Monday, August 04, 2014

NASDAQ set for a recovery bounce or to test the bottom of the trading range

After the steep decline on Thursday and further sloughing off on Friday, NASDAQ is now poised for a recovery bounce. That will certainly feel a lot better than a selloff, but it will take a couple of days to determine whether a bounce today is a true reversal or just a "dead-cat" bounce ("even a dead cat can bounce") before further declines into another mini-correction. The key thing to watch today is whether people sell into any initial (or even subsequent) rally or whether they pile on and kick off a short squeeze.
 
NASDAQ has technically "broken" below its support at the March peak, but only by a few points and that was on a slow summer Friday, so I would personally say that it is "at" support and hasn't clearly and decisively moved well below support. That makes today and tomorrow rather critical. If NASDAQ falls another 20 points or another 1% or more, then I'd say we are sliding into a mini-correction, but for now, we are poised to reverse and head back upwards within the current trading range.
 
IOW, NASDAQ is poised to "test" the bottom of its trading range. Either we bounce and continue the trading range, or we break down and begin a mini-correction.
 
I made some more dip buys on Friday – Tableau (DATA), Yelp (YELP), 3D Systems (DDD), and Amazon (AMZN). My goal with those particular positions is a 5% pop. I have existing positions in those names that I will be holding for the longer term.
 
I have a small position in Michael Kors (KORS). I may sell a little depending on how high it pops after their quarterly report this morning.
 
-- Jack Krupansky

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