Sector Investing

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Trading Ideas
by Dave Landry, Director of Research
TradingMarkets.Com
June 17, 2003

http://www.hardrightedge.com/ideas.htm

On Monday, the Nasdaq opened firmer and after a brief dip, began to rally. Then, after drifting mostly sideways, it resumed its rally late in the day. This action has it closing well, just above last Thursday's pivot highs (minor resistance) and at new closing highs for the year.



The S&P put was even more impressive. It cut through last Thursday's pivot high and managed to take out its prior high for the year.



So what do we do? The fact that the indices were able to rally to make back all of Friday's losses (and then some) is a positive. Nervous longs who were shaken out are now faced with the decision of getting back in or watching the rally leave them behind. And, eager shorts, who were quick to call a top last week, are now faced with losses. Looking to the sectors, nearly all were up nicely on Monday. This action keeps most in strong uptrends and puts many such as banks, telecom, drugs, HMOs, and homebuilders at or near new 52-week highs. Other sectors that were beginning to look questionable such as the semis and to a lesser extent software also bounced back nicely on Monday. Therefore, once again, continue to focus on the long side. However, make sure you are honoring your protective stops, trailing stops and taking partial profits when offered.

Looking to potential setups, Encana (ECA), mentioned Friday (originally mentioned in late May (a)) and in the strong independent oil & gas sub-sector, looks like it has the potential to rally out of a pullback. Talisman Energy (TLM), in the same sub-sector and also mentioned Friday, looks like it has the potential to rally out of a Double Top Knockout-like formation (email me if you need the rules).



Icos (ICOS), in the strong drugs-other sub-sector (a), looks poised to rally out of a pullback/micro-cup and handle-like formation.



Best of luck with your trading on Tuesday!