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us stock market, trade stock
Begin Part 2 of 2
Dow/NYSE: Nothing spectacular, but a test of support and a recovery was good.
Stats: Up 16.91 (+02%) to close at 11,122.42.
Volume: NYSE volume fell again, down to 1.103 billion shares (-4.4%). Down volume on an up day is not what we like, but given the pre-holiday trade and the resting above support at 11,000, not a bad compromise. Still, down volume led up volume 586 million to 508 million shares. The Dow had to make a comeback from a lot of early selling. We will need to see higher volume finally when it makes another run at resistance.
A/D and Hi/Lo: Advancing issues on the NYSE did take back the lead, but it was nothing strong at 1.08 to 1 (decliners led 1.94 to 1 Wednesday). New highs fell to 123 (-7) as new lows fell to 24 (-1).
The Chart: http://www.investmenthouse.com/cd/$dja.html
11,400 (hit 11,350 on Tuesday's high) turned the index back, but today it found support where it should have (11.044.97 on its low) above 11,000 and rallied back up from there. It is still in a pretty tight range between those two points. Volume is low and it appears to be attempting yet another period of rest and consolidation before it takes another shot at 11,400. There was some distribution on Tuesday at the top; we can live with that if we get a solid upside day on above average volume (back over 1.2 billion). Like the tap down to the low to test support and then the move higher as that indicates there are buyers at that former resistance at 11,000 that should now be support. Last night we were looking for this. Now we look for a bigger move on better volume.
S&P 500: The big cap index was a very close match to the action on the Dow, selling off early in the session to form a double bottom pattern that led to a late-session rally. Intraday it tapped down to 1281.22, just below the 10 day MVA (1285.21) before bouncing higher to close the session. A nice 12-point run in the last two hours of the session is a good, bullish close to the session. It still has resistance ahead at the 200 day MVA (1332.44).
Stats: Up 4.12 points (+0.3%) to close at 1293.17.
Volume: NYSE volume continued its decline, dropping to 1.103 billion shares (-4.4%). Still below average volume.
The Chart: http://www.investmenthouse.com/cd/$spx.html
TOMORROW
Futures are up after hours, but then again, we have yet to hear from Greenspan tonight, and we will be getting durable goods orders and GDP numbers before the open. Plenty of news between now and then, but overall the market continues to show a positive building as it makes higher lows and higher highs and shows overall positive price/volume action. At the same time there is just enough touch of skepticism to keep everyone on edge. It has not been a rocket ship straight up, but what we are getting is really much better in our opinion: strong moves higher on surges in buying that last 2 to 3 sessions, then consolidation on lower volume, followed by another move higher. That is good. That is building and has a better chance of lasting than a week of extensive gains that have to be unwound. Building and testing, building and testing. Might not be spectacular overall, but that leads to great moves by the leading stocks.
This action gives the strong stocks the chance to build their bases, breakout, test the breakout, and then move higher. It allows other stocks to continue to build their bases as they form bullish interim patterns such as ascending wedged or flat bases as they move higher off of their lows. There is a lot of damage to repair from the bull market, and building a solid base is part of that, both in the market and in the individual stocks that make up the market.
Barring any nasty surprises (a negative GDP? Maybe around 0.8 or 1.0%?), we anticipate a decent session tomorrow to the upside. The one caveat is potential selling in the last part of the session as short term traders clear out positions to avoid riding them over the weekend. While that was a real concern back in the depths of the bear market and the continued bad news that would hit time and time again, right now other than the usual round of analyst comments that come out on Monday's badmouthing stocks that have already been killed, there has not been real negative reactions to news. That is part of a better market psychology: institutions are accumulating stocks for perceived better earnings to come. They build positions over long periods of time, and they have been at it of late.
So, we will continue to take positions as they present themselves, tomorrow to the upside. The market let us clear out the few short term downside plays started Tuesday and Wednesday, and led us into the bounces up from support in key names such as SEBL, COLM, and LOW. We look for an extension of the move up tomorrow, and quite frankly we are looking at some short term option plays to garner a fast $3-$4 move starting today and running the play through tomorrow. Of course we are always ready for the longer term trades on the breakouts. If the breakout is good, we get in and let them do their work; patience is the key. BMET was one we caught on the break higher. It tested back to the 18 day MVA, but started back up today on stronger volume. We still have to be ready to exercise our stop rules, but we also want to give the stock time to work for us.
Support and Resistance Levels
Nasdaq: Closed at 2282.02.
Resistance: 2500.
Support: 2232 to 2250. The 10 day at 2223.46.
S&P 500: Closed at 1293.17.
Resistance: 1332.44 is the 200 day MVA. Some price consolidations are at 1325 from February and October of 2000 and the summer of 1999.
Support: 1300 and 1270 should act as some support now.
Dow: Closed at 11,122.42.
Resistance: 11,400 to 11,450. Then the old high at 11,750.28.
Support: 11,000 should now act as some support (old resistance usually becomes support). The 18 day MVA is at 10,982.19.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
5-24-01
Initial Claims, 5/19 (8:30): 407,000 actual versus 380,000 expected and 395,000 prior (revised higher by 12,000).
New home sales, April (10:00): -9.5% actual versus -3.6% expected.
Greenspan addresses the New York Economics Club in the evening.
5-25-01
Durable orders, April (8:30): -2.0% versus 3.5% prior.
GDP-Prel., Q1 (8:30): 1.9% versus 2.0% prior.
Chain Deflator-Prel., Q1: 3.2% versus 3.2% prior.
Existing Home Sales, April (10:00): 5.27M versus 5.44M prior.
SUBSCRIBER QUESTIONS
Q: I am confused, to put it mildly. I just read that Buckingham Reasearch has downgraded NVDA from a strong buy to accumulate. Why ???????????????? It has so much good stuff going for it. I don't understand this at all.
A: Questioning an analyst? Well . . . . good for you! It was downgraded from strong buy to accumulate. We were looking for why, but did not get the full scoop. Most likely: valuation as the stock flirts with new high territory again after beating the street, reporting a 41% increase in net income and a 62% increase in revenues. It also reaffirmed 2002 at 50% revenue growth and 2003 at 40%. Those are solid numbers. Moreover, it is being added to the Nasdaq 100. But, there is that new high. To many analysts that is a sign of trouble. We know a good pattern and a new high are not bad things. NVDA sold down Wednesday after trading up most of the session; it hit a new high on the good news and then suffered at the end with the selling. Note today, however, how the stock tested the 10 day MVA and then bounced up on still above average volume for a nice gain. Leaders shake off downgrades based on valuation. NVDA was one of the first leaders in this recovery. We want to see it continue to perform well, stepping to new highs, pulling back to support in the form of the 18 day MVA or recent trendline as it did two weeks ago, and moving up from there. Leaders are targets for analysts; the strong ones will pullback but then shake it off.
TEAM TRADES
LOW: A pre-announcement candidate heading into its forecast split (SSR) tomorrow that was too much to resist with Wednesday's doji above the 10 day MVA. LOW broke out of an 8-week cup with handle pattern 8 days ago, and was pulling back on declining volume after a run to a new high. LOW opened higher, but we were expecting early weakness, and that is what happened. The stock touched down to Wednesday's low and started back up. We were interested when it broke its early morning high for the session at 71. We set an alarm at 70.80 and took care of other business. That alarm went off just after noon CT, and we put in a buy stop at 71. The stock moved sideways for about 45 minutes, moved up to an ask price of 71 and the deal was done. We were looking for a decent entry point for tomorrow's anticipated announcement. Now we need that injection of volume an announcement can give a stock.
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Good Investing!
Jon Johnson and the Tech Traders Report Staff.
All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Online Investment Services, LP or its paid consultants and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on our related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Partners of Online Investment Services, LP or its paid consultants may, in some instances, include securities mentioned herein and on our web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors.
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