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us stock market, trend trading stock
Begin Part 2 of 2
TOMORROW
Futures were improving a bit after hours on some of the earnings news, indicating there may be an attempt at some upside action early. The indexes have sold hard and are at points where they are ready to bounce on some good news. We don't believe the news at this point is enough to support any strong upside move. There has not been the change in perspective just yet to support a lasting upside move. We will look to take some downside positions on any bounce that fails at resistance, and use that as well to clear out upside positions we still have. One thing to watch for is the quick pop and sell down that later gives way to a rally attempt after over a week of downside action. That may or may not happen, and you can get wound up trying to play every micro move. For now it appears the overall trend is down though we will continue to have good upside plays that can bring us great returns as well. Play the moves that you are comfortable with and be ready to take your gains when the targets are hit.
Support and Resistance
Nasdaq: Closed at 1882.53.
Resistance: The 200 and 50 day MVA (1933.31 and 1941.44, respectively). The March 2000 down trendline at 1943. Then 2000. After that, the December intraday high at 2065.69, followed by the January intraday high at 2098.88.
Support: The top of the November consolidation collapsed, and there is support at 1875, the bottom of that consolidation range. After that point, 1800 at best. As noted 1750 would be a 50% retracement. Support at that level looks to be anywhere from 1700 to 1750.
S&P 500: Closed at 1119.31.
Resistance: The March 2000 down trendline at 1123 may try to hold it back, but there is more resistance at the 50 day MVA (1138.27) and 1150. After that the 200 day MVA looms at 1166.42. The December high (1173.62) and January high (1176.55) all line up as strong resistance.
Support: 1125 is being broken right now, but volume has been declining; it may try to hold or at least test it again. After that is 1100, the tops of the November consolidation range. That is followed by a range of support from 1075 to 1050, the 1050 level holding twice in October. That is right at the 50% retracement.
Dow: Closed at 9713.80.
Resistance: Still the 50 day MVA (9885.88) has checked upward movement thus far. Then 9992 to 10,000. After that the 200 day MVA (10,104.10).
Support: Sliding below 9750, though still in that 9690 to 9750 congestion range. From here it gets dicey all the way down to 9500, a level of good support. After 9500 there is a very congested trading range from 9125 to 9500. A 50% retracement is 9181.
Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.
1-22-02
Leading Indicators, December (10:00): +1.2% actual versus 0.7% expected and +0.8% prior (revsed from 0.5%).
Treasury Budget, December (14:00): $26.6B actual versus $24.0B expected and $32.7B prior.
1-24-02
Initial Claims, 1/19 (8:30): 400K versus 384K prior.
1-25-02
Existing Home Sales, December (10:00): 5.16M versus 5.21M prior.
SUBSCRIBER QUESTSIONS
See 'Playing a down market' above.
TEAM TRADES
We were again looking upside and downside today. KSWS had a great pattern and gave us the upside move.
KSWS: Retailers have had a stellar run. Some are flagging, but others have set up good patterns and are ready to make a run as well. The shoe makers were looking good, and KSWS gave us a breakout today from its cup with handle set up over the past 5 months. The stock showed a good move up in the handle Friday, presaging today's breakout. The stock started well, but ran into 35.60, a point it could not break for three hours. Then at 10:30 CT it launched higher, taking out our buy point at 36.02 on a huge volume surge. We love that: pressure building at a constant high, then it blows higher on a huge volume surge. We were ready, and after the alert, set a limit order a bit ahead of the ask (then at 36.25). The trade was done inside that level at 36.20, and the stock continued a steady rise, bouncing up off the 15 minute MVA all session and closing near 37.40. Wish all trades today worked this well.
THE PLAYS:
Good movers: RMG jumped on the breakout for a gain of almost a point, but showing a doji. This indicates it could fill the gap before continuing higher. Want to see a hold in the buy point range (27.63). ISIL (put) dropped over three points on stronger volume for the put play. That is what we like to see.
Previously covered and looking good: GSLI is still holding above the 18 day MVA, which is support for the handle of its 7.5-month cup base.
Notes on some stocks that are selling back:
AUDC (removed this weekend): At the 50 day MVA on stronger volume (still below average but up sharply). Lost the pullback pattern but may bounce back (bounced from the 50 day MVA the last time it tested the level early December, but that was a low-volume pullback).
Continued plays:
IONA: Earnings out before the open Wednesday and is holding up very well ahead of the numbers. We could see a nice bounce from this internet (remember AMZN).
DSTM: Hit our aggressive buy point (7.55) on the 18 day MVA bounce play. Volume was sharply lower, still above average. Could not hold the move to its intraday high of 8.10, which was a move over the earlier January highs. Showed a doji, so look for a hold at the 10 day MVA (7.15).
FORG: Forging lower on stronger volume (just below average) and selling down to the 50 day MVA, from which it bounced slightly. Could just be a test after four moves up the 18 day MVA. We will see; not exactly what we were looking for.
NCR: Tank. Back down to the 50 day MVA on strong selling. The handle fell apart.
Weekend Puts:
MCK: Exploded higher, a trend reversal gap, one of the strongest signs of reversal there is. The move was on the back of great profits. That is why we let the move start before we enter: see the move and then get in; that way you have less chance of getting in trouble.
ANAD: Moved down from the 10 day MVA on lower volume. Looking for a head and shoulders breakdown; holding at 12, recent support, for now. Buy point for the move lower from here is 10.60.
ISIL: Good move down (over three points) on rising volume, taking out the January low. Target is 22.
NBIX: Target is the 200 day MVA at 37.50; the stock tapped 41 on the low with volume decreasing. It opened below Friday's closing price and moved down from there and was unable to bounce back up that high on the lower volume. Still weak.
Index Puts: Looking for a possible bounce tomorrow but then selling.
OEX (Standard & Poors 100--$570.63; -4.61; optionable):
STATUS: After making the aggressive buy point on Friday (582 on a move down from the 50 day MVA, the kiss good-bye), the index hit our lower buy point at 570 Tuesday. The low was 569.68 and the index bounced back to close, but has taken out the January support at the 575 range. We are holding existing positions, but new entry points (or for add-to's) for the move down to our new target at 545 can open up on a move through the December low at 568.12. We are looking for about a 50% retracement of gains made since the September lows (as indexes roll over) but look for the action to comprise first bounces from and then breaks of support as the index trends lower until it cycles down to the 550-545 range target. May get a bounce from the December low (568-570) before the index moves below that support. We will also look for entry points if the 50 day MVA holds on a bounce higher. Volume Tuesday was 1.3 million (avg. 1.26 million).
BUY POINT: 568 on rising volume.
POSITION: February $570 puts to buy (OEB NN).
DJX (1/100 Dj Indu--$97.14; -0.58; optionable):
STATUS: Looking for a breakdown for this index as well, for a move down to a new target at the 92.50 range for a hefty retracement of the gains since the September lows (near 82.50). The index is holding above the previous January low at 97.11 but tapped below that (96.97) on Tuesday's low. Volume has slid back since the index broke through the 50 day MVA over a week ago, but is still high relatively. Still, if volume continues to fall, after the recent selling in the markets the DJX may try to bounce back up to the 50 day MVA (from here) before breaking the support. That is the kind of action we expect to see as the index trends lower. Holding current positions, but looking to add to positions and for new entry points on a move below 97 at the December lows. As with the OEX, we are also looking for a failed bounce up to the 50 day MVA. Volume 1.3 million (avg. 1.2 million).
BUY POINT: 97 on preferably rising volume for the move down.
POSITION: March $98 puts to buy (DJV OT).
Continued Plays: The smallest were the best-looking for upside today. MOGN and EGOV still look very good; please see the weekend report for buy points.
IOM (Iomega--$8.97; +0.35; no options): Computer Hardware
http://biz.yahoo.com/i/iom.html
STATUS: Moved up toward its buy point at 9.01, actually making that and moving to a high of 9.20 on strong and rising volume of 461,200 (avg. 206,400), but closing back below the ascending wedge pattern's high. We like the move, though, so are looking for the breakout. Good money flow. Short term target at the 200 day MVA (10). A 20% move, our normal target on breakouts, is at 11. Once the stock hits our target(s) we will look at pocketing the gains, since in this market we are not seeing a preponderance of breakouts succeed in the normal manner; that is, some stocks on tests of breakouts are pulling back below the buy point, or even lower.
BUY POINT: Holding positions taken at 9.01. For new entry points: Aggressive: 9.01 rising volume. Stop: 8.38 (7%). A buy on the breakout up to 9.50.
POSITION: Stock.
http://www.investmenthouse.com/ct/iom.html
New Upside:
WCS (Wallace Computer--$19.86; +0.06; optionable): Office Supplies
http://biz.yahoo.com/w/ww.html
STATUS: Has formed an ascending wedge after breaking out of a cup with handle pattern in December, the whole of both patterns being part of a larger 11-month base. The previous basing highs are right at the resistance in the wedge (at 20), which is functioning as a test of the breakout from the cup with handle. This is a bullish combination of patterns that we have not seen a lot in the recent market. However, the wedge is holding up nicely at the 18 day MVA (19.44) and while volume has not stayed below average consistently, it is lower than that of the recent breakout (lower Tuesday to 127,800; avg. 95,000). Strong money flow and high relative strength. Target: 24. That is a 20% target, reasonable for smaller issues that can run up more quickly. Once the stock hits that, we will be looking at taking money off the table instead of riding out a pullback in this market.
BUY POINT: Breakout: 20.12 on volume of 143,000 or higher. Stop: 18.71 (7%)
POSITION: Stock and/or March $17.50 calls to buy (WCS CW).
http://www.investmenthouse.com/ct/wcs.html
STK (Storage Technology--$21.69; +0.13; optionable): Hardware
http://biz.yahoo.com/s/stk.html
STATUS: In an ascending wedge and posting the lows just above the 50 day MVA (holding support actually at the 50 day MVA, simple, at 21.29). Volume falling off nicely over the last several days; the stock pulled back rather abruptly Friday but held the support and moved into a tight doji Tuesday on slightly lower volume, and that is good action. The doji signals a possible move up; resistance in the pattern is at 23.50, over which we will look for a breakout. Earnings were out after the bell and profits were up 30%. Strong money flow and high relative strength. Volume was 572,400 (avg. 792,181). Target: 28
BUY POINT: Aggressive: 22 (over the 18 day MVA at 21.91) on average or higher volume. Stop: 20.46 (7%). Breakout: 23.60 on volume of 1.1 million or higher. Stop: 21.95 (7%)
POSITION: Stock and/or March $20 calls to buy (STK CD).
http://www.investmenthouse.com/ct/stk.html
New Put:
AA (Alcoa--$33.95; +0.25; optionable): Mining
http://biz.yahoo.com/a/aa.html
STATUS: AA has been selling back for 2 weeks (broke the 50 day MVA 8 days ago) and now is having trouble moving back over the December lows at the 34 level. This is despite rising volume over the last three days; the stock has tried to move higher but the resistance is holding it back. That shows weakness, and with the close under the support today on the highest volume in a week (up to 4.3 million; avg 3.17 million), we are looking for a drop once the stock lets go, to 28 near the September lows. There is a chance AA could move up to test the 10 day or 18 day MVAs (at 34.69 or 35.24) in a market bounce, but will look for the fall on a failure to break resistance.
BUY POINT: 33 on continued strong volume.
POSITION: March $37.50 puts to buy (AA OU).
http://www.investmenthouse.com/ct/aa.html
For a review of frequently asked questions, please use the link below:
http://www.investmenthouse.com/1questions.htm
Investment House subscribers are offered a special from eSignal for those interested in a realtime service. Contact:
Ray Fitzgerald
Account Executive
800-322-0940
Office hours 6:30-3:30 PST
rfitzgerald@esignal.com
Good Investing!
Jon L. Johnson and the Technical Traders Team
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.
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us stock market
trend trading stock
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