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us stock market, trade stock
Begin part 2 of 3
THIS WEEK
The market has its work cut out for it again given the inability to hold the gains late Friday. It is still predominantly in a downtrend in the correction though NASDAQ and DJ30 have tapped at support intraday last week, held, bounced, and then paused on lighter trade. With the sentiment indicators we saw ahead of the move (put/call ratio, TRIN, rising volatility, increased talk of the bear continuing) as well as some slight improvement in NASDAQ price/volume action, we anticipate the bounce will continue even if it takes a slight pause and pullback early in the week.
Then there may be some hesitation ahead of the Friday jobs report. Moreover, the quarter ends on Wednesday, and that will add to some volatility to the market as positions are shuffled to take some gains or put some prettier faces in the portfolio for those quarterly reports. There is no lack of events for the market to deal with this week, but just as it used any news as a reason to sell the prior thus far this month, it will use some decent news to continue the rebound.
We are going to keep an eye out primarily for three play types this week. The first as always deals with stocks in good patterns and set up to make the move higher. In addition, after the Friday action there may be some strong stocks that started a rebound, pulled back some, and are still in position to take advantage of a continued move higher. Third, as stocks continue to rebound we will watch for those moving on lower and lower trade that reach resistance and stall. Those will provide opportunity as the market bounce stalls and the second test begins.
Again, if the bounce can continue into Thursday we will probably some hedging ahead of the jobs report. Stocks have moved higher ahead of previous reports in hope of better news only to get burned. Expectations are set lower this time and we feel that is good because we don't believe this will be the breakout month. Grand if it is, but we are not hopeful. It depends upon where the market is at that time, but if it has managed to continue its bounce it will most likely give some of the move up ahead of the report. If the jobs report fails to show a breakout and just meets expectations or, for shame, fails to meet the 100K expected, that will be a downer that most like starts another test. We would prefer the move to last longer as that makes for a better test.
We cannot forget earnings either. YHOO kicks them off in two weeks. First Call is indicating that the warnings are at quite a low pace even with required disclosure; if there is anything bad to say companies will air it and usually as early as possible to provide a window of forgetfulness before the actual results are released. A rally into the jobs report followed by some selling after the results sets up the market for a bounce as earnings start. If this is all wet and the jobs report is very strong stocks then rally further, set up a better test, and then come back a bit further down the road to make the bottom. Either way we look for it to continue the move higher then run out of steam for the next test that will set the bottom.
Support and Resistance
NASDAQ: Closed at 1960.02
Resistance: 1966 (18 day MVA) stalled it Friday. 1990 to 2000, the top of the late 2003 base. The exponential 50 day MVA (1999). The simple 50 day MVA (2035).
Support: Looking to see if the 10 day MVA (1948) and some prices from the recent March consolidation attempt (1943). Mixed tops and bottoms at 1900. The 200 day MVA (1890).
S&P 500: Closed at 1108.06
Resistance: The 10 day MVA (1109). The 18 day MVA (1116). The exponential 50 day MVA (1122) and price resistance at 1125. The simple 50 day MVA (1135). The January high (1155). Next is 1159 (February highs) and 1160 to 1175 the highs in that double top that spanned late 2001, early 2002.
Support: 1106 is a May 2002 top and represents some early 2001 lows. 1096 to 1100 may also try to hold. 1075 to 1070 from the December consolidation.
Dow: Closed at 10,212.97
Resistance: The 18 day MVA (10,267). The exponential 50 day MVA (10,359). The simple 50 day MVA (10,482). September/November up trendline (10,515).
Support: 10,000 to 9900-9850. 9859-9855 is the next real support
Economic Calendar
These are consensus expectations. Our expectations will vary and are discussed in the 'Economy' section.
3-30-04
Consumer Confidence, March (10:00): 86.0 expected, 87.3 February.
3-31-04
Factory Orders, February (10:00): 1.4% expected, -0.5% January.
Chicago PMI, March (10:00): 61.0 expected, 63.6 February.
4-01-04
Initial jobless claims (8:30): 340K expected, 339K prior.
Construction spending, February (10:00): -0.1% expected, -0.3% January.
ISM (manufacturing sentiment), March (10:00): 59.8 expected, 61.4 February.
4-02-04
Non-farm payrolls, March (8:30): 100K expected, 21K February.
Unemployment rate, March (8:30): 5.6% expected, 5.6% February.
Average hourly earnings, March (8:30): 0.2% expected, 0.2% February.
Average workweek, March (8:30): 33.8 expected, 33.8 February.
THE PLAYS:
Wednesday night play results:
MDRX: Still in a solid pattern as it works toward the breakout.
NSM: Excellent surge higher on strong trade.
NVDA: Strong surge on strong volume.
RHAT: Nice recovery and breakout on solid volume.
New Plays:
Upside:
Play Date: 03/27/2004
CACH (Cache--$30.61; +0.36; no options): Retail apparel stores
http://biz.yahoo.com/p/c/cach.html
STATUS: Flying plateau. A top rated stock as far as earnings and sales growth combined with a solid pattern. That is a combination you want to see. CACH broke out from a 13 week cup w/handle base in early February and rallied to 32. It has spent the past three weeks moving laterally between 29 and 31 on mostly lower volume but showing volume spikes on up sessions. Accumulation is a solid 5 to 1 in the cup base, setting the stage for the breakout and run as money moved in all the while the stock was pulling back. In other words, institutions were using the pullback to quietly accumulation positions. The good price/volume action continues in this lateral move, and money flow is surging higher ahead of price. The stock looks ready to continue its breakout run. This is one that will be moving into split range on the next breakout as well, and we will start looking for a date at that time.
Volume: 129.78K Avg Volume: 95.709K
BUY POINT: $31.58 Volume=165K Target=$37.95 Stop=$29.48
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/cach.html
Play Date: 03/27/2004
NVTL (Novatel Wireless--$20.55; +1.90; no options): Wireless telecom
http://biz.yahoo.com/p/n/nvtl.html
STATUS: Flat base. NVTL blasted out of a 4 month flat base to start the year and then powered up to 21. by mid-February. It has since slipped into a 6 week flat base over the 18 day MVA (18.30). It has shown several volume spikes the past month, mostly on upside sessions. That is a very positive sign; we call them 'get ready' spikes. Excellent money flow surging ahead of price and relative strength breaking out as NVTL jumped higher Friday on a very strong volume session. Looks ready to make the breakout and we are ready to get in.
Volume: 1.57M Avg Volume: 761.045K
BUY POINT: $20.88 Volume=1.1M Target=$24.92 Stop=$19.42
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/nvtl.html
Play Date: 03/27/2004
PCR (Perini--$17.10; +0.41; no options): Construction design services
http://biz.yahoo.com/p/p/pcr.html
STATUS: Breakout test. PCR is coming back for a nice low test of the 18 day MVA (16.31) after a pair of massive breakouts from flat bases (27 weeks on the first, 8 weeks on the second). After a mostly lower volume pullback volume started to jump Friday as PCR bounced up off of the 18 day. Money flow is strong, moving up well ahead of the price. Looking for PCR to bounce and follow the money. Looks good, and we have had success with this type of pattern of late.
Volume: 151.2K Avg Volume: 75.545K
BUY POINT: $17.48 Volume=150K Target=$20.55 Stop=$16.26
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/pcr.html
Play Date: 03/27/2004
MTIC (MTI Technology--$3.00; -0.08; no options): Data storage devices
http://biz.yahoo.com/p/m/mtic.html
STATUS: Double bottom. Very nice action as MTIC comes off of the second lower leg of its 9 week bottoming pattern. It is approaching the 'hump' in the middle of the pattern (3.24), also called the middle of the 'W.' Accumulation is strong at 3 to 0 in the base and money flow is running higher ahead of the price. It may move up to 3.25 and then move laterally and form a handle. How it behaves at that point will drive how we approach the play. If it is surging through the buy point on strong volume we will go ahead and open a position. If volume is so-so up to that level, it will most likely form a handle. All we need to do is be patient and watch what it is showing us as it hits the buy point.
Volume: 81.345K Avg Volume: 167.5K
BUY POINT: $3.28 Volume=251K Target=$4.12 Stop=$3.05
POSITION: - Stock (option chain)
http://www.investmenthouse.com/ci/mtic.html
Play Date: 03/27/2004
RMKR (Rainmaker Systems--$2.29; -0.06; no options): Rainmaking services
http://biz.yahoo.com/p/r/rmkr.html
STATUS: Breakout test. After a huge surge two weeks back, RMKR has tested that move, coming back to the 18 day MVA (2.21) on lower and lower trade, holding over that level the last three sessions of the week on lower trade. This move follows the breakout from three consecutive bases. It is a bit winded, but this pattern has been yielding nice gains in the market as the stock tests back after a very strong move higher. We are looking for a strong rebound here up to the prior highs to book a nice gain. From there we watch if it can continue the move or if it then stalls and starts to work on a base. Strong money flow and nice breakouts from good bases offer a strong foundation for this move.
Volume: 129.611K Avg Volume: 111.227K
BUY POINT: $2.42 Volume=167K Target=$3 Stop=$2.25
POSITION: - Stock (no option chain)
http://www.investmenthouse.com/ci/rmkr.html
Good movers Friday: FINL; INTV; KFY; ONCY; SWK; TASR; TKO
End part 2 of 3
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