|
|
us stock market, trade stock
Begin Part 2 of 2
An additional plays left off of part 1:
RCGI broke out, and remains a buy on this move up to 31.69 (options from last night's report still good).
BVF (Biovail--$44.00; +1.22; optionable (BVF): Drugs
http://biz.yahoo.com/p/b/bvf.html
STATUS: Making a move up from support after showing a doji yesterday. Volume was higher at 443,100 (avg. 666,000). Looking for a breakout here after the stock formed another quick handle in the 4-month base.
BUY POINT: Breakout: 45.23, on volume of 999,000 or more. Stop:
POSITION: Stock and/or October $40 calls to buy (BVF JH).
THE MARKET
The indexes held at the gap up points (S&P and Nasdaq) and at the handle of the Dow double bottom. This could turn out to be one of the most important days in the history of this recovery. Holding at these levels indicates that institutions were once again ready to buy at these levels, and that really builds major support there. This could have been the move that ultimately sends the Dow to its new high. We don't know that right now, but we do know that the indexes held here and started their move up off the level on strong volume as buyers came back in. We also know that the economy is turning the corner. We have to track the numbers, not our stomachs. If we see the moves, we need to get in or be in. Based on history, it appears to us that the indexes made their test here and held. We could be wrong, but that is the way we see it.
Overall market stats:
VIX: 22.44; -1.13. Volatility still remains very low even as the market rallies. While it is something to watch, we cannot let it overrule the primary indicators of price, volume, and good patterns.
VXN: 48.71; -3.18. Low and moving lower, but as with the VIX, we cannot let a low VXN rule our buying. It is a secondary indicator.
Put/Call ratio (CBOE): 0.50; 0.16. No reason to buy puts today as the indexes made a broad advance. Still in good shape, but a sharp drop as the index rallied. Drops as fast as it jumps when there is fear.
NASDAQ: Started out strong and rallied hard, but then gave back over 30 points. Once again this is not great bullish action even though volume was higher. The big caps continue to struggle.
Stats: Up 50.72 points (+2.4%) to close at 2125.46.
Volume: 1.961 billion shares (+14.3%). This is more like it: a strong move up on a solid, above average shot of volume. And this came even with a problem with some trading systems that shut things down for awhile. Up volume led 1.546 billion to 352 million downside shares.
A/D and Hi/Lo: Advancing issues led again at 1.65 to 1 (1.27 to 1 Wednesday). This is a continued improvement in the A/D line as large caps joined in on the action today. New highs rose to 150 (+20) as new lows fell to 51 (-6).
The Chart: http://www.investmenthouse.com/cd/$compq.html
The larger cap tech names joined in on the action today and that helped propel the index higher and back above the bottom of its previous trading range that was holding it down. There is all kinds of resistance in the jumble of its trading range, but 2160 to 2200 represents a range that has to be cleared. It will either do it or not. That sounds so simplistic, but that is just how you have to look at it right now. The key is that it launched up off of that 1990 to 2000 level on strong volume, and that gives it a shot at taking on greater obstacles. Given the improving economy, the prospects of a break higher are better and better, but we have to remember that not all tech will rebound together. Some will hold the index back. We need to focus on those that will move it higher. Right now we are looking at software and other strong stocks in different sectors. Again the small and mid-cap stocks remain high on the list.
Dow/NYSE: The Dow danced on the edge and for now has powered higher on strong volume. It could not break over its 200 day MVA, however, and that is something to keep an eye on.
Stats: Up 131.37 points (+1.3%) to close at 10,566.21.
NYSE Volume: 1.305 billion shares (+12%). Some decent price/volume action as the index scored a gain on strong, above average volume. Up volume led 877 million to 424 million downside shares.
A/D and Hi/Lo: NYSE advancing issues improved yet again to 1.55 to 1 (1.43 to 1 Wednesday). The breadth has been solid even if it has not been impressive. We like it: good, solid building across the board. New highs rose to 162 (+22) as new lows fell to 44 (-2).
The Chart: http://www.investmenthouse.com/cd/$dja.html
Not the picture you would see if you opened a textbook to the page that had a robust index chart on it. But then again, the Dow may have just pulled off the big hat trick. It had sold down to the level it tested on the 'handle' to its double bottom, and it rebounded from there on very strong volume. Finished well off of its high (10,646.45) and also below its 200 day MVA (10,603.56). It too has lots of serious overhead resistance at 10,700 to 10,750 then 11,000 and higher. Still, much as with the Nasdaq, if investors are looking at the stronger economic numbers and thinking things will be better down the road (and look at the future expectations components of the consumer confidence), they are going to buy stocks in anticipation of those better times. Why? Because better economics means better earnings, and better earnings means higher stock prices ahead of those earnings. For now it has made a good start at a point that it needed to move up from.
S&P 500: The big caps moved up off of the 1200 level on a strong shot of NYSE volume as the large caps finally took part in the moves higher. It held at the gap up level, but it too has serious resistance overhead at 1240 to 1250, and then again at 1285. It will take some effort to break back above, but if the economy is improving and institutions are buying now ahead of the Christmas rush, that bodes very well for all stocks.
Stats: Up 15.13 (+1.2%) to close at 1226.20.
Volume: NYSE volume rose to 1.305 billion shares (+12%) on the buying.
The Chart: http://www.investmenthouse.com/cd/$spx.html
Summary: We like what we see even though there is still a long battle ahead. It won't be straight up for all stocks and indexes. Some sectors are dead in the water and not going much of anywhere. But they are not the entire economy nor are they the entire market. Thus we are going to see gains, but we might not see the indexes leaping higher and higher. There are anchor chains in the form of telecom and networking, etc. Still, overall the economy is improving and going to get better and better. The signs in the market are telling us this right now. We like 6 months from now a lot.
TOMORROW
MSFT perhaps will help herald a new dawn for the techs. Not unbridled capitalism that technology experienced with the internet era (and there will be another such era, it will just look different), but hope that any one of those startups out there can be a success, can once again take advantage of opportunity and success to become a leading player. That attracts venture capital and that helps drive the ingenuity engine here in the U.S. Let's not kid ourselves, it was a combination attack by the Fed and the government (they are separate) that led to this recession (from 6% growth to flat). The Fed controlled the money supply as the federal lawyers attacked capitalism. We hope that era that killed the greatest bull run in history is over.
After the close PMCS warned, but the warning was not as bad as expected though the guidance was gloomy. Stocks were higher on the warnings and the futures were up. We know that does not mean a lot, but it does show enthusiasm for what is going on in the economy and market.
There is rebalancing going on in the Russell and other indexes, and there will be a lot of buying and selling going on. We will most likely see a high volume Friday as opposed to the lower volume ones we usually get in the summer. We may see any gains sold a bit late in the session on concerns of holding over a weekend after some gains are in place. For most certainly we will get some gloomy analyst outlooks come Monday. Seems investors don't know what to do with success; today there was a nice rally going, but profit taking pushed the indexes well off of their highs toward the close. This is a trait that developed on the wildly swinging market as it has tried to find bottom this past 6 months. It is a learned habit. It will be muted, however, when the economic news continues to come in better and better as we anticipate.
We feel we are seeing the buds coming out in the economy right now. We have gone through a very choppy market and some very dour news regarding the economy. But we said that we suspected the bad news was at its peak, that Q2 was history already and that we knew the story already as well. The thaw is coming in the summer and we think we will see blooms in the fall. Waxing poetic is not our style, but I just saw 'Being There' with Peter Sellers and I could not resist.
In any event, we very much like what we see right now and feel stocks are going to have a solid rally over the next several months. It will be up and down with the up moves and then lateral moves we have seen, but we don't believe the down moves will be as large in the interim. Indeed, we think it will be more like a stair step up with a few back steps every now and then. What stocks? Remember, the stocks already in good patterns that are breaking to new highs as the market starts to move higher are the stocks that have the head start on everyone else. History shows us that they tend to run farther than the rest of the pack. There will be more and more leaders emerge, but we just pick them off as they come out of their bases. We think we are close to being there. We are ready.
Support and Resistance Levels
Nasdaq: Closed at 2125.46.
Resistance: 2160 to 2200. Then 2250.
Support: 1990. After that, 1961.
S&P 500: Closed at 1226.20.
Resistance: 1240 to 1250. The 1285.
Support: 1200. Head and shoulders bottom and the breakout support from the double bottom pattern is right at 1182.
Dow: Closed at 10,566.21.
Resistance: The 200 day MVA remains overhead at 10,603.56. Then 10,750 to 10,800 (down trendline between the January 2000 all-time high and the September high is currently at 10,700). The 50 day MVA is at 10,732.57. 11,000 is possible resistance after that. Then 11,196.53 (the last top). After that, 11,350.
Support: 10,400. Then 10,200.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
6-25-01
Existing Home Sales, May (10:00): 5.37M (+2.9%) actual versus 5.2M expected and 5.2M prior.
6-26-01
Durable Orders, May (8:30): +2.9% actyak versys -0.4% expected and -5.5% prior (revised from -4.0%).
Consumer Confidence, June (10:00): 117.9 actual versus 114.5 versus 116.1 prior (revised up from 115.5).
New Home Sales, May (10:00): +0.8% at 928K actual versus 900K expected and 921K prior (revised up from 894K).
6-27-01
FOMC meeting results (2:15): 25 basis point cut as expected.
6-28-01
Initial Claims, 6/23 (8:30): 388K actual versus 420K expected and 404K prior (revised from 400K).
Help-Wanted Index, May (10:00): 65 versus 65 prior.
6-29-01
GDP-Final, Q1 (8:30): 1.3% versus 1.3% prior.
Chain Deflator-Final, Q1 (8:30): 3.2% versus 3.2% prior.
Michigan Sentiment-Rev., June (9:45): 91.6 versus 91.6 prior.
Chicago PMI, June (10:00): 39.0% versus 38.7% prior.
TEAM TRADES
LEN: A double bottom with handle on last night's Daily, LEN is a home builder, and it had corrected into a double bottom with handle as there were doubters about the economic recovery. Now that things are again looking better, LEN had built a good pattern and today broke out early. We got in on the first test of the session. I was not at the computer, but I knew what I wanted to do. I had the alert and was talking to the broker on the cell phone. The stock was moving up past the breakout at 42.75 (hitting 43.50 early on). We figured it had to pullback to test the breakout, so we did what we like to do when we miss the first move: we put in a limit order just above the breakout point so we can pick it up on the test. Well, we dropped in the limit order at 43.12 and went about our business. Over the next hour and a half the stock fell, but we did not know until we received the call from the broker saying sure enough, the fill had been made. The stock continued to move back up from there and then spiked to 43.95 at the close. We love buying breakouts this way.
DGX: A cup with handle and ascending wedge pattern, a very powerful pattern for big gains. DGX gapped higher, but as we know with gaps, they often come back. As we said in the technical analysis seminars, a gap up can find support at the previous close, previous intraday high, or the gap point for that particular session. We had totally missed the early move on DGX as it gapped higher and powered up to 74.90. When we checked in around lunchtime, DGX had just tested the open price at 72 (there was one oddball trade at 71.50) and had started back up. We saw a big move up off that level at 12:20, so it looked like a good spot to get in on this powerful mover. The stock was trading 72.69 by 72.85, and we were not going to mince around since it was running higher. We put in the order and it was done. The stock moved higher and close around 74.20, a new high. New highs out of this powerful pattern are good signs.
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
Investment House subscribers are offered a special from eSignal for those
interested in a realtime service. Contact:
Jeff Whitney
Account Executive
800-322-1875
Office hours 6:30-3:30 PST
www.esignal.com
Good Investing!
Jon L. Johnson and the Technical Traders Team
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.
|
us stock market
trade stock
|
