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wise stock trade, understanding the stock market
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11/12/02 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Tuesday: IDXX
Buy alerts issued: ADI; HITK; IBM; OEX; MXIM
Trailing stops issued: USNA
Stop alerts issued: SLAB
THE MARKET
Stocks made a comeback Tuesday, but it was not a stampede of buyers. Volume picked up overall, but it was barely there Monday; an easy hurdle. Buyers also showed a lack of conviction. They bought on the Cisco news then sold on the Cisco news, the MO news, and the Bin Laden audio tape praising the murderers. That it was yanked around by the news shows there were no steadfast buyers of significance. The indexes bounced where they had to bounce to keep this move alive, and many individual stocks made great moves. The indexes also gave back a good chunk of the gains after hitting resistance. That is not the best action, but they did hold positive, avoiding the intraday reversal. They still have work to do, but they are still in good position to move up from here.
Sentiment Indicators
VIX: 35.39; -0.72
VXN: 55.25; -0.46
Put/Call Ratio (CBOE): 0.85; +0.07. Put buyers still strong even as the market tried to rally.
Nasdaq
Off and running on average volume, but could not hold a move over resistance at 1357 after an intraday surge above that level. It rallied when it had to, and now it has to get over that resistance.
Stats: +30.37 points (+2.3%) to close at 1349.56
Volume: 1.551B (+22.09%). Volume ran back up but could not quite make average trade after a low volume holiday session. Not the foundation of a strong move.
Up Volume: 1.382B (+1.255B)
Down Volume: 147M (-988M)
A/D and Hi/Lo: Advancers led 1.71 to 1. Was over 2:1 before the afternoon selling. Not bad but disappointing after the broad selling that surfaced Monday.
Previous Session: Decliners led 2.65 to 1
New Highs: 32 (+3)
New Lows: 52 (+4)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Gapped higher and did not come back to test that gap as it ran to its session high at 1367.97. That temporarily cleared resistance at the July and September interim highs near 1354 and the October 1998 low at 1357, but it could not hold the move. A solid 2.3% gain, but it gave back almost 20 points from its high in the last hour and one-half as SSB pooh-poohed the Cisco story. It was a solid move by the Nasdaq, but not a clear return of institutional buyers. It needs those after the test of the August top that failed. This range is where it needs to make a stand and take out the August top or else there is real trouble.
S&P 500/NYSE
A nice push but it stalled at the 10 day MVA and fell back to close right at the 50 day MVA. It held some of the gain and is still sitting near the bottom of its range.
Stats: +6.77 points (+0.77%) to close at 882.95
NYSE Volume: 1.355B (+21.74%). A good push higher in volume, but still below average.
Up Volume: 906M (+767M)
Down Volume: 430M (-531M). Buyers were not as dominant on the NYSE as on the Nasdaq.
A/D and Hi/Lo: Advancers led 1.58 to 1. Was over 2.1:1 before the selling, but the selling took it back down.
Previous Session: Decliners led 2.55 to 1
New Highs: 21 (+4)
New Lows: 41 (-11)
The Chart: http://www.investmenthouse.com/cd/$spx.html
Jumped up to the 10 day MVA on the high (894.30), clearing the March down trendline in the process. Volume was up but not huge. Then it reversed and closed right at the 50 day MVA (882.16). That keeps it in the consolidation range, but it is a bottom feeder in that range right now, failing its first attempt to make another move up. We like that it attempted to move up off this level, but we do not like that it could not hold the move and finished with a relatively light gain. Even more so than the Nasdaq, this is the spot where it has to make its stand.
Dow:
Even more dramatic than the SP500, the Dow rallied to resistance at 8500 then gave it almost all back.
Stats: +27.05 points (+0.32%) to close at 8386
Volume: 1.355B (+21.74%)
The Dow was hot, rallying past the 10 day MVA (8477.83) and up to 8500 resistance. It pulled back to take a breather, then got gut punched by MO's warning that shaved 30 points off in a flash. That was just the start, however, and when it was over the Dow had clipped 120 points from its high. It managed to hold above the 50 day MVA once again (8333.70), clinging to a narrow gain as volume increased. Now, while you don't like to see these intraday reversals, the candlestick pattern is a doji after a pullback and that can indicate a move up is coming. There were buyers back in the market today, and we will have to see if they inspire more. If the Dow does not sell off below the 50 day MVA or 8250 on the close and then can rebound on volume, that would indicate buyers are back. Right now it is sitting on the bubble with the other indexes.
The Chart: http://www.investmenthouse.com/cd/$indu.html
WEDNESDAY
Greenspan speaks Wednesday and WMT and AMAT announce earnings (WMT before the open). WMT said Wednesday it was on track thus far for the month, but this month is not included in the earnings report tomorrow. The market is responding to news, showing its indecision at this point; we know Greenspan is going to be upbeat given his 5 henchmen out making positive speeches today and we know AMAT is struggling still. Question is how much is priced in.
There is a lot of concern still about the economy as evidenced by the deflation talk each and every day on the financial stations. We still, however, see improving retail, improving business spending, and many other positives for the economy. If the market does fail here, that means the market believes there is no recovery ahead, and the market is the best forecaster. Even if it was not, it is hard consolation to be right but have the market move against you in the interim. In short, the pessimism with respect to the economy appears late and incorrect based on what we are seeing in the numbers. We feel the market has been pricing in those improvements. The question now is whether they are fully priced in.
The indexes are under pressure but still holding where they have to. We have been weeding out non-performers, doing so again on today's move up, and also capturing gains on some stocks that ran well but are struggling some. That is always wise when the market shows some indecision and the big institutional money has stepped aside. At the same time we see strong individual upside moves continuing in stocks and stocks that have pulled back and started solid bounces today despite the late pullback in the indexes. Now they cannot swim upstream against the market forever, and if the market breaks down we will move up stops or take gains and look to the downside. At this point, however, the market has not broken down and the price/volume action is still as it should be. That at least indicates there is no dumping ongoing as the market tries to hold this consolidation.
After hours the Bin Laden tape was confirmed as authentic and it is viewed as a signal that his followers can go ahead with whatever attacks they have planned. That was pressuring futures and it will most likely continue to do so in the morning. A softer open would not be a bad thing, and we will be watching to see where the indexes and stocks hold support. The terrorist tape puts a wrinkle in the action, but unless there is a wave of pessimism we don't see yet, we anticipate the indexes to try to continue the rally from this point.
Support and Resistance
Nasdaq: Closed at 1349.56
Resistance: July, August, and September interim highs at 1345. 1357.09, the October 1998 bear market low. 1418, the interim test after the September 2001 low, and 1426 the August high. Then some price resistance at 1500 and the 200 day MVA (1520.08).
Support: The 50 day MVA (1302.74). 1250 from some prior price lows. 1200 (August closing low) to the July intraday low at 1192.42. There is price support from 1080 to 1100. Then there is a big shelf of support at 1050 down to 1000.
S&P 500: Closed at 882.95
Resistance: The 50 day MVA (882.16) and the March down trendline at 879. The September 2000/May 2001 downtrend line at 892 and the 18 day MVA (887.92). July, August and September interim highs at 909 to 911. Some resistance at 921. Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high. Then price resistance at 990.
Support: 875 is some price support. 850 to 855 (the October 1997 and Q2 1998 lows). Prior closing lows and highs at 800 from July and October. The July intraday low at 775.68. 750 to 760 with an intraday touch to 730.
Dow: Closed at 8386.00
Resistance: 8500 from October high (10 day MVA at 8477.83). The late July and early September interim high at 8726 to 8762.14 (8745 closing). A range of resistance from 9000 on up to 9050. The 200 day MVA (9251). 9500 from June and July lows.
Support: The exponential 50 day MVA (8334) and then 8250. The simple 50 day MVA (8168). 8000 (August low at 8043; September 2001 intraday low at 8062).
Economic Calendar
11-13-02
WMT earnings, before the open
AMAT earnings, after the close
11-14-02
Initial jobless claims (8:30): 400k expected, 390k prior.
Retail sales, October (8:30): -0.2% expected, -1.2% prior.
Retail sales, ex autos (8:30): 0.2% expected, 0.1% prior.
Dell earnings: after the close
11-15-02
Business inventories, September (8:30): 0.0% expected, -0.1% prior.
PPI, October (8:30): 0.3% expected, 0.1% prior.
Core PPI (8:30): 0.1% expected, 0.1% prior.
Industrial Production, October (9:15): -0.4% expected, -0.1% prior.
Capacity utilization, October (9:15): 75.7% expected, 75.9% prior.
Michigan sentiment, November preliminary (9:45): 82.0 expected, 80.6 prior.
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THE PLAYS:
INTU (Intuit--$54.24; +2.44; optionable): Tax software
http://biz.yahoo.com/p/i/intu.html
STATUS: Testing the breakout. INTU broke out of a 3.5 month cup base in October and just made the second test of the short term moving averages (the 18 day MVA just under 52). Tuesday it jumped up on much stronger, average volume after settling back to the 18 day over the prior week. Stocks tend to breakout and then march up the 18 day MVA 4 to 5 times before a deeper test. The second move up is a good one to get in on as the stock still has plenty more upside. Accumulation of the stock is outstanding at 10 up weeks on rising volume to 3 down weeks on rising volume.
Volume: 3.481M Avg Volume: 3.343M
BUY POINT: $55.26 Volume=500K Target=$65 Stop=$51.39
POSITION: IQU DJ - April $50c (68 delta) and/or Stock
http://www.investmenthouse.com/ci/intu.html
NXTL (Nextel--$11.93; +0.95; optionable): Wireless communications. Can you hear me now?
http://biz.yahoo.com/p/n/nxtl.html
STATUS: Testing the breakout. NXTL broke out over 10 in October on strong volume and after a good run stalled at 13 and has now tested lower. Monday it closed on the 18 day MVA (11.12) and Tuesday it made a sharp jump up on solid, above average volume. Accumulation is excellent and money flow is back to running up ahead of the price. Wireless has been very strong in this recovery, and Tuesday NXTL showed that it wanted to start back up again for the next leg.
Volume: 50.116M Avg Volume: 32.489M
BUY POINT: $12.15 Volume=4.5M Target=$16.15 Stop=$11
POSITION: FQC EB - Feb. $10c (74 delta) and/or Stock
http://www.investmenthouse.com/ci/nxtl.html
UTHR (United Therapeutics--$15.84; +0.49; no options): Drugs
http://biz.yahoo.com/p/u/uthr.html
STATUS: Double bottom w/handle. UTHR is still moving in a big base, up off the lows but still way down. As with many stocks, however, it is showing good action and good accumulation as it builds up off the lows. In fact, it has come off of a 52-week high from September, forming the current 2-month base on top of a cup base it built from June to September. Accumulation in the two bases is excellent at 8 up weeks on rising volume to 4 down weeks on rising volume. It is moving through the handle of its short base, showing a good volume surge Tuesday as it moved up off the 18 day MVA (15.36).
Volume: 194.953K Avg Volume: 177.59K
BUY POINT: $16.25 Volume=295K Target=$20.25 Stop=$14.94
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/uthr.html
End Part 1 of 2
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wise stock trade
understanding the stock market
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