Test

On Monday, the Nasdaq gapped lower on the open and sold off for a solid trend day lower. This has it closing near its lows and right at its 50-day moving average.

It still looks like we are in transition mode with the last two days being a correction of that first leg up. This action is setting up a Bow Tie pattern in the index (a).

The gap near the 2000 level should be the next level of support (b). If this is violated, it may suggest the market could return to the old lows. For now though, it looks like we are in first pullback mode.

So what do we do? Now's the time to be on your toes. The market is in transition mode and is up against its first test. This sets up many first pullbacks and transition patterns such as Bow Ties (see below). Keep building your watch list but wait for entries. If this thing does not follow through, you might just get lucky and not get filled.

Looking to potential setups, Genzyme (GENZ | Quote | Chart | News | PowerRating), on the Pullbacks Off Highs List, appears to be attempting to rally out of its first pullback since rallying out of a lengthy base.

Johnson Controls (JCI | Quote | Chart | News | PowerRating), also on the Pullbacks Off Highs List, looks poised to rally out of a shallow pullback.

Minimed (MNMD | Quote | Chart | News | PowerRating), not to be confused with "Mini-Me," has formed a cup and handle combined with a Bow Tie setup. Just don't overstay your welcome here as there is overhead resistance in the 40-45 level (not shown).

Computer Associates (CA | Quote | Chart | News | PowerRating), on the Pullbacks Off Highs List, has also formed a Bowtie/cup and handle.

On the short side, Procter and Gamble (PG | Quote | Chart | News | PowerRating), on the Pullbacks Off Lows List, looks poised to resume it long-term downtrend.

Listening To The Database

I often like to "listen" to the database for what it is telling me. Tonight, it spit out more Bow Tie buys than it has in months. This confirms that we are in transition mode. Below is an unedited Bow Tie scan for 04/23/01. For parameters, I used a minimum price of $15, a minimum average volume of 25,000 shares, a minimum 50-day historical volatility of 40 and no maximum volume. Obviously, you can't trade each one of them nor would you want to. Use bigger picture technical analysis such as overhead resistance, cup and handles etc.... when culling through the list.

AC ADIC ADTN AFCO AHAA ALKS AMAT AMKR ANAD AOL APH ASF ASML ASYT BBOX CA CAMZ CCMP CCU CDWC COHU PWM CTXS CXR EBAY ENZ ESPD ETM EXAR EXPE FDS GE GILD GLC HELX HGSI HHH HON HRS IBM IMGN IRF JBL JKHY KEA KLAC LEH LSCC LSI MEDC MONE MSCC NCR NOK NVLS ONIS PCAR PCS PHTN POWI PRGN PRSE PTEL PXLW QSFT RFMD RHI RTEC RYL SCI SEAC SFA SGMO SNDK SYMC TKLC TLGD TSM UTEK UVN VECO VIA
VIA-B VSTR WERN WMS

Other

Congratulations to Tony Saliba and traders Chris Hausman and Joe Corona for putting on an excellent seminar. Also, I enjoyed speaking with many of you as much as I did attending the seminar. The level of expertise of you guys (and gals) have is amazing. I am humbled.

Special thanks to Duke Heberlein for filling in while I was away. Nice job Duke!

Best of luck with your trading on Tuesday!

Dave Landry

P.S. Reminder: Protective stops on every trade!

P.P.S. Thanks Bubba for house sitting while I was away. Just remember, next time to drag the bodies inside the house after you shoot them. Good thing you know the sheriff.

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