In what's turning into a choppy trading session, stocks have reversed marginal gains found earlier this morning and now post marginal losses after an October existing home sales number, which came in stronger than expected had pushed stocks to their highest levels of the session.
Communications-type sectors continue to provide some bullish upside with the Fiber Optic (FOP.X) 55.89 +4.32%, CBOE Internet (INX.X) 103 +4%, Networking (NWX.X) 158 +3.6% and North American Telecom Index (XTC.X) 491 +3% trading against a marginal current of selling in the broader S&P 500 Index (SPX.X) 925 -0.58%, which traded lower by 5.5 points.
After some negative comments regarding lack of further pricing gains in the HMO stocks by SG Cowen this morning (downgraded WLP -9.6%, HUM -8.4%, HNT -8.7%, UNH -9.89% along with insurers AET - 8% and CI -2.9%), the HMO Index (HMO.X) 460 -8.62% tries to firm near an intra-day low. JP Morgan has come out in defense of saying that they see flat to slight price increases in 2003 for the group, and would be buyers of UNH, WLP, and Anthem (NYSE:ATH) $55.12 -7.26%.
In a separate note, Salomon Smith Barney said they agree with SG Cowen's pricing survey, however they believe that the Street is underestimating earnings forecasts for the sector.
Shares of appliance software maker Neoware Systems (NASDAQ:NWRE) $21.21 +13.97% break to a 52-week high on strong volume of 2.14 million shares (avg. daily volume is 670K) on what looks to be a technical squeeze to the upside. After reporting better than expected earnings on October 29th, when NWRE traded 3.9 million share, today's gap higher on strong volume hints that shorts may be getting squeezed in the stock.
Neoware Systems - Daily Chart
I like this type of technical pattern to be looking to trade bullish where near-term consolidation finds the stock breaking higher on strong volume. Traders that "don't like" to chase gaps higher might look for a pullback to the $18.00 level, follow with a stop at $17.00 and target the $26-$28 zone. I would expect market makers to be assessing near-term upside to $22.37, but looking to bid a pullback near $17.66. This may also be a good stock for bullish trader's to "watch list" for around 11:00 EST on Wednesday when senior traders turn their market making activities over to their "junior" traders ahead of the Thanksgiving holiday. Market history tends to be bullish the latter part of this week as most senior trader look for a 4.5 day weekend, with markets closed on Thursday and trade-shortened Friday. In essence, senior traders usually try and get a head start on the weekend and leave early on Wednesday, getting most of their institutional trades completed by Wednesday morning so they can take off early.