In Daytrading Mode

 | Jun 05, 2012 | 11:00 AM EDT
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This morning's routine oversold bounce was boosted by a slightly better-than-expected ISM-Services number. There isn't any standout leadership in the market, but breadth is strong and there are a lot of minor gainers. Homebuilders, banks, oil and chips lead while retail and gold lag. Google (GOOG) and Apple (AAPL), which led Monday, are lagging today.

The problem is that there aren't many good reasons to trust this action to last. If you want to play, you had better be very short term and not too picky about charts. At the lows, there will be very few good swing trade setups but that doesn't mean you won't see upside.

A couple of good examples of stocks that I like fundamentally but have poor charts are Tangoe (TNGO) and Vaalco Energy (EGY). Both have broken below their 50-day simple moving averages and are up a bit after finding support. While I like the stocks, there isn't any reason to load them up as the charts look like they could easily roll over again, and probably will, if the market weakens. If you want to buy stocks like that, you need a healthier market.

Fundamental investors won't worry about the chart, but I want the added insurance of a setup that indicates that there is positive sentiment. Just because you like the story doesn't mean you ignore the chart.

I have little confidence in this market, and I will stick to daytrading mode until I see a good reason not to.

Columnist Conversations

we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
Large-cap, high-quality McKesson (MCK) is too cheap now, at $147.51 or so. The stock hit $243.60 more than 2.5...
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