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Tech turns south, while HMO's trade our target

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An earlier bid for tech stocks looks to have been overcome from selling as the Biotechnology Index (BTK.X) now trades in positive territory. Earlier this morning the NASDAQ-100 Trust (AMEX:QQQ) $33.36 -0.68% rallied to a morning high of $34.25, before selling stepped in and now we're seeing a bearish violation of yesterday's lows.

Leading technology declines is the GSTI Software Index (GSO.X) 140.50 -2.6%. This morning in the market monitor on OptionInvestor.com, we were monitoring shares of software maker SAP Aktiengesell (NYSE:SAP) $33.56 +0.84% at the $34.17 with the thought this stock could undergo selling after recent earnings warnings from competitors PeopleSoft (NASDAQ:PSFT) $21.28 -8.35% and Kronos (NASDAQ:KRON) $35.50 -1.47%.

Bucking the trend of broader technology weakness this morning is the Gold/Silver Index (XAU.X) 68.46 +2.63%, Cyclical Index (CYC.X) 479 +1.25% and the Health Providers Index (RXH.X).

I'm monitoring the HMO Index (HMO.X) 534 +0.66% closely here and advising bulls in this group to raise stops under their gains. This group has been on a torrid run for several weeks and today's action has this sector breaking above our regression channel, similar to two other times. The simple raising of stops should keep bulls long, but if stops are triggered, then we believe we're taking some gains near the top of a channel and reloading and getting ready for bullish trades back near the bottom of the channel.

HMO Index Chart - Daily Interval

It's very tough for a trader/investor to sell a stock that is going higher. One way to let a stock continue to try and run is to simply raise a trailing stop under it. Another account management or trade management technique is to sell part of the position on strength and hold the other portion of the position should the stock be under such severe accumulation that it continues to run. With many HMO stocks at or near 52-week highs, there is very little supply available to the market thus the nice gains investors are seeing. At some point, the gains will become too great and we will see a pullback. That pullback along with the recent success will have bulls showing some support on the pullbacks.

Jeff Bailey
Senior Market Technician
Option Investor

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