us stock market, stock watch

Begin Part 2 of 3

Dow/NYSE

The short handle to the 8-week cup was telling everyone to get ready, and Friday it received the catalyst for a continued move higher. Nice breakout on solid volume and internals.

Stats: +262.73 (+2.6%) to close at 10,368.86.
NYSE Volume: 1.457 billion (+4.7%). Price/volume action remains very good after a churning session on Wednesday. Volume was not the strongest we have seen this year, but it was up smartly on a breakout.

Up volume: 1.084 billion
Down volume: 327 million. First billion-plus up volume session since January.

A/D and Hi/Lo: NYSE advancing issues jumped to 2.4 to 1. They had held the edge even as the index moved laterally the prior three sessions, a portent to the move that was to come.

New highs: 192 (+18)
New lows: 27 (+10)

The Chart: http://www.investmenthouse.com/cd/$indu.html

A very pretty 8-week cup with handle breakout Friday on rising, above average volume. The action continues the outperformance the Dow has shown since late January when it took over from the Nasdaq when investors turned to old economy sectors that should do well in a less than robust economic recovery. Friday they were at it again even as some money was diverted to the Nasdaq as it always is when there is a big rally.

The move pushed the Dow over the January high at 10,300 and into the middle of the summer 2001 trading range before it broke down in the September meltdown. That range runs up to 10,600, but it does not get any easier as there is more at 11,000. We expect the Dow to run up toward that 10,600 level on this move before it then has to take a breather. In this post-boom market, there are no extended runs without heading back lower to fill in the base a bit.

S&P 500:

The Dow needed help, and the S&P delivered. These are the 500 largest cap stocks in market, and they were struggling in January before finding bottom in February and forming that double bottom with handle pattern. Thus, as the big techs burned lower, the other large cap stocks were able to form a good base, fighting off the effects of the techs. That shows how much better these stocks were performing than the techs. Then Friday they got some tech help and there was a great breakout of that double bottom pattern. The move popped it over resistance at 1125 and the simple 50 day MVA (1126.53). After a nice breakout on continued good price/volume action the next point of resistance is 1150, a point of prior lows and highs as well as the 200 day MVA (1152.86). As with the Dow, we do not expect it to clear much farther beyond that level on this move before it has to consolidate the move.

Stats: +25.05 (+2.3%) to close at 1131.78.
Volume: NYSE volume jumped again on the breakout, what the index needed to show to clear up any doubts about the price/volume action from earlier last week (1.457 billion; +4.7%).

The Chart: http://www.investmenthouse.com/cd/$spx.html

THIS WEEK

A powerful move to end the week with breakouts on the Dow and S&P 500. It is too bad the Nasdaq could not make it three with a surge in volume. That leaves open the question as to what the big techs will do; attempt a further rally and follow through or just fade. In any event it appears that whether the Nasdaq follows or languishes, certain economically sensitive areas will continue to reap the benefit of the improving economic picture. Friday's vastly improved news in the manufacturing sector bodes well for the non-tech sectors as the country gets back to business though it may not be a powerful move.

As for the indexes, after such a powerful move we may see a continued move on Monday, but in this market the MO is to rally sharply and then take some profits. The breakouts in the Dow and S&P give us more confidence any pullback will hold, but this can give us better exit points on some put plays we want to get out of and also allow us to get in on some moves we may have missed on breakouts. The Nasdaq rallied, but it has not followed through or shown real buying power from the big money. Also there is potentially some trouble from ORCL's news; is NVLS' losing a penny less than expected that wonderful of news when ORCL is not going to make its previous forecast?

As for the non-large cap tech stocks, the new uptrend remains in place and is bolstered by the moves in the Dow, the S&P and the broad NYSE advance/decline line. We will therefore continue to look to those plays to the upside. AS for Nasdaq big names, there may be a few upside plays to take advantage of such as KLAC and the like that are actually in good patterns and moving higher. Downside positions are in limbo now after Friday's big price surge, and we will not look to initiate many more of those until the tech index gives us a better picture of whether Friday was something for real or just another pretty day.

Support and Resistance

Nasdaq: Closed at 1802.74.
Resistance: 1800 is slight resistance. The 50 day MVA is next at 1857.23, but the bottom of the November consolidation range at 1875 has proved to be support and resistance in the past. A break over that point is the turning point. The 200 day and simple 50 day MVA are next (1911.06 and 1903.62, respectively). That is just under the top of the November consolidation at 1934 to 1941.
Support: 1775 is some support and then the November gap up point at 1745. 1700 has held loosely. After that, there is not much until 1626, the early October gap up point and the April 2000 intraday low at 1619.58.

S&P 500: Closed at 1131.78.
Resistance: 1150 (former support and resistance) and the 200 day MVA (1152.86) are next and are important resistance. The next level is 1175 marking the December and January tops. That point also marks roughly the lows of summer consolidation.
Support: 1125 is the hump in the double bottom, and the simple 50 day MVA is also there at 1126.53. 1100 can act as support and did so last week. Then 1075 to 1080 continues to hold tough, right at the March 2001 intraday low. There is a jumble of prices in a range from 1075 to 1050. 1050 was tested twice in October, holding both times.

Dow: Closed at 10,368.86.
Resistance: Cleared the January high at 10,300 on the breakout. 10,400 to 10,600 makes up the rest of the June, July, and August 2001 trading range.
Support: The January high at 10,300. Then the 200 day MVA (10,033.77) and 10,000. After that is 9730, the first January low and has provided some support. There is some support at 9691, the bottom of the November, December and January range.

Weekly Economic Calendar (All times Eastern). The figures are the consensus expectations, not ours.

3-5-02
ISM Services, February (10:00): 51.0 versus 49.6 prior.

3-6-02
Factory Orders, January (10:00): 1.4% versus 1.2% prior.
Fed Beige Book (2:00)

3-7-02
Initial Claims, 3/2 (8:30): 380K versus 378K prior.
Productivity-Rev., Q4 (8:30): 380K versus 378K prior.
Consumer Credit, January (3:00): $3.2B versus -$5.1B prior.

3-8-02
Nonfarm Payrolls, February (8:30): Unch. versus -89K prior.
Unemployment Rate, February (8:30): 5.8% versus 5.6% prior.
Average Workweek, February (8:30): 34.1 versus 34.0 prior.
Hourly Earnings, February (8:30): 0.3% versus 0.0% prior.

TEAM TRADES

CNMD: In a cup from September to December when it tried to make a breakout but failed. It then formed an ascending wedge on top of that base; we really like this type of base on base pattern as it can give really strong moves. It was ready to make the breakout and Friday it did. We were watching it all session move up toward the breakout of the wedge at 21.55. At 12:30 CT is started to make a move after slowly building all session. It started jumping on higher volume and hit the buy point at a quarter to 12. We put in a limit order at 21.55 but got jumped over. The ask went to 21.60 and was moving higher. We modified the order a few minutes later to the current ask at 21.62 and that was good enough to do the trick. The stock ran up over 22 over the next 10 minutes, but then moved laterally the rest of the session, finding some resistance at 22.

CUB: A pre-split play on the Stock Split Report that is just coming off of the 18 day MVA after a nice low volume pullback. This is just where we like to catch them on these pre-split moves: right off of some support. We could have moved in earlier as soon as it started to make the move, and we often do that, but this stock can move an easy $5 to $10 on a move so we were not in a hurry; plus it had just recently announced and was not just days before the actual split when the momentum can just take over. So, we were looking for the move to show us some legs. Well, the stock was dormant until about 12:00 CT when it started a steady climb as volume moved in big time. It made one run to 55.60 (buy point at 56.10), backed off, and then rallied right up through the buy point as volume continued to expand. When it was close to the buy point volume was running over 100% of average. It is more thinly traded, but we have had good luck on these pre-splits. It hit the buy point; the spread was 15 cents to 20 cents. It then narrowed down to 10 cents and the ask dropped to 56.07. We had put a limit order in at 56.10, and it was not filled at the time the ask was 56.07. Strange, but the fill came a few minutes later at 56.10. Not a big deal, but not what it should have been. Anyway, the stock hung around at 56.10 for 20 minutes or so and then finally ran up toward the close to hit 56.70 on strong volume. Not a bad start; now if it will give us that $10 run.

THE PLAYS:

Good Movers: KLAC soared up from the 18 day MVA as the chips rallied, and the move was solid as the stock cleared the February highs. CEY continued its solid breakout from the flat base.

Targets hit Friday: PHM (53)
Trailing Stop Advisories: VRTS (37.50, put)
Stop Advisories: AMD (15), UTSI (23), BRCM (35), SOX (535), FEIC (30)

The following stocks were removed from the report. Where noted, several are on a watchlist for this week; the others are dropped:

On a watchlist:

ATVI ($29.82; +1.26): Broke out of the ascending wedge and after a one-day pullback on low volume found support at 28 for a low-volume bounce. Has almost reached the 5% limit for buying on breakouts (29.97). Holding current positions.

AZR ($22.77; -0.18): Strong breakout from the ascending wedge pattern, and now looks ready to test. Will protect option plays and take profits on this 15% move in the stock if it starts down. On stock plays will watch for a pullback to the 21.40 range.

ROK ($19.76; +0.01): Still testing the breakout from its ascending wedge/pennant and holding up well (above the buy point (19.44). We are looking for a new breakout over 20.05.

CBSH ($41.68; -0.06): Tried Wednesday to make its breakout move in the test (of the ascending wedge breakout) but volume slipped away. It continues to hold support at the 18 day MVA, so looking for the breakout over 42.10 (breakout high) on strong volume. Holding positions taken at 41.15 for now.

CMX ($17.46; +0.01): The handle is volatile in the 7.5-month cup with handle base. On strong volume the last 2 days the stock couldn't pull off a breakout, instead selling back to the support, but to its credit it held there. Buy point on a breakout is 18.10.

UTX ($74.20; +1.25): Reached over our limit for buying on a breakout (73.66) and tried to head up Friday on decreasing volume (broke out of a 3-week ascending wedge). It can pull back to the 71.40 range (10 day MVA, or perhaps not even that far), but will look for another move up after this test.

URS ($31.20; -0.10): Testing the ascending wedge breakout with a couple of tight, lateral dojis and falling volume. New buy point on a move over the breakout high of 31.71 on above average volume. URS can pull back to test the buy point at 30.20.

ABC ($68.00; +0.30): Had a nice run on the ascending wedge breakout and now looks ready for a pullback, perhaps to the 10 day MVA at the 66 range (just above the buy point).

SYK ($60.60; -1.00): Hit the buy point at 62.11 but has pulled back on lower volume to the 18 day MVA. Below the buy point now, and if ti breaks below the 18 day MVA (60.10), it is time to get out.

AMFH ($27.05; +0.32): Still like AMFH for a breakout from the cup with handle. Volume surged Friday on no specific news, so look for a move over resistance (buy point is 27.20, hit on the intraday high Friday). Holding positions.

ENZN ($42.78; -1.12): Dropped. Made the aggressive bounce as expected, tapping the 18 day MVA on the high Wednesday, then collapsed. Never made the 50 level we were looking for. Closed positions on the move back down Thursday.

Puts:

Watching:

CACI ($34.08; +0.13): Still below resistance in the head and shoulders pattern. Holding positions taken at 33.99. Target is 30.

MANU ($14.57; +1.61): Hit the buy point of 15.65 and fell to a new closing low for February, from which it bounced back up Friday. Volume was low, so holding positions for now. Target is 12.

VRTS ($39.20; +3.71): Held the 35 range after Wednesday's drop and bounced back up in Friday's rally. Volume was lower, however; so will hold positions taken at 37 as long as the stock cannot move over the 50 day MVA (39.48).

IDTI ($28.90; +3.33): Hit the buy point at 26.90 on Thursday, then bounced back up to close just above the 50 day MVA (28.80). Volume was lower, but the stock may hold the support. It has the 200 day MVA at 30.27 to handle, however; if it gets over that time to close any existing positions.

PNRA ($53.81; +2.17): Moved up on lower volume Friday but stopped short at the 50 day MVA in the more or less lateral move below the resistance. Buy point is below 51 for the put play.

ADVS ($51.38; +2.87): Did not hit the buy point for the put play (44.30) and moved over the 50 day MVA Friday. Still below the 200 day and down trendline, so may be a play this next week.

BOBJ ($40.80; +2.68): Dropped. Got stopped out on a move over the 50 day MVA, and was strong Friday as it blasted up near the February high.

EXBD ($32.85; +1.34): Dropped for now. Back over the 50 day MVA Friday, moving above the right shoulder in the head and shoulders pattern. Did not hit the buy point at 30.

End Part 2 of 3

us stock market
stock watch