Listening To The Database

On Tuesday, the Nasdaq continued its bad behavior: opening near its high (a) and closing on its low (b).

Tuesday's action puts the index at new lows for the year.

As you've heard me say before, it pays to listen when our database is "talking." For instance, tonight (and for quite some time, for that matter) I see that our  Proprietary Momentum List  is made up mostly of foods, drugs, and healthcare, and the Proprietary Implosion List is littered with former tech darlings.  Going through all of these lists is a great exercise.  If your schedule allows, I strongly urge you to do this every night.

So what do we do? As implied above, once again the defensive stocks, such as drugs ($DRG.X | Quote | Chart | News | PowerRating) and consumer non-durables ($CMR.X | Quote | Chart | News | PowerRating), hit new highs while the tech wreck continues.  Therefore, at the risk of boring you to death, stick with defensive issues on the long side and consider a short or two in tech.

Looking to potential setups, Respironics (RESP | Quote | Chart | News | PowerRating), mentioned Monday night and on the  Pullbacks Off Highs List, still looks like it has the potential to rally out of a pullback, especially if it can take out (trade above) Monday's pivot high (a).

Clorox (CLX | Quote | Chart | News | PowerRating), on the  Pullbacks Off Highs List, is in its first pullback since rallying off of major lows

On the short side, Cache Flow (CFLO | Quote | Chart | News | PowerRating), on the Trading Where The Action Is List, looks poised to resume its meltdown.

Continuing on the short side, Clear Channel Communications (CCU | Quote | Chart | News | PowerRating), on the Pullbacks Off Lows List, has formed an inverted cup-and-handle. Corixa (CRXA | Quote | Chart | News | PowerRating), on the same list, looks poised to resume its freefall. 

Best of luck with your trading on Wednesday! 

Dave Landry

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

P.P.S. I continue to refuse to plug my upcoming book on swing trading at a 20% discount. It's just not me!

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