this week's IBD 100. GOOG took the number 1 spot on the IBD 100 this week after investors embraced the earnings report with open arms. SYNA is in the #15 spot after reporting earnings and running up huge. But the most interesting IBD 100 pick this week is TASR. Coming out of nowhere (hasn't been in the IBD 100 for months) to take the #3 spot this week, TASR is sporting a textbook cup and handle. This thing could break out in a huge way any minute now. I've got a large position in TASR and will add more during a convincing breakout. I'm no expert at assessing base stages, but my interpretation of O'Neil's base stages, TASR reset to a first stage base after it collapsed over 50% back in April. The short interest in TASR is huge but they haven't broken key support levels, so this should add fuel to the fire if it does break out. I think this is the kind of setup that O'Neil might take his cash out of the money market to get a piece of.

We aren't all in the clear though. This Friday gave us some NASTY reversals. Take a look at JUPM, YHOO, EBAY, TZOO, AIRT, and NVDA. All of these stocks looked like they had a good thing going last week and then BAM, out of nowhere huge sellers came in to liquidate into the strength.

With the election right around the corner and oil still going strong, we probably don't quite have all the ingredients in place for a sustained bull run yet. I've been taking it easy lately because of all the reversals going on right now. The market is almost unpredictable for my style of trend trading when there is so much uncertainty. We aren't really seeing an uptrend (higher highs and higher lows) or a downtrend (lower highs and lower lows) across the major indexes right now. The naz has been stuck in a remarkably tight range of about 75 points for the entire month of October and it sort of looks like it has been in an uptrend since August. But the S&P 500 and the Dow tell a different story this month. Both are clearly moving down. With the MACD indicator on the naz starting to point down, the naz may well join its peers and slide off.

TASR is my only position right now after getting stopped out of AIRT during its Friday reversal. There is a good chance that I won't trade anything except TASR until after the election.


At 8:49 AM, Anonymous Anonymous said...

I agree with your thoughts. I decided to get back into TASR this morning (in the game) and probably won't trade until after Nov. 2.

Stevd (aka at2martusn)


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