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us stock market, swing trading stock
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11/21/02 Investment House Alerts Report
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IH Alert Subscribers:
MARKET ALERTS:
Targets hit alerts issued Thursday: AVID; BSX; ARTI; MXIM; SNDK; QCOM; NVLS
Buy alerts issued: PPD; UTHR; HTCH; WFR; PIXR
Trailing stops issued: VAR
Stop alerts issued: ABFS
SUMMARY:
- Market was poised and good news helps deliver a breakout.
- Jobless claims drop, Leading indicators flat, Philly Fed much better. Subtle but important change continues.
- Indexes take out key resistance on some outstanding volume.
- Subscriber Questions
Market was ready and it delivered.
One reporter on the financial stations kept talking how trader 'chatter' was all the sudden positive. Heck, it is easy to be positive on these days. In fact, as we wrote last week, all of the negative talk about the market (remember those technicians saying the market was breaking down because PG, JNJ, C, etc. were not rallying?) was a good thing, a contrary indicator. Not many believed in the market even as it was moving higher and leading stocks were breaking out and holding those breakouts. That is an important point we teach in the seminars: you have to listen and watch with your eyes and ears in your head, not the internal organs in your gut. That is why we were taking upside positions the past two weeks even as the pundits were talking about the end of the rally. That is why we took an awful lot of gain today and have even more to take as this rally progresses even as a lot of late comers rushed in madly to buy whatever they could, not wanting to miss the bus. It was nice to sit back and let them bid up the price of our positions that we took when the market told us it was time to act.
The breakout was set up and the catalysts it needed came in early. HPQ reported solid though hardly spectacular earnings. The phrase 'stabilization in technology spending' was probably the most powerful point made in the release. On top of that jobless claims dropped to the lowest level since January, Leading indicators were better than expected, the Philly Fed was much better than expected, and another head murderer was taken into custody. That was more than enough to give the market the jack it needed to blast through resistance on some of the best volume in since the early November gap higher and since July before that.
THE MARKET
The news fell into place with the good technical position, and the Nasdaq broke out over the August high while the Dow and SP500 made significant moves as well, clearing their November highs. Volume was heavy across the board as many stocks made important breakouts over near resistance, pulling in quite a bit of volume as they did. Again breadth was solid, and with the strong volume moves over resistance, the market has put itself in great shape for the next leg of the rally.
Volume was very impressive. Nasdaq volume was the highest since the July selling. The significance? Well, at that point institutions wee dumping shares in big numbers. Since then there have been a lot of short covering rallies where volume spiked, but it did not reach those levels. With volume leaping up Thursday well above all other levels in the interim, it is an indication that institutions were heavy buyers. Indeed, in checking around with institutional traders throughout the session we were informed that there mutual funds were buying stocks aggressively in big blocks. This surge in volume was some of the 'purest' buying we have seen in a long time in that it was buying as opposed to a lot of short covering.
Sentiment Indicators
All of the negative press the market received the past two weeks helped usher in this rally as the pessimism keeps the money from freely flowing in, and thus the market moves up in progressions. That also keeps investors anxious, but it keeps the market with plenty of fuel when investors feel they are missing out. Wednesday and particularly Thursday were such days.
VIX: 27.37; -1.29
VXN: 44.7; -0.12
Put/Call Ratio (CBOE): 0.75; +0.12. Interesting action, rising as the market rose. Could have been position closing and put selling.
Nasdaq
Blew through the August high on some outstanding volume. Plenty of momentum up toward the 200 day MVA.
Stats: +48.2 points (+3.4%) to close at 1467.55
Volume: 2.418B (+36.26%). An explosion of volume, the highest since the July selling. This was an impressive display of institutional buying.
Up Volume: 2.146B (+613M)
Down Volume: 253M (+43M)
A/D and Hi/Lo: Advancers led 2.17 to 1
Previous Session: Advancers led 2.18 to 1
New Highs: 91 (+40)
New Lows: 35 (-11)
The Chart: http://www.investmenthouse.com/cd/$compq.html
Blew past the August high at 1427 on massive volume. A clean breakout and post low high. There is not a lot to say other than the next level of resistance is an interim low from the 1998 bear market and the 200 day MVA (1504). That is just 36.5 points away. After such a strong run we can expect the Nasdaq to start struggling a bit at that point and consolidate some of the big gains on the rally higher. Good to be in shouting distance of the 200 day MVA once again. That has not happened since the first of the year.
S&P 500/NYSE
The large caps also joined the action, clearing the November high. It still has to clear the post July high, a point where it will find some difficulty without taking a breather after it gets there.
Stats: +19.61 points (+2.15%) to close at 933.76
NYSE Volume: 2.022B (+35.23%). Strong volume, equivalent to the volume on the move up off the October low.
Up Volume: 1.648B (+520M)
Down Volume: 383M (+9M)
A/D and Hi/Lo: Advancers led 2.21 to 1. Another solid, broad advance.
Previous Session: Advancers led 2.27 to 1
New Highs: 48 (+23)
New Lows: 24 (-17)
The Chart: http://www.investmenthouse.com/cd/$spx.html
The large caps gave the move it needed after working back to the prior November high (925.66). Volume shot up on the move as institutions plowed into stocks. The breakout gives the index a lot of momentum as it heads up to the August high (965). We expect it to work toward that level over the next several sessions as it will be hard to duplicate the moves we have seen the past two days. We do expect a continued move toward that resistance where it will need to consolidate some of the gains and get that anxiety level back up.
Dow:
Surged over the November high as well on strong volume.
Stats: +222.14 points (+2.58%) to close at 8845.15
Volume: 2.022B (+35.23%)
Just 230 points away from the August high (9077) with a very explosive move over near resistance from the November high (8800). As with the Nasdaq, the current momentum can push it near that level in short order where it will have to regroup for a further move similar to what it did as it approached this last resistance point.
The Chart: http://www.investmenthouse.com/cd/$indu.html
FRIDAY
The scheduled economic news has been delivered and favorably received. The indexes have made breakouts over important resistance with a lot of buy side volume. This is what we were looking for and we enjoyed the fruits of sticking with what the market was telling us. There is still plenty of momentum to carry stocks further, but we doubt they will blast higher with the same breakout vigor of the last two sessions. We look for more of a stair step move up toward that next resistance level. That is why when we took gains we took part of the money off the table to lock in a good gain and then let the rest of the position continue to work higher for us as the market moves higher as well.
Many stocks have blasted higher and are not in great buy points right now. There are, however, stocks that are getting ready for moves once again even as these stocks have rallied higher in this move. What happens in a healthy market is what is called rotation. There were early breakout leaders in October and even early November, e.g., IMN, TSCO. They ran up hard and have been resting even as dozens and dozens of stocks shot higher the last two sessions. These early leaders helped set the stage for the move we have just enjoyed and they are not taking a breather. When the current batch of stocks start peaking, then the baton should be passed to another group. It will probably include these early leaders and then some others that have continued to form up their bases but were not ready to breakout on this move.
Thus we are not going to chase those stocks that have rallied hard, though there still are stocks that moved today that remain in buying position. We will be looking at those as well as those stocks that are still forming up their current bases and those early leaders that are working through their consolidations still and are getting ready to make the move higher. We have a lot of cash available after a lot of targets were hit but we don't want to be too eager and chase stocks that are extended and put those gains at undue risk. The key is keeping the deck stacked in your favor, using good patterns and volume to key your buys.
With resistance looming ahead as well as the Thanksgiving holiday, we don't want to get too aggressive with new option positions that could have to wait through the holiday season to give us any real movement. With options, time is money. If we do see a good stock play make the move we will move in. We will also not give up on new option plays for strong moves from solid patterns, but will buy time. Take a look at the subscriber question below as well.
Support and Resistance
Nasdaq: Closed at 1467.55
Resistance: Price resistance at 1500 and the 200 day MVA (1504). 1574, the May low, is next.
Support: The August high at 1427. 1418, the interim test after the September 2001. The 10 day MVA (1400) is possible support. The 18 day MVA at 1375. 1357.09, the October 1998 bear market low. July, August, and September interim highs at 1345. The 50 day MVA (1329).
S&P 500: Closed at 933.76
Resistance: Price resistance at 950. 965, the September 2001 closing low along with the August 2002 high. Then price resistance at 990.
Support: The November high at 925.66. 921 is some price support. July, August and September interim highs at 909 to 911. The top of the late October consolidation range at 899. The 10 and 18 day MVA (907; 900). The 50 day MVA (889). The September 2000/May 2001 downtrend line at 879. The March down trendline at 867. 850 to 855 (the October 1997 and Q2 1998 lows).
Dow: Closed at 8845.15
Resistance: A range of resistance from 9000 on up to 9050. The 200 day MVA (9208). 9500 from June and July lows.
Support: The November high at 8800 and then the late July and early September interim high at 8726 to 8762.14 (8745 closing). The 10 day MVA (8575). 8500 from October high. The 18 day MVA (8507). The exponential 50 day MVA (8393) and then 8250.
Economic Calendar
11-19-02
CPI, October (8:30): 0.3% actual, 0.3% expected, 0.2% prior.
Core CPI: 0.2% actual, 0.2% expected, 0.1% prior.
Trade balance, September (8:30): -$37.0B actual, -$37.3B expected, -$38.50B prior.
11-20-02
Housing starts, October (8:30): -11.4%; 1.603M actual, 1.710M expected, 1.810M prior (revised from 1.843M).
Building permits, October (8:30): +1.7%; 1.763M actual, 1.698M expected, 1.733M prior.
11-21-02
Initial jobless claims (8:30): 376K actual, 394K expected, 401K prior (revised from 388K).
Leading Economic Indicators, October (10:00): 0.0% actual, -0.1% expected, -0.2% prior.
Philly Fed, November (12:00): 6.1 actual, -0.5 expected, -13.1 prior.
Treasury budget, October (2:00): -$54.0B expected, -$7.7B prior.
SUBSCRIBERS QUESTIONS
Q: Was wondering if it might not be a bad idea to consider closing out stock/option positions ahead of Thanksgiving (well ahead, like by this Friday), in anticipation of lower volume trading next week. Don't the indexes tend to drift lower as a consequence of the light holiday volume? I'd rather not close anything assuming the rally hasn't run out of steam again by this Friday, but with a potentially "wasted" week upcoming, December options will be within 3 weeks of expiration starting with the next full trading week after Thanksgiving. Any thoughts about this?
A: Great question. You are correct that lighter volume can exacerbate moves. When a hedge fund or buy or sell program is initiated in light volume it can really swing the action up or down when there is no one else to stand it its way. The question becomes when will the light volume come in and what do we anticipate the direction to be? Typically it would start next week and get lighter heading into the holiday. Wednesday afternoon would be dead and Friday is a half session. Given that, do we want to risk holding positions, particularly those nearer term option positions?
Holiday action can be great because of that light volume. In years past we have scored nice gains the day before and that Friday following Thanksgiving simply because the bias drove the market in the direction we were playing. The moves were not huge, but if you were in the positions it could add some nice gravy and dressing so to speak. This year the action is up heading into the holiday. There is resistance getting closer and closer that the indexes and their stocks will most likely have to consolidate under before breaking higher. Thus, if the indexes continue with their momentum and move up to resistance, the odds of making a meaningful break over that resistance are not as great.
Thus your instincts are good; if the market does move up to that resistance or close to it and starts to buck a bit, we will look at taking gains on the index plays as well as some other option plays and even on stocks that have made good moves and hit the targets. That could be Friday, but we think we could get a bit more early next week as the bias is upside and in lighter volume the market tends to move in the same trend.
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THE PLAYS:
Good movers: Another take your pick. Too many to list.
BMRN (Biomarin Pharmaceuticals--$7.41; +0.56; optionable): Drugs
http://biz.yahoo.com/p/b/bmrn.html
STATUS: Test breakout. After a solid move over the 200 day MVA (6.50) in early November, BMRN tested the move and then blasted higher Thursday on strong volume. It is right at the breakout high, and a move over that level is our entry point. This one has not run a long way to this point, still coming off its lows in its base. Accumulation is excellent over the past three months at 4 accumulation weeks to 0 distribution weeks. Money flow is racing ahead of the price.
Volume: 1.066M Avg Volume: 314.545K
BUY POINT: $7.66 Volume=750K Target=$10.45 Stop=$6.94
POSITION: NUR DA - April $5c (low OI) and/or Stock
http://www.investmenthouse.com/ci/bmrn.html
HAR (Harman Intl.--$59.91; +0.6; optionable): consuemr electronic equipment
http://biz.yahoo.com/p/h/har.html
STATUS: Testing the 18 day MVA. HAR broke out of its 6-month base in late October and is now moving up the short term MVA as a good breakout stock should. It is currently in the process of its second test; stocks usually give 4 to 5 moves up off the short term MVA before testing lower. Accumulation in the base is positive at 6 up weeks on rising volume to 4 down weeks on rising volume. Very good accumulation, and good money flow. The stock is ready to make its next move up the short term MVA.
Volume: 427.6K Avg Volume: 322.863K
BUY POINT: $60.55 Volume=488K Target=$70 Stop=$56.31
POSITION: HAR DL - April $60 and/or Stock
http://www.investmenthouse.com/ci/har.html
IMN (Imation--$41.68; +0.68; optionable): PC disks and the like
http://biz.yahoo.com/p/i/imn.html
STATUS: Ascending wedge. IMN was an early leader in the rally, blasting off in October and running ahead of the market as it reported great earnings. It peaked out at 42 and has spent the past month moving laterally on mostly below average volume, showing good price/volume action as it does. Very solid action to consolidate the move. In a rising market, this is a very bullish pattern after a strong run; the stock is consolidating its strong move and is still strong as the higher lows in the wedge build that pressure up for the next breakout.
Volume: 439.1K Avg Volume: 478K
BUY POINT: $42.41 Volume=700K Target=$48 Stop=$39.44
POSITION: IMN DG - April $35c (68 delta) and/or Stock
http://www.investmenthouse.com/ci/imn.html
End Part 1 of 2
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us stock market
swing trading stock
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