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us stock market, trend trading stock
Begin part 2 of 3
S&P 500/NYSE
Took a day off Friday, showing a doji on continued strong trade.
Stats: -0.52 points (-0.05%) to close at 1088.66
NYSE Volume: 1.59B (+1.96%). Another strong, above average volume session on the heels of the big gain Thursday on solid trade as well. Best volume in two months as SP500 surges on the back of the cyclical and energy stocks. A bit of churn Thursday, but that was mostly due to expiration.
Up Volume: 798M (-530M)
Down Volume: 756M (+547M)
A/D and Hi/Lo: Advancers led 1.07 to 1
Previous Session: Advancers led 2.95 to 1
New Highs: 369 (-83)
New Lows: 9 (+2)
The Chart: http://www.investmenthouse.com/cd/^spx.html
After a lateral move for most of December, SP500 broke higher this week, surging Thursday on volume. Still has room to the upside though there is some resistance at 1100 before the 1150 to 1175 range that marks the early 2002 double top where the real overhead supply comes in and will pressure the index. Indeed it will most likely feel the pressure long before it gets there, i.e., near 1100. Right now there is not much to stall it out as it heads toward Christmas and money managers are reluctant to take money out of the market.
DJ30
Stats: +30.14 points (+0.29%) to close at 10278.22
Volume: 279 million versus 218 million
Still working higher in a 650 point move off of the 50 day MVA (9867). It has now reached the first headwinds of resistance at 10,259 (January 2002 high) and May 2002 (10,353), both precursors to the 10,600 March 2002 peak. There is major overhead supply at 10,500, the bottom of the range running from Q2 1999 to Q3 2001 before the big meltdown really started. It will need a pullback to test before too long as it and its stocks are getting extended. That would set up the run into that resistance at 10,500 to 10,600.
THIS WEEK
Two full sessions this week, Monday and Tuesday, with half days Wednesday and Friday. After the stronger expiration week volume, trade will dry up. As we have seen in the past, lighter volume allows a few buyers or sellers to move the market. As money has moved around the market and not out of stocks overall, we anticipate that it won't be leaving the market this week either. That does not mean a continued rise is necessarily in the cards; as noted, DJ30 is extended and is due a pullback. We do not, however, expect it to sell of hard.
NASDAQ is set to muddle through, but with many of the leading stocks moving through bases and still correcting into new bases, a strong gain is not likely. SOX remains important as it struggles at the 50 day MVA and many semiconductors have rebounded from the early week selling but are still below potential resistance in the form of broken support. These stocks need to continue and form bases as well, and there is some downside with these, though it is not the downside as seen in the long downtrend. They will fall and then start to move laterally if they are going to base. With chip sales increasing and business capital spending growing solidly, we do not anticipate that they will melt down, just sell down some more and then start basing laterally.
We are not going to chase extended cyclical stocks but will look for opportunity from some downside plays that are set up nicely as well as some smaller cyclical plays that are set up well and some of the smaller techs and even chips that are set up to move higher as the market continues its rise this week
Support and Resistance
NASDAQ: Closed at 1951.02
Resistance: Price resistance in the 1950 range has still not been totally broken. The March/August up trendline (1981). November high (1992), December high (2000). The January 2002 double top (2044 to 2099).
Support: The 18 day MVA (1938). The 50 day MVA (1920). 1875 to 1880 is the bottom of the November range.
S&P 500: Closed at 1088.66
Resistance: 1100 represents some early 2001 lows. Minor resistance at 1115. 1150 to 1175, the early 2002 double top.
Support: The December to June upper channel line at 1084. 1080 from February 2002 lows. November high (1061.40-1064). The 10 day MVA and the 18 day MVA (1075, 1069).
Dow: Closed at 10,278.22
Resistance: 10,353 from May 2002 high. 10,600 (March 2002 peak).
Support: 10,259 (January 2002 high). The 10 and 18 day MVA (10,093 and 10,004). The November high (9903). The October high (9850). The exponential 50 day MVA (9827).
Economic Calendar
12-23-03
Personal Income, November (8:30): 0.3% expected, 0.4% October
Personal Spending, November (8:30): 0.8% expected, 0.0% October
Q3 GDP, final revision (8:30): 8.2% expected, 8.2% prior.
Michigan sentiment revised, December (9:45): 91.0 expected, 89.6 prior.
12-24-03
Durable goods orders, November (8:30): 0.6% expected, 3.3% October.
Intial jobless claims (8:30): 355K expected, 353K prior.
New home sales, November (10:00): 1.11M expected, 1.105M October.
SUBSCRIBER QUESTIONS
Q: In your recommended trades, you say to open a position when a stock hits a specific price and volume. If it hits the price but not the volume do you still go ahead and open a position or not?
It depends upon a few factors--at what time of the day the stock hits its buy point, what the market is doing when it does, how the stock is behaving intraday, and just what the volume action is. We typically don't like to grab any positions in the first half hour or so of trading because this is when the market makers are trying to determine the price of a stock and its options. Until that is done it is prudent to wait to avoid any more risk than necessary (entering a position right off the bat just to have it come back on you). Even if volume buy points are met at that time, unless it looks like a solid breakout or there is some especially good news, we will tend to wait and let the move test before getting in. If that happens within the first half hour, the stock shouldn't get too far ahead that we can't get in before it becomes over-extended.
The second factor to consider is the market trend. Since most stocks will follow what the market does, if that's positive, then we might enter the play with partial positions (anywhere from one-third to one-half of what we plan to put into a position). That gets us in but provides a buffer if things don't go well. On the other hand if volume continues to rise along with a positive market, and then hits our target volume we can move in and complete the position by picking up the remaining shares/options. If the market is not performing well we usually tend to avoid taking even partial positions if the buy point but not volume in any significant amount is reached. That tends to be riskier. If the buy point and volume target is reached against the backdrop of a negative market we may decide to watch unless the move seems particularly strong, because we have seen stocks take off in that scenario just to pull off their highs and close nearer the lows. That can depend upon how the stock's sector is/has recently been performing. If the market is sluggish or struggling of late and we see a stock gap higher, we will definitely wait and see if the move can hold up.
Third, observe what the intraday trend for volume is. Is it consistently increasing, and how quickly? If we see a stock jump up over the buy point on a breakout move early, we look to see if the volume looks 'on track to make its target. Sometimes that is an easy call; many times when a stock makes a breakout, volume will shoot up early and be running near the target. Other times it is a stealth move with volume slowly accumulating throughout the session. Then in the last hour you realize the volume is there. We like to see a big surge that takes it 30% of the way there. So, we either look at time and sales or talk to our broker to see if there are a lot of block trades. Big breakouts from solid patterns are usually driven by institutions, and if we see a lot of 10,000 share plus trades, we have a good idea the big boys are buying and we follow them. If we see 5,000 share trades, even though they are not block trades, on a $50 stock that means someone is putting up $250,000; that is big money making a big call. If we see this kind of action we are usually buyers.
Finally, how is the stock price acting in relation to the volume? Does the stock shoot higher but then spend the rest of the session giving back the gains? Early volume may be strong, but if it starts the inevitable test of the first move and does not every find support and start a rebound, we will often let it go and wait for it to set back up.
Thus, outside of the first half-hour of trading, and if the market is positive, we certainly can consider entering with partial positions before the volume target is matched. Just look for a good move with volume steadily increasing for a stock in a well-performing sector.
THE PLAYS
Good movers Friday: GTI; TEK; SLAB
Best Plays:
1) CHRD: Making a nice breakout move on volume.
2) OTE: Volume is surging as OTE nears the end of its base.
3) CLE: Volume rising as it fails at the 50 day MVA.
4) MICU: Looking strong as it makes a higher low last week.
5) MTX: Very nice pullback to test the breakout.
6) AV: Turning back down at the 10 day MVA.
7) RTH: Has made the test and now looks ready to fail.
NEW PLAYS:
Upside:
Play Date: 12/20/2003
CHRD (Chordiant Software--$4.99; +0.42; no options): Technical and system software
http://biz.yahoo.com/p/c/chrd.html
STATUS: Ascending triangle. CHRD is making the breakout form a 10 week base sporting solid 3 to 1 accumulation (3 up price weeks on rising volume to 1 down price week on rising volume. A very nice, tight base with volume surging on the Friday breakout move along with a relative strength breakout showing the stock's strength. CHRD is following the money flow higher, and we are ready to move in on a further gain.
Volume: 1.336M Avg Volume: 689.236K
BUY POINT: $5.08 Volume=1M Target=$6.12 Stop=$4.58
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/chrd.html
Play Date: 12/20/2003
ENMC (Encore Medical--$7.76; +0.69; no options): Medical appliances
http://biz.yahoo.com/p/e/enmc.html
STATUS: Flat base. Volume is surging as ENMC starts a breakout move from its 14 week flat base. Money flow is surging and the stock price is following. Positive 3 to 2 accumulation in the pattern has set the bouse for the stock to move off of. This base has formed in new high territory, sitting on some very old tops. It is ready to make the next breakout to an all-time high, and moving out of this base is a good place to step in.
Volume: 953.63K Avg Volume: 278.1K
BUY POINT: $7.88 Volume=417K Target=$9.55 Stop=$7.33
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/enmc.html
Play Date: 12/20/2003
OTE (Hellenic Telecom--$6.35; 0; no options): Foreign telecom services
http://biz.yahoo.com/p/o/ote.html
STATUS: Cup with handle. After rallying off of the April low, OTE has dropped back to form the current 19 week base sporting outstanding 6 to 1 accumulation. It has moved laterally the past two weeks forming the handle to the base. After low volume, trade has surged the past four sessions. Friday it tried to make the breakout, rallying to 6.48 on the igh but giving all of the move back. Still very solid and looking for that breakout on continued strong trade.
Volume: 344.9K Avg Volume: 89.734K
BUY POINT: $6.52 Volume=135K Target=$8.15 Stop=$6.19
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/ote.html
Downside:
Play Date: 12/20/2003
ADI (Analog Devices--$44.35; -0.77; optionable): Semiconductors
http://biz.yahoo.com/p/a/adi.html
STATUS: Put. ADI has formed a short 6 week head and shoulders topping pattern. Last week ADI broke below its 50 day MVA (45.28), rallied back up to test the move Thursday but on lower, below average volume. Friday it tapped the 50 day on the high and fell on rising, average trade. That is the kind of price/volume action you want to see on a breakdown and test. Looking for ADI to fall further on continued brisk trade.
Volume: 3.385M Avg Volume: 3.328M
BUY POINT: $43.85 Volume=4M Target=$39.75 Stop=$45.32
POSITION: ADI OI - Mar. $45p (-50 delta)
http://www.investmenthouse.com/ct/adi.html
Play Date: 12/20/2003
CLE (Claires Stores--$38.81; -1.19; optionable): Apparel stores
http://biz.yahoo.com/p/c/cle.html
STATUS: Put. CLE shot higher in late November in what appears to be an exhaustion move on the current run. It peaked at just over 45 and dumped lower on volume, breaking through the 50 day MVA (39.87). It has spent the past two weeks moving laterally below that level. It tried to retake the 50 day Friday but rolled down after tapping the 10 day MVA. Volume rallied as CLE rolled over. That is the price/volume action you want to see when a stock tests resistance after a break through support.
Volume: 419K Avg Volume: 452.337K
BUY POINT: $38.62 Volume=679K Target=$36 Stop=$40.48
POSITION: CLE NH - Feb. $40p (-61 delta)
http://www.investmenthouse.com/ct/cle.html
CONTINUING PLAYS:
Upside:
Play Date: 12/01/2003
ALTI (Altair Nanotechnologies--$2.19; -0.03; no options): Industrial metals
http://biz.yahoo.com/p/a/alti.html
STATUS: Test breakout. Still trying to continue complete the test of the 10 day MVA (2.10) following the explosive breakout to start the month. Thursday it was moving well on above average volume, but then faded fractionally Friday on very low volume. Still soli dand looks ready for the next move. Want to see that volume come back in. Outstanding money flow.
Volume: 886.66K Avg Volume: 1.402M
BUY POINT: New: 2.36 (orig. $2.05) Volume=1.2M Target=$2.95 Stop=$2.05
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/alti.html
Play Date: 12/16/2003
CEVA (Ceva Inc.--$9.82; 0; no options): Semiconductors
http://biz.yahoo.com/p/c/ceva.html
STATUS: Reverse head and shoulders. Tried to make the breakout Thursday and Friday, tapping at 10.27 on the highs but falling back. Still solid in its 12 week accumulation pattern showing outstanding 5 to 1 accumulation (5 up price weeks on rising volume to 1 down price week on rising volume). A new issue November 2002, CEVA is working through its second base. We love these newer issues when they breakout from their early bases. Showing good action, we will be patient and let it make the breakout move; it is straining to do that.
Volume: 37.769K Avg Volume: 87.461K
BUY POINT: $9.92 Volume=128K Target=$11.92 Stop=$9.23
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/ceva.html
Play Date: 12/17/2003
CHL (China Mobile--$15.08; +0.03; optionable): Chinese wireless communications
http://biz.yahoo.com/p/c/chl.html
STATUS: Reverse head and shoulders. Still working in the very nice 10 week base forming over the 50 day MVA (14.42). It is a sign of strength when a stock can hold over this key support level as it bases; big money is buying at that level, picking up the stock at lower prices. Accumulation is a strong 3 to 0 and price/volume action is mostly solid. It has set up a nice pattern, and we are being patient and letting it make the breakout move. Volume was higher Friday as the stock tapped higher. Looks ready to make the move.
Volume: 424.2K Avg Volume: 533.388K
BUY POINT: $15.45 Volume=790K Target=$18.55 Stop=$14.58
POSITION: CHL CC - Mar. $15c (60 delta) &/or Stock
http://www.investmenthouse.com/ct/chl.html
Play Date: 12/17/2003
DTPI (Diamondcluster Intl.--$9.27; -0.23; no options): Efficiency experts to international clients
http://biz.yahoo.com/p/d/dtpi.html
STATUS: Ascending triangle. Still working on the pattern, but sagged late in the week to the 18 day MVA (9.32). Volume was very low, however, as it made the pullback, and it did hold the 18 day on the close. That maintained the stock in its very nice littl pattern that is showing solid 3 to 0 accumulatoin. It is setting up for a solid move, and we really like these patterns because th move can be so explosive.
Volume: 128.48K Avg Volume: 377.411K
BUY POINT: $10.12 Volume=577K Target=$12.22 Stop=$9.41
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/dtpi.html
Play Date: 12/13/2003
MICU (Vicuron Pharma--$18.75; +0.15; no options): Drugs
http://biz.yahoo.com/p/m/micu.html
STATUS: Flat base. Volume has jumped up the past week as MICU moved up over the 18 day MVA (18.29). Showing great price/volume action in the 10 week base, and the strong 4 to 0 accumulation (4 up weeks on rising volume to 0 down weeks on rising volume) bears that out. Money flow continues to head higher, and we are waiting for the stock to rally and follow money flow higher.
Volume: 263.743K Avg Volume: 371.356K
BUY POINT: $19.12 Volume=488K Target=$22.95 Stop=$17.98
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ct/micu.html
Play Date: 12/15/2003
MSPD (Mindspeed Technologies--$6.88; -0.08; no options): Chip equipment
http://biz.yahoo.com/p/m/mspd.html
STATUS: Ascending triangle. A very nice 8 week base that has formed over the 50 day MVA (6.11), making a series of higher lows over that level with a constant top at 7. Money flow is continuing to move up ahead of the stock. Relative strength is excellent and ready for a breakout. These patterns can yield explosive moves, so we want to be on it when it starts the move on spiking volume.
Volume: 410.918K Avg Volume: 668.227K
BUY POINT: $7.15 Volume=1.1M Target=$8.65 Stop=$6.65
POSITION: - Apr. $7.50c (46 delta)
http://www.investmenthouse.com/ct/mspd.html
Play Date: 12/09/2003
MTX (Minerals Technologies--$58.3; +0.05; optionable): Synthetics
http://biz.yahoo.com/p/m/mtx.html
STATUS: Testing the breakout. MTX surged on the breakout move from the short 6 wweek cup with handle base, making a quick run to our initial target at 60. After that strong move it faded last week on lower volume, tapping at and holding the 10 day MVA (57.70) on the intraday lows before rebounding to close. Excellent money flow and price/volume action. Looks ready for more upside, and it is showing so much life we are looking at additional positions on a volume bounce from here.
Volume: 59.7K Avg Volume: 100.907K
BUY POINT: New: $58.72 (orig. $55.82) Volume=150K Target=New positions: $64 (orig. $59.94) Stop=$57.55
POSITION: MTX DK - Apr. $55c (58 delta)
http://www.investmenthouse.com/ct/mtx.html
End part 2 of 3
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us stock market
trend trading stock
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