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Boing!

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Stocks continue to ring in the New Year with a nice bullish trading session. Semiconductor stocks as represented by the Semiconductor Index (SOX.X) lead the charge with a 5.98% gain as they break back above their 200-day moving average.

Semiconductor Index Chart - Daily Interval

I'm impressed with today's move back through the 200-day moving average by the Semiconductor Index (SOX.X) and we could now see a test of downward trend near the $600 level. The recent holding of retracement near the $515 level can now be used as a good support level for this index. I'm still more of a trader than a rampaging bull in the group, but longer-term, I do like the action and MARKET response to some positive comments on the sector bellwether Intel (NASDAQ:INTC).

TranSwitch Chart - Daily Interval

One of our "tax-loss bounce" candidates in TranSwitch (NASDAQ:TXCC) is adding to yesterday's impressive 11% bounce with a 10% gain today. Things couldn't have worked out much better for our scenario here. Some of the "key elements" look to have been the position of MACD rounding out just above the zero level and now crossing over. The stock also made a sharp move higher on BIG volume in early December, that was then followed by a decline right back near its 50-day moving average. My original target for the bounce was $6-$6.50 and that may be achievable if the SOX.X can trade the $600 level and downward trend there. For me, it is tough to give back a 20% gain in two days without getting some type of reward for our efforts. I think a good strategy would be for a trader to lock in some early gains here, get the New Year off to a good start and perhaps look for some other stocks with similar technicals and try to duplicate success.

Newport Corporation Chart - Daily Interval

When I first began outlining the tax-loss bounce strategy, I thought it best to dip your toe in the water with one trade, then when success was found, then add another. In last night's market wrap on premierinvestor.net and then this morning in the "market monitor" on OptionInvestor.com I profiled shares of Newport Corporation (NASDAQ:NEWP) as a good candidate for today.

Actually, what I did was go back and read Mr. Utley's market commentary from Monday (I was out of town and Eric did a great job filling in) and went through the list of candidates. Newport traded just fractionally higher on Wednesday, but the table looked to be set for a move higher on a break above the $20.28 level. I'd also point out that today's trade at $21 was a quadruple-top buy signal on the point and figure charts. There were some very good similarities between the technicals found here in Newport to those found in TranSwitch. The point and figure chart of Newport was what also had a bull interested this morning.

Jeff Bailey
Senior Market Technician
Option Investor

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