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world stock market, us stock market
Begin Part 2 of 3
TOMORROW
Again there is still a lot of unknown. Today did not answer any questions longer term; we got an oversold bounce, though it was a good one. We still have to watch for that follow through later in the week or early next week.
Shorter term we anticipate this rally to last through tomorrow and all or part of Wednesday. This would allow the indexes to rally up to the prior lows in March and April that were broken in the recent selling. That is a logical point of resistance and rest before the market can move higher. That is also a logical point to mind our shorter term index option plays and indeed most of our short term option plays.
Today was a good start, and we are going to continue to take positions on the breakout stocks and other rally stocks that can give us a good move over the next two sessions. We want to be careful on these, however, as we don't want to get in on the tail end of this, hopefully, initial rally in the return of a stronger bull run. If it is not, however, we do not want to be taking upside positions on the tail end of an oversold bounce. The trend is still down; we do not want to buck the trend with unwarranted chances at this point. If we were in an uptrend, we could withstand a pullback after a rally and ride it on up. The trend can backstop you if your timing is a bit off; if you are against the trend, it can hurt. So, don't stretch short term bounce plays at this point.
Support and Resistance
Nasdaq: Closed at 1499.40.
Resistance: 1500 is some resistance. 1619 and 1638 are the prior lows that have been undercut and are the nearest potential resistance.
Support: The lows of the 1998 bear market, 1419 closing and 1357 intraday.
S&P 500: Closed at 1003.45.
Resistance: 1045. Then 1075 to 1081.
Support: 960 held on the close Friday (one of the lows in the 1998 double bottom). The other low in that patter is 925.
Dow: Closed at 8603.86.
Resistance: 8500 did not stop the Dow. Then 9106 and 9500.
Support: 8100 held last week. 8000 is next (the middle of the 1998 double bottom) and then 7500 (the lows of the 1998 double bottom).
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
9-24-01
Leading Economic Indicators, August (10:00): -0.3% actual versus -0.1% expected and +0.3% prior.
9-25-01
Consumer confidence, September (10:00): 109.0 expected and 114.3 prior.
Existing home sales, August (10:00): 5.20M expected and 5.17M prior.
9-27-01
Initial jobless claims (8:30): 410,000 expected and 387,000 prior.
Durable good orders, August (8:30): -0.4% expected and -0.7% prior.
New home sales, August (10:00): 922,000 expected versus 950,000 prior.
9-28-01
GDP final, Q2 (8:30): 0.1% expected and 0.2% prior.
GDP Chain deflator, Q2 (8:30): 2.2% expected and 2.2% prior.
Michigan sentiment (revised), September (9:45): 79.0 expected and 83.6 prior.
Chicago PMI, September (10:00): 42.3% expected versus 43.5% prior.
SUBSCRIBER QUESTIONS
Q: I live in Toronto. Most Sundays, I pick up an Investor's Business Daily at a variety store in a small neighborhood shopping area. IBD is often sold out, as the paper does not offer subscriptions to Canadians. At 8:30 this morning, the store was sold out of the Herald Tribune, and the London papers. They had some New York Times left, and an absolute ton of IBD. What is this world coming to?
A: Actually, you just described one of the indicators of sentiment that is needed for the market to turn: so many investors get to the point where they want nothing to do with the stock market. They thought they could make a ton of money at it, they got in at the top, it sold down, and they got out disgusted and vowing not to return. That is what happens when you do not understand why the market and stocks move the way they do. The lack of understanding makes it look tremendously difficult or rigged. Again, they leave with an oath not to return. When this happens in large numbers, the sellers are getting cleared out. When the financial newspapers are not shunned, that is a good sign sentiment is reaching that negative level. Keep those observations coming. A lot of success in the stock market is just paying attention to trends and looking at them in light of how they reflect upon sentiment. It is not hard to make money in the market, you just have to think a bit differently.
TEAM TRADES
Getting sucked in.
PLCM may be in a long base, but it has been showing signs of wanting to make a big break higher. It cleared the 200 day MVA Friday on massive volume, and we were looking to pick it up when it cleared some further resistance. As it turned out today, we should have waited until it cleared the May high at 29.88 as opposed to the September intraday high at 28.
PLCM was off and running again today, gapping higher, and then making a quick run up to the buy point (28.13). Volume was really high on the open with lots of buy orders. We liked what we were seeing and figured we were going to get another two or three days of upside on the stock. So, we put in a limit order for the stock at 28.25. It took a few minutes but was done. The stock was in high gear, racing up to 30 in the first half hour. Then it ran into 30, and turned right back down, selling to 28.50 over the next hour. That looked as if it was going to hold. After a half hour it sold sharply to the open price. It rallied back but then could not hold. The rest of the day was quite frustrating; the market rallied, PLCM did not. It closed the session right at 26.50, flirting with our sell point. There was no bad news; indeed, PLCM announced its first shipment of voice over IP telephones. Volume was again huge. We will give it a chance to regain itself up to 28 or even 30, but we are disappointed in this move to say the least.
THE PLAYS:
Note for reading plays: A "prior high" refers to the high at the start of a base.
All prices are current as of the close of trading Monday.
Best Plays:
1) PCS: Moving up in an ascending wedge/flat base.
2) PRHC: Moving up in a handle on good volume.
3) MIMS: Nice move on rising volume.
4) PDX: Can keep rallying if volume surges back.
NEW PLAYS:
PCS (Sprint--$25.60; +2.03; optionable): Telecom
http://biz.yahoo.com/p/p/pcs.html
STATUS: PCS is in a 14-month base with previous highs around 66. Currently the stock is in a flat base with a kind of ascending wedge character, upper resistance in the range of the July high of 27 (May high is 27.50). Recent lower support was established at the August and September lows just above 22, from where PCS made its most recent run. It pulled back to test 23 and support at the short term and 50 day MVAs late last week, and today made a good move up from the MVAs on rising volume (11 million; avg. 8 million). We are looking for a breakout over the recent highs. Super money flow, and relative strength is breaking out ahead of price. Target: initial 34
BUY POINT: 27.13, on rising volume. Stop: 25
POSITION: Stock and/or November $22.50 calls to buy (PCS KT).
Back On:
ODP (Office Depot--$13.45; +0.85; optoinalbe): Specialty retail
http://biz.yahoo.com/p/o/odp.html
STATUS: Made a nice move over the short term MVAs (18 day MVA at 13.10), gapping up on the open and breaking the resistance on stronger volume (4 million; avg. 2.2 million). ODP is in a 17-month cup with handle base, and was pulling back from the August (handle) high of 14.25 on decreasing volume earlier this month, then sold off to test the 11 range (just above the May high), but immediately moved back over its 50 day MVA last week. We are looking for a strong breakout over the high, as the stock shows strong money flow and great buying. Target: 17
BUY POINT: Breakout: 14.38, on minimum breakout volume of 3.3 million. Stop: 12.60. If the stock pulls back, support looks firm at 13.
POSITION: Stock and/or January $10 calls to buy (ODP AB).
SBC (Sbc Communications--$45.10; +0.85; optionable): Telecom
http://biz.yahoo.com/p/s/sbc.html
STATUS: SBC made part of last week's strong run (from 40-41 support) from below its 50 day MVA, topped out at 46.25 Thursday (which broke the stock out over the 200 day MVA), then pulled back for 2 days. Volume remained quite high, but dropped back Monday as the stock opened just a hair under the 200 day (which is at 44.67) then moved up, volume falling to 9.2 million (still well above the average of 5.6 million). We are looking for a hold here for further consolidation in this newly-forming handle to a 7-month base, though it is possible the stock might re-test around the 44 range before bouncing back up for a breakout. SBC shows strong money flow, positive buying. Target: 53-56
BUY POINT: Breakout: 46.38, on rising volume (minimum breakout volume is 8.4 million). Stop: 43.50 (just below the 18 day MVA at 43.62).
POSITION: Stock and/or January $40 calls to buy (SBC AH).
PRHC (Province Healthcare--$37.50; +1.80; optionable (PUH): Health Services
http://biz.yahoo.com/p/p/prhc.html
STATUS: In a cup with handle base of 9 months (prior high at 42.63). The stock has found support again at the 50 day MVA (currently at 35.65), firm ground since early June), and moved up from there Monday on strong volume (640,600; avg. 429,181). We are looking for a breakout over the handle (August) high of 39.10. Shows great money flow and relative strength that has moved out ahead of price, a bullish sign. Target: 45-47
BUY POINT: 39.23, on minimum breakout volume of 644,000. Stop: 36.09 (18 day MVA is at 36.59). A buy on the breakout up to 41.19.
POSITION: Stock and/or December $35 calls to buy (PUH LG).
GD (General Dynamics--$86.20; +2.18; optionable): Aerospace/Defense
http://biz.yahoo.com/p/g/gd.html
STATUS: Made our buy point of 85.65 as the stock pushed out of the flat base/ascending wedge-type base on a mere crawl up in volume (to 2.02 million; avg. 899,000). The stock closed just under 86.50, an opening price from earlier this month and the only overhead supply left here save today's intraday high of 87.13 and the September high of 96.50, reached on last week's rally in the defense sector. We will look for the continued breakout from here; the stock can run to 89.93 and remain within our 5% over the buy point limit on breakouts. Target: Monday's high of 96.50, initially.
Great money flow and buying.
BUY POINT: A buy up to 89.93 on continued strong and rising volume. Stop loss from entry points here: 82.80
POSITION: Stock and/or November $80 or $85 calls to buy (GD KP or KQ). Deltas were unavailable at the time of this writing.
MIMS (Mim Corp.; $10.90; +1.53; no options); Health services.
http://biz.yahoo.com/p/m/mims.html
STATUS: Made the move we wanted, on stronger volume making good on the bounce from the 50 day MVA (9.28). The stock broke resistance at the 18 day MVA (10.31), and popped up to the next level of resistance at 11. Volume was up to 734,600 (avg. 768,600). We are looking for volume to break above average levels and keep this one moving, first over 11 and then on a run over the September high of 12.58. Our target on that move, 14.50. The stock made our buy point today (10.31); aggressive entry points can be taken on a continued move up from here, or on a pullback to the 18 day MVA for a bounce.
BUY POINT: Aggressive: Over 11, on 770,000 volume or better. Stop: 10
POSITION: Stock only.
New:
PLCM (Polycom--$26.51; -0.86; optionable): Telecom: Processing Systems
http://biz.yahoo.com/p/p/plcm.html
STATUS: Made a strong move Friday, breaking over the 200 day MVA (25.39) on strong volume, which was up again and higher Monday to 8.06 million (avg. 1.2 million), but the stock, after running to a high of 30, sold back down to close, but remained above the 200 day (buy point for today's move was 28.13). Look for a test of that support for a renewed bounce (there is other price support reinforcing the 200 day from the previous 4 months); Friday's move came on a tap of support at the 10 day MVA then strong bounce from there. Target: 32-34
BUY POINT: Aggressive: On a bounce from the 200 day MVA on continued strong volume. Stop: 22.50 (just below the 50 day MVA).
POSITION: Stock and/or November $22.50 (QHD KE; 0 open interests at this point), or, January $22.50 calls to buy (QHD AX; 31 open interest thus far for January strike).
DRS (Drs Technologies; $31.85; -0.40; no options) Aerospace defense.
http://biz.yahoo.com/p/d/drs.html
STATUS: Tried to move higher after Friday's strong moved up that continued a bounce from the 10 day MVA, a support level DRS pulled back to after the stock raced higher last Monday (to 40) with other defense stocks. Today the stock reached a high of 33.25 then dropped back slightly as volume rose higher to 614,900 (avg. 92,000). We may get another pullback from here; support is at the 10 day MVA (28.99) if the stock cannot catch firm ground higher up (30.25 range). Target: 36-37.
BUY POINT: Over 33.50 after a bounce from the 30 range. Stop: 30.82
POSITIONS: Stock only.
FIMG (Fischer Imaging--$13.09; +0.89; no options): Health Services
http://biz.yahoo.com/p/f/fimg.html
STATUS: Popped higher on a gap up to the opening price of 13.49; volume was higher at 250,100 (avg. 114,000), but the stock couldn't hold the high of 13.95 and closed nearer the low of 13.09, showing a doji. Looks likely to pull back here, and can catch support at 12.70-12.80, or lower, at the 18 day MVA (12, at the level of other price support from August and earlier this month). We are looking for a breakout over the August high of 15.41, which FIMG reached after making a fine run up since July. Huge money flow, good buying and relative strength that is breaking out ahead of price. Initial target: 15.41
BUY POINT: Aggressive: 12.90, after catching support at 12 or higher. Stop: 11.99.
POSITION: Stock.
PDX (Pediatrix Medical--$39.00; +2.10; optionable): Health Services
http://biz.yahoo.com/p/p/pdx.html
STATUS: Made the buy point of 37, breaking to a new all-time closing high. The stock made the move on strong volume, but that which was down from Friday's higher volume levels (Monday at 257,900; avg. 170,000). We will look for a continued breakout on surging volume; otherwise, on a pullback the stock can grab support at the 38 range, level of late August/early September prices. Huge money flow and improved buying. Target: 44
BUY POINT: Aggressive positions for upside positions from here. For a pullback to 38 and bounce: Over 38.60 strong, above average volume. Stop: 36.50
POSITION: Stock and/or November $30 or $35 calls to buy (PDX KG).
End Part 2 of 3
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world stock market
us stock market
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