|
|
us stock market, trade stock
* * * *
Tech Traders 12/28/00 Market Summary
* * *
Technical Traders Subscribers: HAPPY HOLIDAYS!!
The plays are popping.
Continuing Plays:
SFNT (Safenet Inc--$49.06; +4.37; no options): The software stock shot up from a Wednesday pullback to the 10 day MVA (45), as it appeared ready to form a handle to its double-bottom pattern. Volume was just higher and still well below average (29,700; avg. 102,000) on today's move, so look for shares surge to support the breakout move. Buy point is 49.01, but volume has to catch up.
BUY POINT: Aggressive: On further upward movement on volume in the range of 153,000 or better.
POSITION: Stock.
http://www.investmenthouse.com/ct/sfnt.html
(Click to view the chart)
ORCL (Oracle Corporation--$31.06; +0.37; optionable (ORY)): Forming the ascending wedge pattern on below average volume (down to 25 million shares Thursday; average is 44 million). The stock moved up the last two days only slightly, waiting for a volume surge. Pattern high is 33.13.
BUY POINT: 33.26, on volume in the range of 59 million.
POSITION: Stock and/or February or March $30 calls to buy (ORY BF or CF).
http://www.investmenthouse.com/ct/orcl.html
(Click to view the chart)
MOND (Robert G. Mondavi--$52.25; +0.87; no options): Breaking out of the pennant on good volume (98,300). Buy point is 52.50, so look for continued rising volume to complete this breakout move. Average volume is 72,000, so Thursday's volume is right in line with what we want to see for a breakout.
BUY POINT: 52.50, on continued strong volume. Remains a buy on the breakout up to 55.13.
POSITION: Stock.
http://www.investmenthouse.com/ct/mond.html
(Click to view the chart)
New Plays to look at:
IVGN (Invitrogen Corporation--$86.13; +5.50; optionable (IUV)): The biotech stock is making a breakout move from a wedging of prices that represents the handle of the stock's cup base. Price surged on slightly higher (and still below average) volume (828,300; avg. 1.2 million). The stock is just cents below the November high of 87.44 (handle high). Look for a volume surge to support this breakout move.
BUY POINT: 87.57, on volume of 1.6 million or better. Remains a buy on the breakout up to 91.95.
POSITION: Stock and/or February $80 calls to buy (IUV BP).
http://www.investmenthouse.com/ct/ivgn.html
(Click to view the chart)
MERQ (Mercury Interactive Corp--$104.94; +4.31; optionable ( RBF): The software stock is running up the right leg of its double-bottom pattern, Thursday breaking higher above the 200 day MVA (100.14) on stronger volume (2.2 million; avg. 3 million). The stock closed right at its down trendline and just below 108.75, the high at the middle peak of the pattern. A breakout can be a strong one, since the stock will have to break the down trendline. Otherwise, MERQ can turn down to form a handle here.
BUY POINT: Breakout: 108.88, on volume of 4.5 million or better. Remains a buy on the breakout up to 114.32.
POSITION: Stock and/or April $100 or $110 calls to buy (RBF DT or DB); April $105 options had insufficient open interests).
http://www.investmenthouse.com/ct/merq.html
(Click to view the chart)
XLNX (Xilinx Inc--$48.56; +0.37; optionable (XLQ)): The semiconductor stock is in a type of wedging pattern at the bottom of its base, and just broke above the down trendline (that connects the October and November highs). Look for a move over 51 on stronger volume; shares remain below average and just lower Thursday at 5.8 million (avg. 9.8 million). Prior basing high is 98.31. Has a ways to go, but looks promising.
BUY POINT: Over 51, on volume in the range of 13 million.
POSITION: Stock and/or March $45 calls to buy (XLQ CI).
http://www.investmenthouse.com/ct/xlnx.html
(Click to view the chart)
THE SUMMARY:
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
TONIGHT:
- Another steady move up on rising volume on the Nasdaq. This does not look like a typical holiday rally.
- The Nasdaq does it without the big names.
- Investors placing bets on the "B Team"? More like the "A" team.
- Small stocks already starting to run before January; as we said, the January effect starts in late December.
- Medical stocks breaking out, and now some tech stocks.
- Economic news not worse than expected, but not great.
- Subscriber Questions
- Team Trades
Another solid, building session.
No flash, no glitz. Just a solid session on excellent volume with key stocks continuing strong moves. Once again the Nasdaq could have sold off, but it refused to do so as real money came into the real leading technology stocks. Even with pessimistic news about DELL and IBM, the Nasdaq came back and finished positive. This is important to the healing and base-building process, and we are very pleased to see it happen. Still a ton of risks out there, but with investors looking at a Fed rate cut, there is money being put to work across the board.
Another broad session.
Again the talk on the tube was about the year gone by and about how the session today was okay but not great. The main reason? The big name blue chip technology stocks were down for the most part; they really did nothing on the day. Indeed, the Nasdaq moved up well given that the major weighting on the index lies in these stocks (INTC, MSFT, ORCL, DELL, CSCO). That means the lesser known, yet better performing, stocks were the leaders once again.
Indeed, the real news was out of the headlines with stocks such as JNPR, AMCC, BRCD, EMLX, NEWP, SEBL, and EXTR made solid gains that lifted the index. On the television the Nasdaq face was talking about how the "B" team stocks were taking the lead today, citing JNPR and AMCC. Hate to break it to these guys, but the old line techs, with a few exceptions (e.g., CSCO, SUNW), have been under-performing as far as revenues and earnings growth is concerned (stock price as well). The network's "B" team has been the "A" team as far as revenue and earnings growth, and that is the way it will stay at least for the near future. Real money is being put into these stocks by institutions ahead of the new year in nice, quiet chunks. JNPR is up 46% in the last 5 sessions; EMLX up 33%; BRCD up 39%; CIEN up 42%.
For more proof, look at the Russell 2000, the index of small cap stocks. That index has been on the move of late, rising 3.1% just today. There is money being put to work in the less-known stocks, i.e., not the brand-names, as we move into January. One cause is the January effect where new money is put to work. That starts the last week of December, and this year is even more apparent given the amount of money that has been sitting on the sidelines the last half of the year. On top of that we have the anticipation of a Fed rate cut in the new year. As we have been saying since last week, the market has wanted to rally, and the move has started.
Stocks breaking out.
We still need to build bases in these stocks. But we continue to see healthcare and related stocks breaking out, and we are seeing technology stocks moving as well. As we noted last night, many semiconductors are forming cup bases and just now appear to be moving up to form the right side of the base. Another common pattern we are seeing form, mostly as a result of the volatile market, is the double bottom. The double bottom can be just as powerful as the cup with handle in launching long runs. AMCC appears to have broken from a double bottom pattern we call a 'flying w.' MERQ is trying to break from the same pattern right now. JNPR and BRCD formed more traditional double bottoms where the right leg undercut the left leg. The breakout of a double bottom occurs when the stock takes out the 'hump,' i.e., the middle of the 'W.' As always, we want to see the move on good volume.
THE ECONOMY
Consumer confidence dropped 5 points to 128.3 from a revised 132.6 in November. That is the lowest reading in 2 years. Not as precipitous as the Michigan sentiment reading, but quite a drop. While most pundits played the number down as it met expectations, those expectations were for a big dip. Just because you expect bad news does not make it good news.
Existing home sales actually rose 4.4% to 5.2 million units versus the 5.1 million units expected. Falling mortgage rates continue to help. That is the conundrum. Interest rates show no inflation at all, and have not forecast inflation all year. Yet the Fed kept raising rates. All the while, mortgage rates peaked and then started to drop. That has kept the economy alive almost by itself.
Jobless claims fell to 333,000 from a revised upward 356,000 for the prior week. The number was expected to come in at 351,000. The four-week average fell to 340,750 from 347,750. This is better news, but it still shows a rapid slowdown in the job market.
THE MARKETS
Another good day for the building in the market. No huge gains, but broad gains on solid volume. Still, the leading stocks, i.e., those with the best revenue and earnings growth, are giving us impressive gains. There is still a long way to go, but it is going about the healing in the right way.
Overall market stats:
VIX: 30.17; -2.14. Volatility fell on today's rise as the market's moves were fairly stable. This would be expected after volatility spiked last week and again started another rally.
Put/Call ratio: 0.60; -0.12. The ratio is falling as the market makes a steady advance. It gave us a big spike on Tuesday, and things have been looking good in the market.
NASDAQ: Did not close on its high (2571.52), but a solid gain on excellent volume. You could say the smaller moves up on rising volume indicate churning (high turnover in shares), but the buying was broad; it just did not include the heaviest weighted stocks in the index. We like the fact that the index is moving up on good volume while leading stocks continue to build positive bases. We still have to watch for the resistance levels on the horizon in the form of down trendlines mainly as they have stopped the recent rally attempts. The market is still weak, but it is improving.
Stats: Up 18.41 points (+0.7%) to close at 2557.76.
Volume: 2.194 billion shares (+9.6%). Back above average again. 1.188 billion shares to the upside versus 889 million to the downside. Not a blowout, but it was not a blowout session.
A/D and Hi/Lo: Advancing issues jumped out to a 1.75 to 1 lead. Better, but needs to get 2 to 1 or better. New highs rose to 166 (+37) while new lows fell to 294 (-90).
The Chart: http://www.investmenthouse.com/ch/nasdaq.html
Not much change from Wednesday. It is holding above the gap down point from last week and has next real resistance at 2750. There could be some resistance at the previous low in November at 2597, but if this rally has any legs, it should overtake that level.
Dow/NYSE: The Dow ran right up to 10,900 on its high at 3:00 ET, but then pulled back in the last hour. Volume was lower. At this point we cannot be certain if that was the resistance or just some late profit taking. Indexes often test resistance and pull back before taking it out. The move pushes it over its down trendline connecting the September and December highs, but it has to take out 10,900 once and for all. That has held the index back ever since September.
Stats: Up 65.60 points (+0.6%) to close at 10,868.76.
Volume: NYSE volume fell to 1.022 billion shares (-3.9%). Still below average volume. Up volume came in at 640 million shares versus 318 million shares to the downside.
A/D and Hi/Lo: NYSE advancing issues maintained their 2.5 to 1 lead. New highs rose to 383 (+65) versus 53 new lows (-33).
The Chart: http://www.investmenthouse.com/ch/djia.html
As noted, the Dow moved over the next down trendline, but it is bumping again into the formidable resistance at 10,900. Again, it has to take that level out for any serious rise in the new year. Still, an index will often test a resistance level and then pullback. If the rally is for real, it will come back and take it out.
S&P 500: The 500 big caps moved up again, but today on lighter volume. The index is still struggling with resistance at 1335, a key level it needs to beat on solid volume. This is a holiday week, and the volume is still impressive, so this move may be stronger than we give it credit for. Nonetheless, it has to take out this level and then the 1360 level before we can really start getting excited.
The Chart: http://www.investmenthouse.com/ch/sp500.html
TOMORROW
The last trading day of the year is always a tough one to take on. We have had a decent move up the past five sessions, and there may be the urge to take some profits before the long weekend. With the market showing us better action, that may provide us an opportunity to take some positions on the stocks that have made a good run to this point and we think are going to continue up next year with continued buying. One way to do this is to start averaging in on positions, not buying all of the position at once. Lets say you want to buy 10 contracts of calls on JNPR, but don't want to jump in after a 46% move. Well, if it starts to pullback, we can let it hit where we think bottom might be (maybe if there is some afternoon selling) and pick up 2 or 3 contracts. If the stock continues down a bit more on Monday, when we feel it has hit bottom again , we can pick up 2 to 3 more contracts. If that is bottom and the stock is starting up, we can pick up a few more. That reduces our basis in the calls, and many times the stock does not even have to reach the point where we first started buying to be profitable in the position. Then if JNPR makes another one of its classic runs, we are sitting pretty.
Don't be surprised to see the market move up in the morning early on and then suffer some selling. We can use that to take some short term positions for the day or do some of that short-term cost averaging discussed above in anticipation of an afternoon rise. Still, there may be some profit taking before the long weekend. We think, however, that buying will start in earnest next week. We will be looking at afternoon selling as a chance once again to take some positions for what may be a solid, gap up at the open on Tuesday. That is what we are looking for at the start of the year. Yes there is still a lot of concern out there, but the buying we have seen the last few days indicates to us that institutions are working on positions in those stocks that are leading in earnings and revenues, the JNPR's of the market. The list is long, but it includes stocks such as AMCC, ARBA, BEAS, BRCD, CIEN, EMC, EXTR, GLW, GMST, JNPR, NEWP, NTAP, PMCS, SCMR, SEBL, VRSN, and VRTS. The first trading day this year the Nasdaq gapped open 116 points higher. It finished the day up just 61.83 points, but the gains were great. This is not the same market as last year, but with all of the leading stocks beaten down there is a lot of incentive for institutions to get into heavier buying. We have seen the signs this past week of accumulation, and we want to be in on the move we think is coming.
Support and Resistance Levels
Nasdaq:
Resistance: 2600 represents some resistance from the late November and early December lows. Then there is 2750. The down trendline is approaching 2750.
Support: 2500 for now. If 2500 does not hold, 2200 down to 2000.
S&P 500:
Resistance: Right at resistance at 1335. Then 1350 to 1360. The down trendline is now at 1360.
Support: 1270 is possible support. 1254.07 is the year low hit last Thursday.
Dow:
Resistance: 10,900 to 11,000.
Support: 10,600, then 10,300. After that, 10,000.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
12-28-00
Existing home sales for November (10:00; delayed due to holiday): 5.10 million versus 4.96 million prior.
Consumer confidence for December (10:00; delayed due to holiday): 128.0 versus 133.5 prior.
Initial jobless claims for prior week (8:30): Not available yet.
Help wanted index for November (10:00): 79 prior. Not available yet.
12-29-00
Chicago PMI for December (10:00): 43.5% versus 41.7% prior.
SUBSCRIBER QUESTIONS
Q: Our discussion of trailing stops earlier in the week brought this response from one of our subscribers about using trailing stops on ECN's.
A: A trailing stop loss is very much something that can be done electronically and have been for over a year now. The ARCA ECN (http://www.tradearca.com/index2.html) supports trailing stops on New York and Nasdaq both (REDI ECN will shortly). ARCA also supports GTC, Day and Day +, Now and BBO, Discretionary, MID, Stop-Market, Stop Limit, Bid and offer orders all on Nasdaq and well as NYSE for up to 90 days for the same order. The orders are stored on ARCA's servers until the triggers hit and then execute. Set the order to your own desired prices and logout of your account if you like and the orders are still in play (most brokers today support ARCA). Options are the same way up to 20 contracts per order on the RAES networks. The orders never go to the brokers' desk or to the exchange floor for trading. The order is matched up electronically. For orders over 20 contracts they are printed to a local printer on the trading floor for the floor trader to work. Since the ISE options exchange has open I can't remember the last time my option order wasn't filled immediately and at the bid or offer price.
TEAM TRADES
EMLX: Sometimes you don't make the trade even when you get the chance to do it. This play did not go to plan, and we could have made a decent trade watching the 5 and 15 minute MVA's, but we will probably get another chance tomorrow.
Opened Thursday at 81.38 and shot up to a high of 85.25 with the Nasdaq at +25; the stock immediately pulled back to the 84 range, reaching 84.69 by 9:00am (CT) as the index pulled back to +14.98. We were looking to enter a position if the stock surged up from here on an index rally, but instead EMLX pulled back to 83. The Nasdaq was showing a doji but was continuing to pull back (+9.05). We decided then to let the stock break back over the 85 level before taking positions. The Nasdaq pushed back up to +18.60, the stock was up to 84.69, tapping 85 by 9:13am.
The alert we set at 85 was triggered, and we were ready to buy the April $82.50 calls (delta was 1), which were trading at 23.75 by 22.75, 220 open interests. The Nasdaq pushing to +25, the stock hit 85.19 at 9:16, but a look at volume showed that it was tapering off from the morning surge. That didn't look good, so we held off until the stock could break over the new high at 86 on better-looking volume.
EMLX didn't do that for the next four hours, instead dropping down to the 82 level by 11:00. The stock then found support and moved up, climbing back toward the high by 2:00. Volume began to pick up again around that time, pushing the stock to a new high of 86.75, but price pulled back right away to 85.69 and then lower, as the Nasdaq headed south again. We decided to hold off on positions to see if the stock would pull back Friday due to the lower overall volume, to a support level. If EMLX did pull back, we could look at getting into some positions on a move back up from 81 or 83.
The stock closed at 85.25. This was one of those days when a decent profit could have been made on the day by jumping on the stock right out of the gates. That isn't our typical way of trading, however, as we like to wait for a pullback on such a quick move up, getting in on a move up after that. We got a pullback with EMLX, but the move up was on even lower volume than Wednesday. Probably should have paid closer attention to the 5 and 15 minute moving averages; when the 5 minute crossed above the 15 minute just before noon, that was a signal the stock was heading higher at least for a bit. Could have taken partial positions at that point, then waited until Friday (or Tuesday). May end up the same in the wash by the end of the day Friday, though.
Good Investing!
Jon Johnson and the Tech Traders Report Staff.
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
|
