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Hugs and Drugs

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Identiying sector rotations can be a profitable endeavor

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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.

Gotta hop.
position in pfe

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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