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us stock market, stock market update
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Tech Traders 6/28/01 Update
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Technical Traders Subscribers:
THE PLAYS:
Continuing Plays: ROOM just won't quit, moving even higher today on its breakout, and showing great volume, too! BORL continued its breakout. FISV moved higher on stronger volume as well, continuing the move up after testing its breakout. JNJ bounced from the 50 day and broke resistance, but needs stronger volume. WPI made a move up in its handle on stronger volume, soon.
ELN (Elan Corp--$61.85; +2.82; optionable (ELN): Drugs
http://biz.yahoo.com/p/e/eln.html
STATUS: Caught support right at 59 (opened at that price today) as noted in Wednesday's report and made a strong move (volume was up at 2 million; avg. 1.6 million) after testing the recent breakout. Looking for a move up to take out the breakout high of 65.
BUY POINT: Aggressive: Up from here on continued strong volume. Stop: 56.90 (just below the 50 day MVA at 57.03).
POSITION: Stock and/or October $50 calls to buy (ELN JJ).
LH (Laboratory CP Hldgs--$77.70; +2.25; optionable ( ): Health Services
http://biz.yahoo.com/p/l/lh.html
STATUS: Hit our buy point by making a move back over resistance (10 and 18 day MVAs at 77.04 and 76.58) on better volume (716,600; avg. 479,000), which has built up over the last 2 days as the stock bounced from the 50 day MVA Wednesday. Looking for a continued move up from here for a breakout from the cup with handle. Target on a breakout: $91-95.
BUY POINT: Aggressive: Up from here on average or better volume. Stop: 71.48. Breakout: 82.63, on volume of 1 million or more. Stop: 76.02.
POSITION: Stock and/or August $75 calls to buy (LH HO).
New or revisited plays: RE broke out and remains a buy up to 76.47. The stock surpassed minimum breakout volume of 458,000 on the move (options from the Tuesday report are still good).
CERS (Cerus--$71.50; +3.29; optionable (CEQ): Biotech
http://biz.yahoo.com/p/c/cers.html
STATUS: The stock was covered on the update June 22 as it formed the handle to its 5-month cup. The handle tested 65 on the low and moved up today after a small Wednesday pullback, with volume increasing to 49,700 (avg. 79,454). Looks ready to continue the move up toward breakout. Shows strong money flow and buying, with relative strength ahead of price. Target: $84-87.
BUY POINT: 76.13, on volume of 119,000 or more. Stop: 70.
POSITION: Stock and/or October $70 calls to buy (CEQ JN).
ADRX (Andrx--$74.09; +3.50; optionable (QAX): Drugs
http://biz.yahoo.com/p/a/adrx.html
STATUS: Making a good move up in the double handle to a 7-month cup base (previous highs in the base around 95). Volume was sharply stronger at 1.55 million (avg. 867,000), so we are looking for a breakout. Good money flow and relative strength is breaking out. Target: $82-85.
BUY POINT: 74.32, on continued strong volume (minimum breakout volume is 1.3 million). Stop: 68.37. A buy on the breakout up to 78.04.
POSITION: Stock and/or September $65 calls to buy (QAX IM).
FINL (Finish Line--$10.82; -0.08; no options): Retail
http://biz.yahoo.com/p/f/finl.html
STATUS: This stock is in a cup with handle of 14-months. The stock moved up after dropping below support in the handle (18 day MVA, 10.66) today, closing just above the 10 day MVA (10.80) on strong volume (248,900; avg. 101,409). The move came in anticipation of earnings, which came out after the bell and beat estimates handily. Looking for a move up and breakout. Huge money flow and great buying. Target:
$13.
BUY POINT: 11.57, on continued strong volume (min. breakout volume is 152,000).
Stop: 10.64 (just below the 18 day MVA, 10.66).
POSITION: Stock.
TONIGHT:
- The day after again gives the gains, but indexes fall from their highs to the close.
- Indexes up, but small and mid-caps still rule the day.
- MSFT ruling adds some excitement to the day.
- Jobless claims fall again.
- Team Trades
THE SUMMARY
This is a familiar scenario.
Day of announcement there is ambivalence. The day after, the market rallies. This is a pretty familiar pattern when it comes to scheduled Fed meetings and rate cuts associated with those meetings. Volume was sharply higher, moving back above average on the session, and that indicates that once again there were more buyers than sellers, something that has shown up again recently. Still, the indexes closed well off of their session highs and did not make any real breaks above near term resistance. So, even though things are improving on the overall indexes, there was nothing that will convince a lot of the doubters out there.
But then again, there never is. There remains a lot of pessimism, and the one thing that has resulted in since April is a solid rally higher and then a sideways and slightly downward drift as the market gropes for what will happen in the future. Today we had a move up off of some pretty narrow ledges of support that needed to hold or else it was going to get ugly. High volume moves up away from support levels are always good. Then there are the better performing stocks and sectors, primarily the mid and small cap stocks and sectors such as builders, health services, software, retail. You get the picture; it is the same one we have been seeing.
The one difference we have that was not present as the last rally move started: some better economic news. No there are not many companies coming out and saying things are better (a very few), but that is nothing new. The economic news over the past three weeks has started to make that turn we were talking about. When all else fails, an improving economy wins out in the market. We continue to believe that the improving conditions in the economy (housing, confidence, jobless claims, durable goods, etc.), the cumulative effect of the rate cuts, a friendlier business environment than we had the past 8 years, and a weak-kneed but still helpful tax cut will all combine to give a positive environment for stocks to rise.
Near term, the large caps may try a move here, and if they have good patterns to go along with the moves, great. Without the good patterns, they remain short term plays. Why? Because if they don't have a good pattern they have a lot of overhead resistance, and that makes them very vulnerable to sharp selling once a rally has an off day or two. That does not mean that good patterns on stocks with great earnings are not failsafe. But they do tend to hang on better in tough times and there is a clear point where we get out, i.e., when the stock closes below the pivot point or other support and cannot get back over it the next session on the close.
MSFT and the government claim a win.
I don't want to beat a dead horse. Each side can say it won the case. MSFT won't get broken up, and it will have about $40 billion in cash at the end of the summer with new products hitting the street. It is well-positioned for an improving economy. It was a victory in that respect. Yes it was a remand on the breakup, but that will not make it again. For the government, the part of the ruling that stated MSFT acted in monopolistic ways to maintain its grip on the market is a victory. It may not survive the Supreme Court; in fact, I would bet it does not survive this Supreme Court and MSFT comes away clean. In any event, both had something to take away to make them happy.
What happens now? MSFT may appeal to the highest court and the government may end up dropping the case as there is no remedy that the government wanted. Moreover, the market today is so different, the case is already moot. The government lawyers just want precedent to attack corporations once a less business friendly administration comes along. Antitrust all turns on what the administration wants. It is thus one of the most dangerous laws in the land other than the income tax regulations.
As for MSFT, as we said, it looks poised to do well. If it can breakout over 74 and hold above that level on high volume, it may be off to the races. It will still have to clear $80, but after that it is a $100 stock again.
THE ECONOMY
Jobless claims fall again.
New jobless claims dropped below the much-watched 400,000 level the past week, coming in at 388,000 or down 16,000 from the 404,000 previously (revised up from 400,000). Given that 420,000 were expected, this was not bad. The 4-week average fell to 416,000 from 423,750.
This number was the first move below 400,000 in six weeks. The 5 weeks above 400,000 was the longest run over that level since September 1992 just as the U.S. emerged from recession. Hmmm. Sure seems as if history is repeating itself here with all of the improving economic numbers we have been seeing the past few weeks.
Continuing claims rose to 2.992 million from 2.978 million the prior week. Again a comparison to 1992 is worthy. Today's number was the highest since November 1992. Note the dates. September 1992 when jobless claims peaked as the economy came out of recession followed by the higher continued claims two months later. Layoffs stopped earlier as the economy was on the mend and then the jobless started finding jobs 2 to 3 months later. We are in a very similar situation now from the looks of it. All of this is positive and tells us that the economy is already starting to move higher as the jobless claims numbers now lag the economic turn back up. The similarity is uncanny, and something we believe cannot be overlooked.
Tomorrow: Michigan sentiment, GDP and Chicago PMI.
More important reports tomorrow, but we are focused on the Chicago report. It is expected to improve tomorrow, and we think it will be one that surprises to the upside. It won't move the market much, but it will be another weight on the economic recovery scale. Sentiment is expected to rise; we will see. The market was down recently, and that will have an impact on the numbers. Still, we expect to see marginal improvement, particularly in the future expectations that have been running strong for the past month.
End Part 1 of 2
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us stock market
stock market update
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