Tech stocks finished off last week on a bullish note as the NASDAQ closed at levels not seen since late January. This strong performance had some bulls hoping that the Composite would continue higher and test its next level of overhead resistance at 1360 - also the location of the descending 50-dma. But instead, the index has slipped steadily lower during today's session and given back a large chunk of Friday's rebound from the 1315 area.
Much of this bearishness can be attributed to Oracle, whose shares are being pressured by some comments out of Thomas Weisel. The firm noted that channel checks indicate revenue for the current quarter will largely depend on the strength of sales during the second half of February. These observations cast doubt on last night's comments from CFO Jeff Henley, who said that Oracle was expecting third-quarter revenue to be "slightly positive." Investors have reacted to the uncertainty by hitting ORCL for a loss of more than 3.5%. The stock retraced Friday's gains but remains above its 50-dma at $11.72. This moving average lies just above the bottom of a wide ascending regression channel that has been in place for several months.
Annotated daily chart - ORCL:
With other major sector stocks such as MSFT and PSFT trading solidly in the red, the GSO.X software index has dropped towards its converging 100-day and 200-day moving averages near 103.65. A break under this level would set the stage for a test of psychological support at 100.
Another drag on the NASDAQ is the BTK.X biotech index, which is currently trading lower by almost 3%. The sector seems to have been negatively impact by news that VaxGen's experimental HIV vaccine showed disappointing results in late-stage testing. This development has caused VXGN to lose more than half of its value. A cursory glance at the major biotech players shows 2%-3% losses in AMGN, CHR, DNA, HGSI, and IDPH. Only BGEN, with a small gain, is bucking the sector weakness. What's technically important about today's sell-off is the fact that the BTK.X has rolled over from the multi-week trend of lower highs. Rolling action in the MACD and daily stochastics is hinting at a test of the relative lows near 315. The next level of clear historical support is in the 300-305 range.
Chip stocks are fairing somewhat better today, as evidenced by the fractional gain in the SOX.X. That relative strength comes on the heels of reports that CSCO has entered into an agreement with several semiconductor companies (including INTC and TXN) in an effort to push the networking giant's new wireless chip technology. Technically, the SOX.X is looking somewhat strong after tracing a pattern of higher lows and higher highs over the past week. But while that's an impressive uptrend, the bulls really have their work cut out for them with overhead resistance at the converging 50-dma/100-dma near 298 and psychological resistance at 300. A rollover from current levels and subsequent violation of the recent uptrend would make it awfully tough for the NASDAQ to hold above last week's lows.