This morning's break of upward trend in the PHLX Semiconductor Index (SOX.X) 456 -4.25% is troubling for broader technology as one of the stronger technology sector over the past quarter succumbs to selling. For technology stocks, this is negative as the broader area of technology now lacks any type of leadership. This lack of leadership and sponsorship by bullish traders/investors now has me believing, base on observation that that the MARKET is showing little bullish interest, thus further potential for more downside. We're monitoring the previously identified 455 level (May 7th low) to see if support can be found there. A break of that level should have subscribers reviewing the OptionInvestor.com bearish play list for select candidates.
Semiconductor Index Chart - Daily Interval
Despite Bear Sterns' morning call saying that now is the time to buy chip stocks based on lower valuation and firming fundamentals, the SOX.X is close to breaking its relative low of 455 from May 7th. Bear Sterns' favorite semiconductor picks are ALTR $17.40, CY $19.25, FCS $24.75, INTC $26.84, LSI $10.77, TUNE $9.78, NSM $29.38 and TXN $27.71.
Williams Company sinks to new lows
Shares of energy trader Williams Company (NYSE:WMB) $11.07 -22% broke to a new 52-week low and 6-year low, despite the company's denial of a report that it tried to corner the natural gas market in California and drive up the price of natural gas. Over the last couple of weeks, I've profiled shares of WMB as bearish and the stock did hit my second bearish target of $10.79 from fitted retracement. It should also be noted that the stock did meet its bearish vertical count of $11.50 from the point and figure chart. Williams Company Chart - Daily Interval
A bearish trader short shares of WMB from recent profile now sees his/her trade quickly falling near their first target level from the various techniques used from the point and figure chart. The vertical count of $11.50 has been achieved, while the stock has almost declined the 24.9% amount from Professor Earl Davis' study involving the spread-triple-bottom we identified at $14.00. While Professor Davis' study finds that type of decline over a 4.6 month time span, WMB has treated bears to a similar decline in just 2 days.
Traders short the underlying stock of WMB should lock in some partial gains here, and can then "go for the throat" by holding a partial position with a stop placed just above the $14.02 level of retracement.
Those holding the profiled November $15 puts (WMBWC) from May 17th profile at $2.70 can also take some gains off the table here, or simply hold until expiration or until gains do not fit your risk profile any further.
Disclosure ... I currently hold bearish positions in WMB.