Baby Blue Arrow

On Wednesday, the Nasdaq opened slightly lower and dipped down to the 2000 support level. It then found its low in this area and begin to rally. It gave up most of that rally by early afternoon but then mounted a solid trend upward into the close.

The fact that the index closed well, survived 2000 and is back above its 50-day moving average (not shown) suggests that the test was successful. This keeps the first pullback/cup and handle intact. If fact, I'm so excited, I had to draw a baby blue arrow up!

So what do we do? This is the best I've felt about the long side in quite some time. My "scratch pad indicator"--the number of stocks that I scribble down while during my analysis--has more longs than I've seen since this bear began over a year ago. The only thing that would change my mind would be if we sold off and went back to/below 2000. For now though, it looks like 2200 is the next target. As far as patterns, continue to look for those that look a lot like the market itself--first pullbacks, cup and handles and Bow Ties.

Looking to potential setups, Cabot Microelectronics (CCMP | Quote | Chart | News | PowerRating) looks poised to rally out of a Bow Tie/Cup and handle. Keep in mind that it'll likely bump up against resistance at 75 or higher--but hey, that'll be a good problem to have!

Ebay (EBAY | Quote | Chart | News | PowerRating) is another Bow Tie/cup and handle that looks poised to challenge its recent highs.

Triquint Semiconductor (TQNT | Quote | Chart | News | PowerRating) looks poise to rally out of a Bow Tie. Just don't overstay your welcome here as there is overhead resistance (not shown) in the 30-35 area.

Americredit (ACF | Quote | Chart | News | PowerRating), on the  Pullbacks Off Highs List, probed lower earlier in the day but reversed to close well. This suggests that its pullback remains intact.

Other

You may have heard a rumor that I'll be at the Kaltbaum/Fleckenstein Intermediate Term Traders Seminar. It's true. I'll be attending the Dallas May 19th seminar (the other dates are May 5 for Atlanta and June 2 for Phoenix). I figure, my setups don't exist in a vacuum. It probably won't hurt to learn about trading in longer time frames.

Best of luck with your trading on Thursday! 

Dave Landry

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

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