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Dow surges 158 points, pulling tech from their lows

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Blue chips in the Dow Industrials lead by Honeywell (NYSE:HON) $39.94 +6.19 are helping technology stocks recover from a whipsaw session that has seen early gains turn into losses and then turn back into gains.

The tech-heavy NASDAQ Composite (COMPX) has battled back to gain 20 points (+1.12%) after briefly undercutting Monday's low 1,734.

Shares of NVIDIA (NASDAQ:NVDA) $38.82 -4.75% were hit by talk that a slowing in Microsoft's (MSFT) Xbox sales could put a damper on growth prospects for NVIDIA's graphics processors and related software serving digital entertainment platforms.

NVIDIA Chart - Daily Interval

After trading to as low as $35.60, shares of NVIDIA look to have found some buyers at our 61.8% retracement level of $36.02. Since violating the 19.1% retracement level, each attempted rally back to a broken retracement level has found eager sellers, most likely from market makers selling inventory or shorting in order to provide liquidity to the eager sellers on a decline. Retracement on the above chart basically represents a "range" from the December 2000 low to the January 2002 closing high. Is NVIDIA set to perform a "round tripper?" Watch the levels and find out. So far, the break of a level to the downside has found firm resistance at the next level above. For the stock to get back above the 50% retracement level, a market maker is going to have to see some type of positive order flow (more buy induced order than sell orders). As you can see, when a lower level of retracement has been tested, the level above has become resistance. Traders short NDVDA should now look for resistance at the $43 level.

Jeff Bailey
Senior Market Technician
Option Investor

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