MLR - PMP 8/11/14

Published : August 11 2014 at 8:28 ET

Major averages rose on lower volume, showing lack of institutional support at this juncture as major averages continue to trade below their respective 50dma and 200dma's, though the NASDAQ rests just a breath under its 50dma. While futures are currently higher, this is primarily due to a bounce in European markets which have been oversold. Distribution days are substantial so until the selling pressure subsides, playing stocks on the long side with the intent of holding for a multi-week move holds higher risk at this point.

When buying a position, it is important to reinforce how to handle the position should it fail. Cloud networking software and hardware provider Arista Networks (ANET) gapped up on Friday at the open after a strong earnings report. Indeed, after it gapped up, it fell enough to invalidate the buyable gap up, thus as we've advised, one can position size smaller initially, wait for the stock for stabilize before buying any shares, or can buy a full position right at the open knowing the stock may fall. With futures rallying sharply this morning, if one still owns the stock based on Friday's initial action, then waiting to see if the stock falls below the 71.50 absolute intraday low of Friday would be one way to handle the position.

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