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us stock market, stock trading course
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Tech Traders 3/06/01 Market Summary
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Technical Traders Subscribers: Including a couple of stocks from the report that are making decent moves, and have added two chip stocks that are forming classic double-bottom patterns. PLAB is making a strong breakout move.
Continuing Plays:
WFT (Weatherford International--$56.80; +1.24; optionable (WFT)): Oil and gas equipment http://biz.yahoo.com/p/w/wft.html
STATUS: Broke out on volume that rose above average (1.84 million; avg. 1.4 million). On a continued move up on good volume we will look at taking positions with stock and/or calls to buy. Strong money flow and high relative strength.
BUY POINT: Remains a buy on this move up to 58.08. Stop loss at 54.93 to 54.68.
POSITION: Stock and/or May $55 calls to buy (WFT EK).
http://www.investmenthouse.com/ct/wft.html
(Click to view the chart)
NE (Noble Drilling Corp--$51.20; +1.78; optionable): Energy
http://biz.yahoo.com/p/n/ne.html
STATUS: Continued to move up in the handle (high is 52), today on a volume surge (1.61 million; avg. 1.88 million). Volume still needs to strengthen, but looks on the way. Looking for a breakout for positions with stock and/or calls to buy. Relative strength has moved out ahead of price, a bullish indicator, and the stock shows pretty good buying.
BUY POINT: Breakout: 52.13, on volume of 2.8 million or better.
POSITION: Stock and/or June $45 or $50 calls to buy (NE F or FJ).
http://www.investmenthouse.com/ct/ne.html
(Click to view the chart)
New Plays to look at:
PLAB (Photronics Inc--$37.63; +3.13; optionable (PQF)): Semiconductor
http://biz.yahoo.com/p/p/plab.html
STATUS: Broke over its long-term down trendline on outstanding volume (2.3 million; avg. 745,272), clearing all overhead supply since the first of the year. PLAB has run up from a December low of 15.25, and looks great for completing its year-long base (previous basing high is 46.50). Relative strength broke out with price, money flow is strong, and buying good.
BUY POINT: A buy on this move up to 39.05. Stop loss at 36.94 to 36.69.
POSITION: Stock and/or June $35 calls to buy (PQF FG; 53 open interests).
http://www.investmenthouse.com/ct/plab.html
(Click to view the chart)
APD (Air Products & Chemicals--$41.83; +1.38; optionable (APD)): Chemicals
http://biz.yahoo.com/p/a/apd.html
STATUS: Broke above a long-term down trendline on good volume (1.87 million; avg. 918,590). The stock has trended up from a March 2000 low of 23.81, and looks ready to break over the January high at 42.44 (the high tested 42.50). APD is in a 22-month base (previous high is 49.13), and the steady uptrend is closing in on the previous high at 49.13. Strong money flow and relative strength has broken out ahead of price.
BUY POINT: Aggressive: Up from here on continued strong volume.
POSITION: Stock and/or June $35 calls to buy (APD FG).
http://www.investmenthouse.com/ct/apd.html
(Click to view the chart)
Two stocks that have formed double-bottom patterns:
KLAC (Kla-Tenor Corp--$45.00; +3.25; optionable (KCQ)): Semiconductor Equipment
http://biz.yahoo.com/p/k/klac.html
STATUS: Broke its down trendline on good volume (9 million; avg. 6.7 million), and crossed the 200 day MVA (44.28) to boot. KLAC has formed a classic double-bottom pattern and is completing the right leg on this move. High in the middle peak of the pattern is 46.63; we will look for a breakout over that price on a move up from here. Otherwise, a pullback into a handle (with support at the down trendline at 42) from here will dictate a buy point over the intraday high of 45.94. KLAC is in a 6-month base (prior high is 67.38 from September, origin of the down trendline, which goes on to connect January and February highs). High money flow and good buying.
BUY POINT: Breakout: 46.76, on volume of 10 million or better.
POSITION: Stock and/or June $45 calls to buy (KCQ FI).
http://www.investmenthouse.com/ct/klac.html
(Click to view the chart)
NVLS (Novellus Systems--$46.81; +2.87; optionable (NLQ)): Semiconductor Equipment
http://biz.yahoo.com/p/n/nvls.html
STATUS: The stock has formed a classic double-bottom pattern in February, and is currently shooting up the right leg on above average volume (8.2 million Tuesday; avg. 5.6 million). High in the middle peak is 47.50, and we will be looking for the stock to begin forming a handle here, pulling back to the 200 day MVA (45.66) for support on that move. Previous high in the short base is from January (49.50). In a continued rally, this stock can offer a solid breakout. Shows high money flow and good buying. NVLS is in a 6-month base.
BUY POINT: Breakout from here: 47.63, on continued rising volume (minimum breakout volume is 8.4 million). If the stock pulls back into a handle here, we will look for a breakout over today's intraday high (48.13).
POSITION: Stock and/or June $40 or $45 calls to buy (NLQ FH OR FI).
http://www.investmenthouse.com/ct/nvls.html
(Click to view the chart)
A Put Play:
DS (Dallas Semiconductor Cp--$34.16; +1.60; optionable (DS)): Semiconductor: Integrated Circuits
STATUS: Moved up to tap its 200 day MVA on the high of 35.38, but dropped back down on lower volume (2.26 million; avg. 11. million). The stock has run up for 4 days, and after closing near the intraday low (33.75), looks ready to head back down. On a break of support (18 day MVA, 32.51; 50 day MVA, 31.89), we will look at playing the stock down, with put positions, to the 26-27 range (February low is 26.50).
PLAY: Below 32 on strong volume, April $40 puts to buy (DS PH).
http://www.investmenthouse.com/ct/ds.html
(Click to view the chart)
THE SUMMARY:
TONIGHT:
- Indexes make it two in a row on better volume, but JDSU warns after hours.
- Have we seen this before?
- Some improving patterns out there.
- Productivity better than expected, factory orders worse than expected, and the Fed seems content.
- Subscriber Questions
- Team Trades
Back to back wins, today with higher volume.
On the face of it today was a much better day: up all day, higher volume, individual stocks climbing on strong volume. The big question today was whether this could stick. As we discussed last night, it appears most think it won't last, and that is not bad news. Markets love to move up on doubt.
After hours JDSU certainly gave more doubt as it announced earnings would come in at 14 cents versus the previously lowered 17 cents. INTC told a conference that there would be no snapback in chip sales. Stocks that had been trying to recover some ground after hours that was lost in the late day fade turned and started down sharply. AMCC, CIEN, GLW, PMCS, and INTC were all down two to three points; not major damage, but it took the flower off the move. The market is going to get another chance to show if it really wants to move up.
Not an enticing pattern.
That brings us to the pattern today. Is it just another step up in the oversold move or is the rally already peaking? The Nasdaq showed us similar action on February 15: a gap over the February down trendline on stronger, but below average volume; a close well off of its intraday high on a move that failed to take out its 10 day MVA; and a doji on the candlestick chart. Gaps to doji's are not the best pattern for continued moves as the initial enthusiasm jumps the market higher, but then it just loses steam. As we saw in February, that can lead to a gap back below the down trendline followed by more selling.
The Dow did not give us a much better picture as it too gapped higher (slightly) and raced to its 50 day MVA at 10,690.93 on its high (near that 10,750 level that could be resistance) before it fell back 100 points to the close. It too moved on higher volume, but it was below average and could not compare to the volume late last week. It has the look of an intraday reversal; if it was a pre-split stock we were playing, we would have been out today.
The S&P looked better, but it too closed well off of its high (1267.42), unable to take out its 10 day MVA. It is trying to turn up off of the tests of 1200, but NYSE volume was the worst in three weeks. The buyers are not running to the rescue just yet.
But things are looking interesting.
Do we panic and throw in the towel on this move? Of course not. We have been patient to this point and we can continue to exercise that patience. Even as the indexes struggle, we have WFT breaking to a new high, and NE, ADSK and TTN ready to do so as well. These have been setting up even when the indexes were heading down. There are some pre-split stocks we are having great luck with as GENI and TWRI soar into their splits. And Dell is making the trading play we were looking for. Moreover, today's action does not mean an automatic selloff. There is great pessimism out there as we noted, and markets tend to thrive on that.
Indeed, we are looking to see if last Thursday's reversal can get some follow through going to confirm a potential new rally. Today would be considered a technical follow through back in the calmer, less volatile times when a 1% gain meant something (actually, it does mean something today with all of the selling on the Nasdaq and S&P), but we did not see the heavy, above average volume on the move that shows the big money is taking part, something that has been sorely lacking on any move up. Further, the A/D line is not there; we like to see at least 2 to 1 on these moves (today it was 1.55 to 1 on the NYSE).
Thus we remain patient and stick to the plays that hit our targets whether upside or downside. There is more talk of a bottom in the market, and certainly there are sectors taking the lead, i.e., the semiconductors, that opens the door for a bigger rally. Look at KLAC and NVLS, two stocks on tonight's reports. We have been tracking KLAC, and today it made an important move that almost breaks it out of the double bottom pattern that it has been forming this last month. Same with NVLS. They may pause here and form handles (slightly downward movement on low volume) after such strong moves to the breakout point, but they are looking solid either way. We have been talking about the lack of patterns to carry a rally very far and noted that double bottoms would be the most likely pattern emerging from the roughed up techs. Here are two examples in the make. The INTC news after hours has hurt some of the semiconductor stocks, but this could just get these to form a handle. It is the same game plan we always have: if we see the move we make the play.
THE ECONOMY
Productivity revised downward to 2.2% from 2.4%. That was better than the 2% anticipated, so it was a decent report, especially when you consider that GDP was revised downward as well. Unit labor costs were much higher, however, revised upward to 4.3% from 4.1%. That was the largest rise since second quarter 1999 (4.3% as well). Still, that was lower than expectations that set the bar at a 4.5% gain.
Factory orders dive 3.8%, well off the 3.3% expected and 1.1% gain in December. Airline orders were the culprit once again; without the drop in demand for new airplanes the fall was 0.3%. You don't like to slice and dice numbers, but when one skews the whole report, it is worth noting. Still, a key part of the economy (air industry) came in a lot weaker than expected.
Dallas Fed President McTeer today stated that the economic slowdown was isolated. McTeer is pretty much a proponent of rate cutting and the new economy, and his comments were taken a bit hard by the market. Indeed, the market lost some of its steam when the statements hit the wire. Maybe some relation, but the market started hard and that usually means it peels back on its own.
End Part 1 of 2
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