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Purely a coincidence

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Lots of reader e-mail this morning hints that I knew Cendant Corp (NYSE:CD) was going to guide earnings higher today, but that's just not the case. However, the charts may have indicated something was taking place on the bullish side and I like today's action as it relates to yesterday's bullish call at 03:00 EST Update and profile of Cendant (CD).

Today, shares of Cendant (CD) are trading higher by 5.4% at $15.65 after the company guided higher on earnings. The company said they believe their 4th quarter earnings should come in near the $0.20 a share level and that fiscal year 2002 earnings will be closer to $1.25. Consensus estimates for CD's 4th quarter were for earnings of $0.18 and FY02 estimates were for $1.18.

Cendant Corporation Chart -

On Monday, it was the plane crash in New York that had us looking at several stocks in the hotel/motel group of q-charts' sector list. Retracement support was at $13.24 as the stock was trading lower. We set our alerts at retracement, but the $13.24 alert was never triggered. Then yesterday, just before the 03:00 update our upside alert was triggered at $14.83. We then looked at the point/figure charts and measured relative strength and liked what we saw technically and outlined some options trades.

With both the point and figure along with the retracement bracket technicals looking bullish, we decided we liked the stock as much as the market apparently did.

Perhaps this is the perfect example of how there are still some very good bullish trades still in the market. Many subscribers that are just looking to get back in the markets need to be selective, but I find stocks that look to be breaking out of bases, where we're seeing some changes in relative strength to the positive side are those stocks that offer some of the better trades.

I think one of the keys for traders right now is don't get tunnel vision and think that technology stocks are the only kinds of stocks that can move quickly. I'd argue that there are many "boring" stocks that offer good trading opportunities, especially when the technicals have pressure building and some good upside to retracement levels or moving averages. Those kinds of technicals like Cendant presented traders with yesterday!

Stocks showing gains

After a weak opening for stocks, we've seen a nice comeback in the major index averages. What I feel is providing the buying is what we're seeing in the bond market again today. Yesterday, bond YIELDS surged higher as Treasuries were sold off rather sharply. Today, we're seeing the same thing and this selling results in cash. It's been my stance for sometime that this type of selling could eventually find its way into stocks.

Yesterday, the 10-year YIELD traded right up to downward trend on its YIELD chart and this morning the 10-year YIELD ($TNX.X) gapped higher (selling in bonds) above this downward trend and now YIELDS 4.586%. Action in the bond market is very similar to that which took place in late March of this year, just prior to the nice summer rally in stocks.

Jeff Bailey
Senior Market Technician
Option Investor

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