Tuesday, March 11, 2008

Quick Thought: The Commodity Bounce

Many broken commodity plays, like the ag sector, have made big bounces today (as of 11:35 AM ET). Keep an eye on volume. One of two things is going to happen:

1. A low volume bounce which will be a "dead cat" signal. If this happens I will intitiate shorts in stocks like MON and TRA.

2. The sector comes storming back on strong volume. This will tell us that the recent action was merely a pullback and it's time to get long again.

Distribution patterns give the edge to the "dead cat" prognostication, but I won't enter in either direction until I get a clear signal.

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