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world stock market, us stock market
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Tech Traders 5/10/01 Update
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Technical Traders Subscribers:
THE PLAYS
Continuing Plays:
LEN (Lennar--$44.81; +1.48; optionable (LEN): Materials & Construction
http://biz.yahoo.com/p/l/len.html
STATUS: Forming an ascending wedge and moving up on slightly higher volume (419,000; avg. 780,272). Resistance is just over 45. The stock will need a strong shot of volume to break it out of this consolidation. May high is 46.69. Target: $51-54.
BUY POINT: Over 46 on volume of 566,000 or better.
POSITION: Stock and/or August $40 calls to buy (LEN HH).
OO (Oakley--$23.00; 0.00; optionable (OO): Sporting Goods
http://biz.yahoo.com/p/o/oo.html
STATUS: Back at support (10 day MVA) on decreasing volume in the pullback from the recent closing high (23.99); volume was 158,200; average is 314,000. In a rally the stock is ready to move back up for a move over that high; it's been a decent pullback. Money flow and buying look great. Target: $26-28.
BUY POINT: Aggressive: Up from here on rising volume. Stop: 21.39 (50 day MVA is at 20.05.
POSITION: Stock. June $22.50 calls to buy (OO FX) have 94 interests and delta of 0.632.
PX (Praxair--$49.96; +1.79; optionable (PX): Chemicals
http://biz.yahoo.com/p/p/px.html
STATUS: Making a strong move out of the ascending wedge on good volume (1.8 million; avg. 873,272). Buy point is 49.73, so looking for the breakout here. Target: $55-57.
BUY POINT: Remains a buy on the breakout up to 52.22 on continued strong volume.
POSITION: Stock and/or July $45 calls to buy (PX GI).
New:
ATML (Atmel--$13.60; -0.10; optionable (AQT): Semiconductor
http://biz.yahoo.com/p/a/atml.html
STATUS: Back to support (10 day MVA) on lower volume (5 million; avg. 6.8 million)
in the handle of a 3-month cup base. Looking for a bounce back on stronger volume for a breakout over the handle high (14.60). Great accumulation and earnings.
BUY POINT: 14.73, on volume of 10 million or better. Stop: 13.70 (10 day MVA is at 13.62)
POSITION: Stock and/or August $10 calls to buy (AQT HB).
Formerly covered:
VAR (Varian--$68.17; +2.77; optionable (VAR): Electronics
http://biz.yahoo.com/p/v/var.html
STATUS: Moving up on stronger volume in an ascending wedge pattern (231,800; avg. 185,227). Our buy point is just above the December high of 71. The stock is showing great money flow and buying. Target: $78-81.
BUY POINT: Breakout: 71.13, on volume of 250,000 or better. Stop: 66.15. 10 day MVA is at 66.26.
POSITION: Stock and/or August $65 calls to buy (VAR HM; 4 open interests). August $70 calls to buy (VAR HN) have 75 open interests and low delta.
Index:
OEX (Standard & Poors 100--$651.42; -0.72; optionable (OEY):
STATUS: Closed on a slight pullback just above the 10 day MVA (650.07), showing a doji at the bottom of the intraday range. Volume was just higher at 1.05 million (avg. 1.2 million). If the index breaks this support in market selling, it can drop to the 50 day MVA (634.52). We'll look at buying puts if we see that move begin.
BUY POINT: On a move below 650 on continued rising volume in market selling.
POSITION: June $660 puts to buy (OEY RL). Deltas unavailable at the time of this writing, so check with your broker in the morning.
* * THE SUMMARY * * *
TONIGHT:
- Nasdaq showing signs of real strain as big names reverse on high volume as they cannot respond to favorable news.
- Dow up, so volume must have been down.
- Broader market continues to rally: retailers and others continue to perform despite reversal in the brand names.
- Retailers very good and not so good.
- Subscriber Questions.
- Team Trades.
ONLINE SEMINARS: Technical Analysis II starts Wednesday, May 16!
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Market starts showing us some trouble today.
Overall it did not look too bad on the surface. Nasdaq sold down again, but on lower volume. Same on the S&P 500. The Dow continued its backward price/volume action, but the Dow has been showing us it wants to pull back anyway. On the surface it looked like a continuation of the same action we have seen for the past week.
Yes, but it is changing. Wednesday the Nasdaq bounced up off of the 10 day MVA and showed us a doji, overcoming some bad news. It was not able to close in the top half of its trading range for the session, so it was not a complete 'win' on the lower volume. Today volume was low again, but the Nasdaq tanked into the close. Some big names that have been recovering crashed through their 50 day MVA's on high volume (PMCS), others peeled away from attempts to break over that level (e.g., AMCC, BRCM, JNPR). Other key names thudded back to their 50 day MVA's and it is a question as to whether that level will hold (e.g., SEBL, ADBE, BRCD, VRTS).
Then we have the intraday reversals. The SOX was rallying on the Morgan Stanley upgrade that said the "train had left the station," meaning it was time to buy now. Well, three other brokerages came out and disputed that message. Many semiconductors reversed on high volume even as AMD once again came out and said that Q2 was in fact the trough or the bottom in PC chips and flash memory chips. The reversals included AMAT, ALTR, INTC, KLAC, PMCS, BRCM.
This reversal was in light of some pretty good news: jobless claims fell instead of rising as expected; AMD came out and said the bottom was in sight on the PC chip market; EMC said it was seeing rising and solidifying IP spending across the board; retailers were reporting some really solid sales for April; other central banks were taking action to shore up world economies. This was all good news, but the Nasdaq responded in bearish fashion: a gap higher at the open and then a close on the session low. This is the exact opposite of what has been occurring. With the big names heading lower, this action is reminiscent of what we saw earlier in the year with the big names heading lower first and then taking the index down with it.
Not necessarily the end of the rally.
Still, this does not mean the rally is over as volume faded again on the index on some selling in the same names that have been selling this week. The index is still above the 50 day MVA and the big breakaway gap of mid April. Many big names sold down on lighter volume, and declines barely edged advancers on the Nasdaq. That means there are still a lot of stocks rising even as the bigger names take the index lower. Look at the retailers that we love to play (e.g., ANF, AEOS, LOW, TGT, HOTT), and they continue to lead the Nasdaq. The big names have provided some great moves for us this past month. Now we need to be extremely careful with those to preserve the gains; watch the 50 day MVA on stocks such as BRCD and SEBL. We are not going to risk gains on moves below these levels. At the same time, we will continue to focus on the best patterns and the best sectors as the other half of the Nasdaq continues to perform well.
Dow rises on lower volume.
The Dow reversed the recent selling, but it did so on lighter volume, continuing the poor price/volume action we have seen. As we have said, the selling has not been intense, and that is a positive, but the buying has not been intense either. Certainly it has not been enough to drive it through 11,028. Moreover, it too closed well off of its intraday high and in the bottom half of its range. Not bullish price action, but not bad; just the same action the Dow has been showing us of late.
The S&P 500 was flat on lower volume. That too is what the big caps have been showing us, but we note that it again ran right into 1270 on the high (1268) and closed at the bottom of its session range. As with the other indexes, that is not really bullish price action, but a continuation of what we have been seeing. The Dow and the S&P are either going to breakout from here in a surprise move or they are going back to test some support a bit lower as we have been discussing. What will break them higher? Some better news; we had some today, but it was not quite enough.
THE ECONOMY
Retailers were announcing April sales today and they were coming in better than expected, but not stellar. There were the exceptions such as AEOS, ANF and others that hit the ball well. At the same time there were many that while not great did in fact beat expectations, and that contributed to some positive mood in the sector. It was great news, and we will see tomorrow what the government says when it delivers its retail report for April.
The jobless rate delivered another pleasant surprise as it fell by 41,000 to 384,000 versus expectations of 416,000 claims. That was below the 425,000 the prior week (revised much higher from 416,000 first reported, so the actual drop in our view was 32,000; still not bad at all). This was the lowest number in four weeks, and the 4-week average fell to 402,500 from 405,500 prior (revised higher). One problem: continuing claims were up to 2.73 million the highest since June 1994. People are not finding replacement jobs as fast as companies continue to remove jobs from the payroll. Not out of the woods by any means, but helping.
The ECB and UK cut interest rates a quarter point, showing commitment to supporting economic stability. It was needed; they cannot stand without the U.S. as Germany's economy is tanking; they were laughing at the U.S. in Davos. Now the Europeans are facing harsh reality with the U.S.: monkey with the monetary system and you cause problems.
Tomorrow we get retail sales, PPI, and Michigan sentiment. We don't expect much from sentiment with the continuing drop in jobs. We would like to be wrong.
THE MARKET
Similar action but showing us some signs we did not like. This is making us very cautious on shorter term trades and the big names that are not holding up as well. We will preserve gains first and look for more positions later.
Overall market stats:
VIX: 27.24; -0.58. Volatility is holding in a tight range near the upper end of the range of what is considered 'high' during periods of relative market calm.
VXN: 66.54; +0.88. Today the Nasdaq 100 fell 2.1% while the VXN rose 1.3%. That is a change from Wednesday's action, but still does not tell us a lot. Volatility is up and down but relatively steady as the Nasdaq moves laterally.
Put/Call ratio (CBOE): 0.69; +0.02. Put activity was a bit higher on the session, but barely. Still, it remains at a level that indicates continued concern about the market, and overall that is a good sign. If we had a lot of complacency in this indicator in combination with what we saw on the price action, there would be real concern. Overall option activity rose to 1.074 million (1.032 million Wednesday).
Short Interest: As we noted over the weekend, short interest was rising in the face of the rally. It has continued to do that this week as the indexes have moved sideways. We view rising short interest with overall decent market action is a positive. It means that more are betting against the good market action. It often has a way of defying the majority.
End Part 1 of 2
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world stock market
us stock market
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