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world stock market, us stock market
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10/11/01 Technical Traders Report Update
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Technical Traders Report Subscribers:
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THE PLAYS:
A breakout from TECD! Also, MOGN is breaking out and remains a buy up to 15.86 on this move. EPIQ made the move we wanted, breaking out from the cup with handle. It is just cents away from the 5% limit for buying on a breakout (31.09 and the stock closed at 30.95), so we are waiting for a test for new or additional entry points. ISIP has moved nicely since we slapped it back on Tuesday; the stock's up the next 2 days as volume rises and still looks strong! SMTC and KLAC rallied with the chips; watch the 50 day MVA for the latter at 41.91. Got a breakout from CPRT but the stock pulled off the high of 35.50 on strong volume. We'll look for support at 33.20 on a pullback. Other breakouts: IMNX, SVU (continued), Of stocks that have broken out already, SANG continued its steady run up after testing the breakout. The indexes were strong as well, and are approaching resistance.
Continuing Plays: MMC, PRX, GNSS. IMNX hit our limit for buying on a breakout so we will look for a pullback to the 200 day MVA for new entry points. RA is trying to break out (see Tuesday's report for buy point, etc.). HCP still looks good in the test of the breakout (see last night's report), as does BEC, as both stocks hold support on lower volume.
ODP (Office Depot--$15.20; +0.78; optionable): Specialty Retail
http://biz.yahoo.com/p/o/odp.html
STATUS: Broke to a new closing high on a sharp volume rise (to 2.5 million; average levels), hitting the buy point at 15. The stock looks strong and ready to continue higher as it closed at the high after the gap up on the opening price of 14.93. Look for that move on continued rising volume. Target: 18 (initial)
BUY POINT: Riding positions taken at 15. From here: 15.25 on volume of 3 million or better. Stop: 13.95
POSITION: Stock and/or January $12.50 or $15 calls to buy (ODP KC or AC).
New Plays:
CYTC (Cytyc--$27.44; +0.94; optionable): Scientific & Technical Instruments
http://biz.yahoo.com/p/c/cytc.html
STATUS: CYTC corrected back to the 200 day MVA in September then cleared resistance at the July high of 27.01 with a strong run up to the October high of 28.93. It found support by Tuesday at the 10 day MVA (26.36), and now looks ready to break current resistance at 28 and that October high. Volume was up to 2.6 million (avg. 1.6 million) as CYTC closed at the top of a bounce from the 10 day. Looking for a breakout to a new high. Strong money flow and good buying. Initial target: 32
BUY POINT: 28, on continued rising volume. Stop: 25.50 (just below the 18 day MVA).
POSITION: Stock and/or November $22.50 calls to buy (YQK KU).
CB (Chubb Corp--$77.11; +2.31; optionable): Insurance
http://biz.yahoo.com/p/c/cb.html
STATUS: Making a breakout move from a 10-month double bottom with handle base (prior high at 90.25) on a pop from support at the 10 day MVA (73.66); volume was sharply higher (2.68 million; avg. 1 million). CB closed just cents below the handle high of 77.50. This potential breakout move can be termed a move out of a more recent cup with handle with prior highs at 79.50. The stock's run up quite a way from the September low of 55.54 (to make the right side of the base), so we will see if it can keep up the strength for a good breakout. CB shows excellent money flow, decent buying, high relative strength. Target: 93
BUY POINT: Breakout: 77.63 on continued strong volume (minimum breakout volume is 1.5 million). Stop: 71.52 (just below the 200 day MVA at 71.77).
POSITION: Stock and/or November or January $70 calls to buy (CB KN or AN).
DRMD (Duramed Pharmaceuticals--$21.70; +0.30; optionable): Generic Drugs
http://biz.yahoo.com/p/d/drmd.html
STATUS: A small double bottom that formed since the first of August. The handle has consolidated above the 18 day MVA (20.71) on steadily decreasing volume, and after today's little bounce up from the 10 day (21), is showing its readiness for a breakout once volume rolls in (down to 89,000 Thursday; avg. 398,000). Huge money flow. Target: 27
BUY POINT: Breakout: 22.09 on minimum breakout volume of 597,000. Stop: 20.32 (just under the 50 day MVA).
POSITION: Stock and/or December $17.50 calls to buy (DUQ LQ).
ENDO (Endocare--$17.42; -0.24; no options): Health Services
http://biz.yahoo.com/p/e/endo.html
STATUS: Formed an ascending wedge since the first of September on some erratic volume that has moved both above and below average levels. On the last pullback to the current support at the 10 day MVA (16.89), however, volume decreased appropriately until Thursday when it rose as the stock made a slight pullback. Look for a move back down to the 10 day then bounce back up to a breakout. The pattern is part of a flat base formed since mid-July, and is in the upper mid-range of ENDO's 19-month base. Money flow is strong and relative strength high. Target: 22
BUY POINT: 18.43 on minimum breakout volume of 277,000 (today up to 155,500; avg. 205,000). Stop: 16 (just under the 50 day MVA).
POSITION: Stock.
BBOX (Black Box--$51.15; +4.75; optionable): Computer Hardware
http://biz.yahoo.com/p/b/bbox.html
STATUS: Broke from a little cup with handle formed at the bottom of a ranging pattern formed since late December. The pattern ranges roughly between 42 and 70 and since spring BBOX actually began to form a large double bottom. On this breakout the stock remains a technical buy to 51.74, but if it surpasses that look for resistance ahead at the 200 day MVA (53.73). In a continued rally we will see if BBOX can break that as volume keeps rallying. May try to form a handle to the double bottom before hitting 70. Volume 657,000 (avg. 627, 409). Buying is looking good. Target: 70
BUY POINT: A buy to 51.74; stop=47.60. Break of resistance: 54 on continued rising volume. Stop: 49.75
POSITION: Both positions: Stock and/or December $45 calls to buy (QBX LI).
SUMMARY:
- Massive rally fueled by a rumor and more.
- Huge volume surge pushes Dow and Nasdaq over prior lows, forcing shorts to cover.
- Dollar surges as the world realizes again the U.S. is the world's market.
- September retail sales better than expected.
- Must the market re-test the lows?
- Subscriber Questions
The running of the bulls.
In case you missed it earlier in the year in Spain, Wall Street is putting on an impressive show of its own. In a rally that caught the 'experts' with their pants down, all of the indexes exploded higher once again. It was not such a surprise to those that take their cues from the market, as the indexes were showing us the right action all along. We had been watching and waiting for what was coming, and Wednesday and today, it delivered.
The market was indicating a lower open, but then it defied the futures and raced out of the blocks. Profit takers tried to take it down after lunch, but it rallied hard in the last hour to close at the highs. The rally was well on its way when a rumor that Bin Laden had been apprehended sent it shooting even higher. We sent out a Market Alert on that rumor. Then Pentagon denied the rumor and the market sold back. Another alert went out with the levels to watch for to hold for the next entry point. It worked as the denial was just enough to give us another entry point for the day before it took off again. Even though the rumor was denied, investors had already started the run, and they were not going to be put off.
Dow and Nasdaq clear prior lows on huge volume surge.
Much was made about whether the indexes were going to close above the September 10 levels. The first big level, however, were the March and April lows. Those had to be taken out. The Dow and the Nasdaq did just that today, an important step in the recovery. Much like the move over the intraday lows, however (remember the Dow and 9106), the indexes have yet to totally vanquish those levels. Moreover, the S&P failed to take out its prior closing low at 1103. So, while September 10 has psychological importance, there is very real resistance the indexes are dealing with right now.
The good news is that the buying volume has been huge. After the consolidation, it moved back above average Wednesday, and it exploded today with the Nasdaq logging over 2.4 billion shares and the NYSE over 1.6 billion. Huge volume surges on buying, close to the highest levels since the reversal started.
The surge over the prior closing lows accomplishes other things than just clearing resistance. When an index closes above an important resistance level, short sellers start seriously closing positions. There has been short covering on the move higher, but a close over resistance on strong volume as we know from the seminars means a change in character. Disciplined traders start closing positions. That has a snowball effect on rallies. The rally starts, shorts start to cover, more buying ensues, and then the shorts cover more. Today there was both institutional buying and short covering going on.
Dollar surges against all currencies.
Remember how we said a couple of months ago that things were improving and all of the sudden there would be some change in sentiment, some trigger that would set things off to the upside? The news was getting as bad as it had been in years, but the reports were showing signs of recovery. Sentiment and fear rise to higher levels even as the recovery is underway. The economy was getting a thumbs down from almost ever quarter, and the dollar was getting pummeled as well. Indicative of the extreme sentiment, the yen was rising versus the dollar even though the Japanese economy is in horrid, horrid shape.
Now what do we have? A terror attack has galvanized U.S. resolve to right wrongs and do what is necessary to fix the economy. Monetary stimulus and fiscal stimulus are giving and going to give an even greater one-two punch. Indeed, tonight Treasury Secretary O'Neill said he had hopes the stimulus bill would be ready for signature NEXT Friday. The U.S. and the world coalition are going to do well in their efforts against terror and the world will be a safer, more prosperous place. All of the sudden it dawned on everyone that the U.S. was going to continue to be the world leader and that the recovery would start here. Stocks are surging, and the dollar is surging as well. We were running in a thousand different directions, trying to do things we should leave up to individuals. Now the government is focused on its task: protecting and establishing an environment where citizens can prosper.
Make no mistake, there are those in Congress who are trying to insert in the stimulus package frivolous ideas that were drummed out of the first tax cut. There is a lot of special interest peddling going on right now. Let's remind our leaders what the goal is: get us out of this economic slump. History tells us how to do that via accelerated depreciation, tax cuts, and tax credits. What makes the U.S. mighty? Unleashing all of the ingenuity and hard-nose work ethic that is here. The right stimulus does that.
September retail sales surprise on the upside.
It was not an across the board win for retailers. Once again discounters such as Wal-Mart, Dollar General, and Family Dollar were the winners with year over year sales up 6.7%, 9%, and 6.7% respectively. Those are very, very salty numbers. Apparel retailers did not fare that well. It seems Americans were focusing on the staples in September, but they were still buying. This is reflected in the FDC numbers reported earlier this week when it said that sales transactions were up again. Airline capacity is coming back as well with planes hitting 60% occupancy. Getting there. Watching late night 'news' shows you would think the country is in utter turmoil. Poppycock. The economy has not gone into hibernation, and it is not going to go into hibernation.
THE MARKET
Powerful, powerful follow through session. The indexes keep piling on follow through sessions, a sign of conviction. The Dow and Nasdaq closed above their March and April closing lows. Those were important moves as they further set a chain of events in motion as discussed above.
Lot's of talk about testing the prior lows. You cannot swing a dead cat without hitting an analyst saying the indexes have to test the lows. For the record, there is NO commandment, rule, executive order, trader maxim, investing principle, or fable that says markets must always re-test the prior lows. We had a very cataclysmic event that sent sentiment levels to all-time highs. The market sold off on massive volume and then reversed on massive volume. Historic interest rate cuts and liquidity. Two stimulus packages in the same year. The market is showing classic, historical signs that it has turned.
Yes we could see a re-test, especially if there is some bad war news. On the other hand, the news could be good. What if (more like, when) Bin Laden is apprehended or otherwise? Big upside stimulus; a rocket up the market's backside. A test at that point? Not the kind the pundits are forecasting.
In short, what is the market saying to us? Major buying is going on in anticipation of the future. Do we sit and squirm wondering if it is going to re-test? If it starts to sell on higher volume, we take profits and watch for the next opportunity, upside OR downside. We do not do what many bears did for the 3 to 5 years prior to March 2000, i.e., try to fight the trend or sit out the run just because things were going to eventually sell off. That is like never buying a computer because you are waiting for that one that will be the best. One, there will never be a 'best'; every computer is outdated in a few months. Two, you will be stuck in the stone ages without a computer while the rest of the world 'foolishly' increases its productivity and profits using less than 'perfect' computers. So act when the market says act, whether it is saying 'buy' or 'sell.'
End Part 1 of 2
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world stock market
us stock market
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