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us stock market, stock share
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Tech Traders 5/24/01 Update
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Technical Traders Subscribers:
THE PLAYS
Continuing Plays: From Tuesday's update, UVN still looks good, pulling back for 2 days on lower volume in a handle. DGX looks ready to move up in the handle (see Thursday night's report for buy points, etc.) and GLGC made a solid move. Formerly covered stocks PDII and RECN made good moves today, too.
PRGN (Peregrine--$31.95; +1.80; optionable (GQP): Software
http://biz.yahoo.com/p/p/prgn.html
STATUS: Broke resistance that halted the stock the previous 2 days (at the 31 range) and the stock shot up to 32.70 on stronger volume (5.7 million; avg. 3 million). PRGN broke out of an ascending wedge 4 days ago, tested yesterday, then headed back up today. Looking for a continued move on the momentum. Target: $35-36.
BUY POINT: Up from here on continued strong volume. Stop: 29.71.
POSITION: Stock and/or July $27.50 calls to buy (GQP GY).
OCLR (Ocular Sciences--$23.04; +1.11; optionable (QLO): Health Services
http://biz.yahoo.com/p/o/oclr.html
STATUS: Made a strong move up from the 10 day MVA (21.62) on the low, breaking
resistance in the 22 range and approaching the previous breakout high of 23.87. Volume
supported the move at 181,700 (avg. 123,272). That is a solid move. Target: $26-28.
BUY POINT: Aggressive: Up from here on continued strong volume, or on a move over 24. Stop: 21.43-22.32.
POSITION: Stock and/or July $20 calls to buy (QLO GD).
SNPS (Synopsys--$62.75; +2.75; optionable (YPQ): Software
http://biz.yahoo.com/p/s/snps.html
STATUS: Made the move and took out the previous closing high (62.07 on Tuesday) after testing the 18 day MVA on the low of 57.60, then moving up on strong volume (1.8 million; avg. 1.6 million). Looking for a continued move up from here. Target: $68-71.
BUY POINT: Up from here on continued strong volume. Stop: 58.36 (above the 18 day MVA at 57.86).
POSITION: Stock and/or September $55 calls to buy (YPQ IK).
Revisited:
BBBY (Bed Bath & Beyond--$30.42; +0.46; optionable (BHQ): Retail
http://biz.yahoo.com/p/b/bbby.html
STATUS: The stock broke out of and ascending wedge (that formed after the cup with handle dating from early November through February) and is testing the breakout. We are looking at a very bullish pattern (the cup and wedge in succession) as the stock holds above support at the 10 day MVA (29.71) on overall decreasing volume (2.6 million; avg. 3.6 million). Looking for a move up from here or from 30 (other price support above the 10 day) on stronger volume. The stock did move up today, but needs a volume surge to take it back over the breakout high of 31.90. Target: $38-40.
BUY POINT: Over 32 on volume of 3.5 million or better. Stop: 29.71 (10 day MVA).
POSITION: Stock and/or August $27.50 calls to buy (BHQ HY).
New: Check out these ascending wedges!
BHE (Benchmark Electronics--$26.65; +0.07; optionable (BHE): Circuit Boards
http://biz.yahoo.com/p/b/bhe.html
STATUS: In an ascending wedge with volume decreasing the last 2 days (and low overall in the pattern, formed since late April). Volume was down to 167,800 (avg. 220,227) as the stock showed a doji at support (10 day MVA, tested on the low of 26.30).
Breakout is over upper resistance at 28.50; target is the 200 day MVA at 34.09).
BUY POINT: 28.63, on volume of 297,000 or better. Stop: 26.63 (or the 10 day MVA just below).
POSITION: Stock and/or July $25 calls to buy (BHE GE; low open interests).
AVCI (Avici--$13.94; +0.32; optionable (QYV): Hardware
http://biz.yahoo.com/p/a/avci.html
STATUS: Another ascending wedge, with upper resistance at 16.25 (May high). Volume is lower and decreasing overall in the pattern, down very low to 590,300 (avg. 2 million) Thursday. Showing a tight doji just under the 50 day MVA (14.09) and the low tested the 10 day at 13.41. Great money flow and buying.
BUY POINT: Over 16.25 on volume of 2.7 million or better. Stop: 15.11.
POSITION: Stock and/or September $10 or $12.50 calls to buy (QYV IB or IV).
* * THE SUMMARY * * *
TONIGHT:
- A bounce back on slightly lower volume ahead of the 3-day weekend.
- Leading stocks bounce up off support on higher volume.
- More splits equals corporate confidence about the future.
- Economic news is not good- - again.
- Greenspan tonight, GDP tomorrow. Hurt or help?
- Subscriber Questions
- Team Trades.
THE SUMMARY
Markets starts the bounce back on steady, below average volume.
Today we had the early softness we thought we would have, and then the building in the last two hours of the session that tends to be the trait of a market that is in better shape. Tuesday it sold down to the close. It continued that downward bias early on, but when stocks started hitting support, they started bounding back up in the afternoon as buyers stepped in. That is the action we like to see.
Volume was not huge. It continued with Wednesday's below average performance, coming in at an almost identical level. We want to see volume increase on moves higher as that shows additional buyers above and beyond the sellers: the market goes up so we know there were more buyers than sellers, and when overall volume is greater than on selling days we know the number of buyers outnumbered the sellers even on the down days. That is obviously good for the market to the upside. Today we did not have that, but we see signs once again that we could get it soon.
Individual stocks that have been performing well in this rally moved higher today, and they did so on rising volume. These were the bounce plays or tests of support that we were talking about last night. SEBL, LOW, COLM, VRSN, OCLR, etc. were on the list of solid performers of late that made the bounce on higher volume today. Those stocks may signal another move higher as the leaders usually start heading up before the rest of the pack.
We also saw many doji's at support on the candlestick pattern. As we have discussed in the seminars, a doji on support is a very good sign of a move higher, especially if the pullback to support has been orderly, i.e., a steady, low volume decline. We saw these in stocks such as BRCD, EMLX, and MERQ, and we saw stocks that move up today, e.g., LOW, with doji's on Wednesday. It is a good sign of a change in direction back to the upside.
Another sign of improvement: More stock splits.
Now stock splits are rarely thought of as giving a read on the market as a whole. But, they do in fact provide some insight into the extremes at either end of the scale. When there is just a rampage of splits after a long move higher, that can be an indication of a possible top. So many stocks have run so far that they are all announcing stock splits. It means the market could be in need of a more serious rest.
On the other end of the spectrum the market is trying to emerge from a bear market and the economy is trying to emerge from a relative recession (6% GDP growth to under 2% GDP growth). Questions are still swirling about whether each is over and a lot of pessimism remains (we like that). At the same time, companies state that they believe they are seeing the bottom and are reaffirming their earnings guidance for the remainder of the year. That is a positive. Then we see stocks starting to announce more and more stock splits. There were 10 this week and we are well out of the heart of earnings season. Now they were across many sectors and many different prices ($12 to $95), but the point is the same: companies are feeling good enough about the future that they are confident to announce splits. In other words, they are not worried about cutting the share price in half or by a third because they feel the business conditions are good enough to propel it right back up. This is the opposite of the extreme exuberance that is shown when companies have spiked higher and are splitting their stock as part of the overall euphoria.
THE ECONOMY
And now the flip side. Today's economic reports were not bearing great news for the economy. Indeed, they poured some cold water on what was thought last week to be good news.
Jobless claims were higher last week than thought, and they really jumped this week.
What happened? Well, the government has done a very bad job of late in estimating nearly everything from GDP to the number of democratic and republican parking spaces at the Senate. Last week they got the jobless claims wrong. Instead of dropping down to the 390,000 level, they were actually up 12,000. Then this week's number came in 15,000 higher than that at 407,000, once again cracking over the 400,000 level that is often associated with recessions. We have been dancing at that level so long, however, it is safe to say that if this is a recession indicator, it is close enough. Question is, is this data accurate? Only one week to find out. At least the 4-week moving average fell, but at 403,000 it is still over that 400,000 'recession' level. Instead of getting a continued reversal that we thought we had going, we got a one-month blip down before the uptrend resumed.
New home sales dive.
This was one of the fears we had. This was the strongest important segment of the economy that was bucking the recession trend. Well, we previously noted our belief that this cross-country migration out of California would be coming to an end, and the falling building permits were yet another sign that we would see this number drop before too long. New home sales tumbled 9.5% in April, the biggest drop in single family homes since April 1997. Some are saying this is no problem because the previous months were so strong. Big plunges can be aberrations. That would be nice, but the permits and reality are hard to deny. In any event the housing market remains strong for now even with this one-month drop.
THE MARKET
Overall market stats:
VIX: 22.94; -1.71. Volatility continues to wander toward the 20 level that can be a sign of complacency. Heading into a 3-day weekend this may be where it holds for tomorrow.
VXN: 53.22; -0.42. Down 0.8% as the Nasdaq 100 rises 2.3%. It is still at decent levels at this point based on the reconstruction of the index using back-dated data.
Put/Call ratio (CBOE): 0.59; -0.14. Dropping today as fast as it climbed Wednesday, but still at very nice levels and showing a lot of quick upside moves whenever there is a hint of selling. That is not usually the case, and we really do like the action as it shows there are still a lot of bears out there who can later cover their shorts and join a bull run. Overall option activity on the CBOE dried up to 909,113.
Bears versus Bulls: Bulls fell sharply the past week relative to their usual action, dropping 25 to 48%. Bears held steady at 36%, off their April high at 43%. Good to see the bulls falling even as the market continues to look good overall.
NASDAQ: Tested lower and rebounded. Not huge volume by any stretch, but the leading names did better.
Stats: Up 38.54 points (+1.7%) to close 2282.02.
Volume: 1.865 billion shares (-0.8%). Volume was a virtual dead heat. Up volume doubled up down volume, however, 1.205 billion to 644 million shares. Basically a holding pattern for the day from a volume perspective; there were no more buyers today than there were sellers on Wednesday.
A/D and Hi/Lo: Advancing issues moved back in front 1.28 to 1 (decliners led Wednesday 1.65 to 1). New highs rose to 131 (+19) as new lows fell to 24 (-2).
The Chart: http://www.investmenthouse.com/cd/$compq.html
The techs continued the selling early on as we thought, tapped just above the 10 day MVA (2223.46) on the low (2226.26), and then spent the last 5 hours of the session in a building pattern. For those at the TA3 seminar last night, the intraday pattern was the double bottom with the right leg higher than the left, a stronger double bottom pattern on intraday moves. That led to a 47-point run in the last two hours of the session, 42 points from the 5 minute and 15 minute MVA crossover that occurred 30 minutes after the index made the second low in the pattern.
As for the daily chart, the index closed back above 2232 and 2250, something we liked to see, but something we wanted to see on stronger volume. As noted earlier, many of the stocks showing leadership qualities did move higher on stronger volume, and that can be a harbinger of stronger volume moves by the rest of the stocks. Still, we have a Friday preceding a 3-day weekend tomorrow, and that tends to hold volume down. That does not mean we won't get a low-volume rally. The market overall is acting well, and the bounce we saw today could easily carry over into tomorrow, at least until the last part of the session where some positions will be cleared ahead of the weekend. What we are looking for now is that higher volume move through 2300 on the way to 2500. May not happen until next week given the holiday weekend, but we will take good positions as they present themselves to set us up for bigger gains down the road.
End Part 1 of 2
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