Hugs and Drugs
Identiying sector rotations can be a profitable endeavor
The Minx springs to life and another session of chilly thrills is underway. The initial trade out of the gate is to the downside (deja vu) but as it stands, she's trying to grind their way back into Hoofy's good graces. Again, traders are conditioned to buy dips and that's bullish -- until it's very bearish.
Keep an eye on the drug complex. There is a story on Bloomie that Pfizer (PFE:NYSE) has an experimental drug that may block the SARS virus. I was giggling around in the PPH (Pharmaceutical HOLDRs) yesterday (on the technicals) and this blurb piqued my interest. The consumers have been a place I've looked to rent upside (with tight stops) and I've done so again early this morning (vs. my put plethora). In the interest of full disclosure, I'm trading Pfizer tight and will be buying/selling it as a function of price.
The morning breadth is skewed 2:1 negative on the big board and 3:2 negative in the Nazz but that can change on a dime. S&P 940 (NDX 1150) is first support followed by S&P 935 (NDX 1140). On the upside, use yesterday's highs and then S&P 950-955 as an important resistance. The financial/semi duopoly continues to be important from a psychology/leadership standpoint.
Finally, be aware of "pin risk" in front of expiration. When there's a high open interest relative to the average daily volume, stocks have a habit of migrating towards the strike. Just something to be aware of as we edge our way to Friday.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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