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Testing 1-2-3

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Stocks are continuing their slide today. On the surface the declines don't look that bad, but its enough for some indices and stocks to be testing last weeks lows.

Nasdaq-100 Tracking Stock Daily Chart

The brief rally that the Nasdaq-100 tracking stock (QQQ) mounted earlier this week failed to retrace 38% of last week's losses. Now that the triple Qs have reversed course and the stochastic has rolled back over, they are within 48 cents of testing last weeks low. Theory has it that the lows must be tested to properly form a bottom, but will the Qs be able to hold?

PeopleSoft Daily Chart

If the Nasdaq-100 has to rely on PeopleSoft (PSFT) the prospects for support holding doesn't look good. After a slight bounce on Monday, PeopleSoft has dropped over $3.80. Today's 10.62% drop puts the stock below support at $17.50. The next support level looks like $13.25, May 2000 lows.

Qualcomm Daily Chart

Qualcomm (QCOM), which makes up 5.4% of the Nasdaq-100, is still managing to hold above support at $42.51. Its $1.34 drop isn't helping the Nasdaq-100 today, and a stochastic oscillator that is rolling over suggests that QCOM could be heading down to test support at $42.51.

Chiron and IDEC Pharmaceuticals Daily Chart

So if PeopleSoft, Qualcomm, and a host of others are dragging the Nasdaq-100 lower, what's holding it up? Biotechs. Chiron (CHIR) is up $1.71, and has climbed above its first point of resistance at $44, a 38.2% retracement and the 9/20 high. The 50-dma and 50% retracement could limit further upside, and resistance at $46 is waiting in the wings if that fails. With only $2 of potential upside, Chiron doesn't look that attractive right here.

IDEC Pharmaceuticals (IDPH) has a little more upside, but will still have to fight through resistance to get there. The stock is up $2.75 cents today, but until it breaks through resistance at $49.50 is still forming a base. If IDPH can climb above that level, it might be able to move $3 higher to test the 50-dma, with some mild resistance at $51.40. $55.50 would be a very optimistic target.

Jeff "Homer" Canavan
Assistant Analyst

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