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  Jim Brown   8/19/02,  6:28:07 PM
Swing Trade Game Plan - Click here: Link

  Jeff Bailey   8/19/02,  5:58:12 PM
Bear Traps Jeff, The p/f on AMD says bear trap is this meaning that it is going down should we be buying puts if we own or what? Thank you,

The "bear trap" is often associated with a potentially BULLISH patter. This pattern was identified by Mike Burke, who Tom Dorsey, in his book "Point and Figure Charting" refers to as the Sherlock Homes of investing. In brief, the bear trap is thought of as a pattern where the p/f chartist sees a "triple-bottom sell signal" which violates the base of support by 1 box, then is quickly reversed higher. It is a pattern that often suggests a stock's bottom after a long decline, especially when the sector bullish % becomes very "oversold."

The "bear trap" in AMD was set up by the trade at $7.50. Understand the semiconductor bullish %! In April (red 4) AMD gave the triple-bottom at $12.50, but at that time, the semiconductor bullish % was "bear confirmed" at 54%. However, when AMD gave the next "triple-bottom" at $7.50, the semiconductor bullish % was "bear confirmed" at 18%. Perhaps the much LOWER level of risk for bulls as depicted by the bullish % gave some insight to a potential "bear trap" in AMD at that $7.50 level and trader only short/put 1/4 or 1/2 position, but now understands the "bear trap."

Other "bear traps" have Qualcomm (QCOM) $29.87 +2.68% "bear trap" at $24, and if memory serves me correct, I believe I pointed this potential out when profiling QCOM as bearish at $24, but STRONGLY suggested 1/4 or 1/2 positions only and BUY lots of time for any puts as upside risk was to $32.

Dell Computer (DELL) $28.12 +2.14% and trade at $22 Link

While www.stockcharts.com does not have as broad of sector bullish % charts as Dorsey/Wright and Associates, both DELL and QCOM are NASDAQ-100 stocks and trader/investor can perhaps tie in the NASDAQ-100 Bullish % ($BPNDX) Link and levels of bullishness when QCOM and DELL were potentially setting up "bear traps." Remember, in early July (after red 7), NASDAQ-100 Bullish % signald "bull alert" and put bearish traders on alert for internal strength forming.

  Jeff Bailey   8/19/02,  4:54:40 PM
Small Caps .... I traded some Stratasys (NASDAQ:SSYS) $5.30 +11.3% earlier this morning and dumped it all into the close for a decent little day-trade from "inside day." Link AG Edward on Level II was bidder all session.

I then rolled to fellow "rapid prototype" 3-D Systems (NASDAQ:TDSC) $8.91 +0.11% late, but sat bid for better part of an hour at $8.71 and never got a share, then bid $8.92 late and got partial fill. Both stocks relatively thinly traded, so need to be careful on what size you're trading as liquidity is rather tough. Link It is "notable" that AG Edwards, somewhat of a "value" shop, upgraded TDSC from "sell" to "hold" on July 18th at $10.33 after past "downgrade" on April 10 from "hold" to "sell" at $14.26.

Smaller caps are lagging the larger caps this move, but might be poised for a little catching up near-term as 50-day MA on Russell 2000 Index (RUT.X) 401.29 +1.34% above at 417. Near-term relative high of 403 from 07/30/02 could be short-term trigger for upside short-covering. This may have some of the smaller cap market makers looking to square some inventory near-term, and perhaps why AG Edwards market maker a bidder in SSYS earlier today. Link

Will also note, Russell 2000 Index (RUT.X) gave "bullish triangle" pattern on Friday ($5 box) and extended gains today. Some decent upside to trend at $450. Link

  Jeff Bailey   8/19/02,  4:00:54 PM
eBay Inc. (EBAY) $61.84 +4.86% ... bold move above both 50-day and 200-day MA today, combined with break of trend and "triple-top" buy signal on point/figure. Aggressive bulls can look full position, stop $54. Link

Past breaks of "triple-tops" (see $59) have given nice upside moves.

  Jeff Bailey   8/19/02,  3:57:45 PM
Amazon.com (AMZN) $15.45 +3.58% ... stock pressing 50-day MA here. Point/figure chart shaping up and breaking downward trend. Vertical count bullish to $19. Looks bullish 1/2 position. Link

  Jonathan Levinson   8/19/02,  3:57:07 PM
Any bears who opened shorts at this level and didn't get exited at the reversal by their trailing stops have a tough decision here as to whether to close the position or let it ride into the close. The TRINQ remains in extreme territory at .36, making the initiation of new longs dangerous right now. I would normally view a TRINQ this low as a bearish sign of an impending reversal, but the TRINQ has been flashing extreme low readings at us for over a week now. The big risk is for a gap up open tomorrow, as bulls mull the charts and the broken 50 day sma's. For the past week, the only opening gaps we've seen have been downward, but the Las Vegas Fallacy is just that- the next occurence doesn't have to obey the previous ones. I'd be either closing the position or taking some off as a prudent play. More aggressive bears can leave the positions open, but I'll reiterate- cash is an excellent position when uncertain.

  John Seckinger   8/19/02,  3:54:00 PM
A stronger dollar is certainly having negative implications on the Gold and Silver Sector Index. This index just gave a sell signal from its rising wedge pattern, possibly setting up for weakness back underneath 60 in the near term. Please see chart: Link

  Jeff Bailey   8/19/02,  3:53:41 PM
Nextel (NXTL) $6.76 +0.89% ... Jeff: Jeff, What is your opinion about buying NXTL, it looks like it is about break bullish triangle? If so, what will be the bullish vertical target?

NXTL did trigger "bullish triangle" at $7.00 on Friday. Current VERTICAL count is to $15.75. Accroding to Dorsey/Wright and Assoc., NXT is "telephone" and that sector currently "bear confirmed" at 15.7% and would need 18% reading to reach "bull alert" status. As such, would advise bullish caution and 1/2 bullish positions only, with plenty of option expiration time. First sign of trouble is trade at $4.75. Link

  Jeff Bailey   8/19/02,  3:51:17 PM
The 3:15 PM intraday update has been posted. Link

  Steven Price   8/19/02,  3:48:05 PM
Reader Question: Hello Steve: OI profiles GS as short; doesn´t the fundamentals same apply equally to C due to the problems in Brazil etc etc. Ernesto

Response: Goldman Sachs (GS) $81.96 (+2.43), Citigroup (C) $36.30 (+1.40) A look at the technicals shows quite different patterns between the two, although Brazil may affect both. I believe Citigroup has more exposure to Latin America than Goldman Sachs, however, I cannot give you exact numbers. GS, profiled as a put play in OI, appears to be very overextended, with its 200-dma looming just above at $82.43. Earlier this morning, I recommended waiting for a rollover below the 200-dma to initiate new positions, and I still feel the same way. I would not initiate a short at this point. Citigroup has established an ascending channel of consistent higher highs and higher lows, and the 200-dma is $44.45, $8 higher than where the stock is currently trading.

  Steven Price   8/19/02,  3:34:30 PM
Reader Question: Hello Steven, I Have a large position in sebl( 5000 shares)-I wrote calls and bought puts on its way down from 36, so I 'm in good shape. I wondered how it looks to you technically today --was thinking of a sept 10 covered call. Thank you

Response: Siebel Systems $9.21 (+0.71) The stock looks like it will encounter some serious resistance at $10, so the idea of a covered call looks sound. My only concern is that the Nasdaq 100 and Nasdaq Composite have both broken out of long-term descending channels and crossed above their 50-dmas for the first time in months. If you are happy with a gain of $0.78 (+0.45 from the call sale) before getting your stock called away, then it is probably a sound move. If the Nasdaq continues to go up from here, Siebel will probably participate, and you might want to get a little more bang for your buck, by selling the Oct 10 call at 0.80, or even the Nov 12.50 for 0.45, since the stock would still need to fill its gap, then cross psychological resistance at $12.00 before having your long stock called away. If you sell the Oct 10 for 0.80, you get a little more protection for your long stock if it drops, and the Nov 12.50 call will give you the same protection you get from the Sep 10 call, only more room for profit on the upside. Obviously, by going farther out in time, you have an increased risk of having your stock called away, as SEBL has more time to go up. However, if the Nasdaq is really going to rally, it is likely SEBL will cross $10 before Sept expiration. A move past $12.50 (for the November call) would require a 35% increase in the value of the stock by November expiration, and even if it gets that far, your 5000 shares will net you an extra $12,500 on the move up to $12.50, while giving you the same downside protection as the Sept 10 call.

  Jim Brown   8/19/02,  3:33:48 PM
Swing Trade Signals
It is frustrating to see the markets moving back to the highs but I am not going to chase it. I want to wait now until we hit resistance at 485 and look for a short entry or catch it on a drop through support. I think the risk/reward ratio for going long at this level is not attractive enough to warrant a new long play.

  John Seckinger   8/19/02,  3:32:10 PM
Will the dollar become a leading indicator in the near term? Possibly, since a bearish trend line is being tested for the eighth time since April and dollar denominated traders will be paying close attention. Please see chart: Link

  Leigh Stevens   8/19/02,  3:21:07 PM
Subscriber QUESTION: "Thank you for all your input. I would like to ask you about MEDI what you think about? and the support and restance ?"

RESPONSE: Medimmune (MEDI) rebounded sharply from a low in the $21 area, on big volume in early-July, which was convincing for a bottom after the stock declined from highs in the $47 made early this year.

The stock is running in tougher resistance - more supply or stock for sale in the $30 area, near the low end of a trading range the stock was in May and the level of a key low last Sept.

MEDI has topped just below 30 twice this month and this becomes a pivotal level - a close above 30 and the ability to hold above it would suggest that the stock could recover some more and test next key resistance in the 34.00 area at prior highs and at the current down trendline. Next resistance above here is 37-38 area. 26.00, then 23.00, is support. My I think the stock goes sideways in trading range in next 6-8 weeks between 23 and 34, maybe to 37.

  Jonathan Levinson   8/19/02,  3:03:43 PM
The TRINQ remains very low, and has been very low for days now. It's currently at .36, which continues to indicate that strong buying pressure is present. With price off its highs, there's a big struggle going on right now, just below resistance. QQV is down 1.82, showing bullishness on the part of QQQ option traders. The TICK.NQ is at -6. I'd be calling for the pullback to continue, except that the bulls have been running, and they know how to deal with dips.

  John Seckinger   8/19/02,  2:56:45 PM
As 8938 was penetrated I went to a "neutral" stance, now on the sidelines watching the market fall quickly to 8918. It was only a few minutes ago when the Dow was at 8960 and showing a nice green candle; however, sentiment evidently turned and longs appeared to concede. Nevertheless, I believe today was a successful trading and learning experience. The Dow should find slight support near the 8918 level and more below near 8900. I would be surprised with a move back above 8938; nevertheless, even if the Dow does rally higher, I feel risk was properly controlled and disciplined trading adhered to.

  Jim Brown   8/19/02,  2:51:10 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the long signal at 14:45:52 when the OEX traded below 478.50. (SPX 945.91, DIA 89.50, SPY 95.12, DJX 89.40, NDX 1020.75, Compx 1389.55, Emini 945.50) Our next target is the short entry point at OEX 475.75 (SPX 940.50 est)

  Jim Brown   8/19/02,  2:36:35 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the entry point on the SHORT signal to OEX 475.75 (SPX 940.50) in case this roll over continues. This puts us under the intraday lows since 11:AM and would represent a substantial setback from recent levels.

  John Seckinger   8/19/02,  2:27:34 PM
Since an aggressive bullish strategy worked so far today, might as well keep with tradition. I expect the 8938 level to hold and prices to get either near or above the intra-day high of 8975 in the near term. There is resistance at the July 3rd area of 8995; however, if this level is tested very late in the session there could be funds rushing in to beat the close and stops triggered; therefore, I would not be surprised if the Dow closes on the highs above 9000. Ok, maybe I just got too optimistic; nevertheless, weakness under 8938 will take my sentiment to more neutral levels.

  Jeff Bailey   8/19/02,  2:26:52 PM
Precise Software (PRSE) $15.09 +9.6% ... Jeff: Re your 8 / 1/ 02 post, I bought Nov 12.50 calls on PRSE. It seems to be moving now and I wondered if you see any technical changes or have heard any details pertaining to a possible takeover by EMC or other. Thanks,

I haven't seen anything regarding 08/01/02 potential takeover by EMC since that post. Main reason I mentioned on 08/01/02 was "bullish triangle" pattern Link on 08/01/02 at $13.50 . Updated technical have stock breaking above trend and this is important technical action from p/f chart perspective. Remember, bullish vertical count was $19 so look to sell some strength there, or test of 200-day MA at $17.70 from bar chart. Per Professor Davis' "bullish triangle" look for 71.4% chance of 30.9% gain over 5.4 months from $13.50. That would be a target near $17.67.

According to Dorsey/Wright and Assoc., software sector is "bull alert" at 21.9% and turned "bull alert" on 08/16/02. Would take a reading of 36% to get "bull confirmed" at this point. You should be "OK" for targets as you bought time for November (good job).

  Steven Price   8/19/02,  2:18:52 PM
IBM: $82.31 (+2.96) OI call play IBM, originally entered at $76.50, has now exceeded our initial target of $82. We have raised our stop loss to $79, and the new target is PnF bullish count of $85. Conservative traders may want to take 1/2 profits off the table, however we will rely on our higher stop loss to lock in some profits, and maintain our full position.

  Steven Price   8/19/02,  2:15:56 PM
Seeing 50-dma breakthroughs across the board - Dow, S&P 500, Nasdaq 100, Nasdaq Composite have all crossed over today.

  Jim Brown   8/19/02,  2:10:20 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the open LONG signal to OEX 478.50 (SPX 945.50) Hopefully the race is on to the close and I will be raising the stop again as we near the 485 target

  Steven Price   8/19/02,  2:09:29 PM
Reader Question: Any news on HIG (Hartford) today? It is straight up this morning. I'm not sure what sector it's in...I think financial services and the $FVX isn't up much. Thanks, Tom

Hartford Financial Services (HIG): $52.40 +2.31 I have not seen specific news on HIG, but the insurance sector is up today, and has continued its recent run. HIG has been in consolidation recently, but has broken above recent resistance of $52. The trade of $52 created a double top buy signal on the PnF chart. Bearish resisatance is way up at $62, so this stock may have some room to run. The next level of resistance, however, may be the 50-dma of $54.36

  Jonathan Levinson   8/19/02,  1:59:57 PM
The COMPX is at resistance, 1395-1400, with all of the 5(3) stochastics in overbought and the weekly approaching that level. We have seen no pullbacks here, only pauses, but with the TRINQ at .30 and the QQV now down 1.64 on the day to 40.3, the only bulls buying here are the ones with steam and flames flying out of their snouts. I believe that any trade today is aggressive, but a short at this level would be less aggressive than a long. I would be using a tight trailing stop on the trade, because with the strong bullishness in the current market, any dips are likely to get bought. In other words, I don't expect to get far with a bearish trade here, but would not go long either.

  Steven Price   8/19/02,  1:53:39 PM
Semiconductor Sector Index (SOX.X) :365.25 (+16.77) The index has now crossed above its 50-dma of 363.51. This looks bullish for the sector, which is most likely riding the backs IBM and MSFT $51.91 (+1.92).

  Jeff Bailey   8/19/02,  1:49:16 PM
The 1:00 PM intraday update has been posted. Link

  John Seckinger   8/19/02,  1:48:58 PM
Illustrating my thought process via five-minute chart in the Dow. First it was the "two red candles", then the key relative low, then the "failed pattern" that became a bullish indicator per post 12:52:27, and then the expectations for a move back above 8940. Please see chart: Link

  Jim Brown   8/19/02,  1:26:38 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the open LONG signal to OEX 476 (SPX 941) This was the entry point and a retracement to there from current levels would be negative. The current target for this move is OEX 485. I would be surprised if we made it but that is where the next real resistance on the OEX begins. However, the Dow will be the controlling factor as it nears the psychological 9000 level.

  John Seckinger   8/19/02,  1:18:24 PM
Per Leigh's 13:09:04 question on failed technical patterns, I am profiling how to take advantage of such patterns during Tuesday's Traders Corner article (possibly called "From Failure to Fortune"). The basic premise actually does not trade against momentum; instead, it allows a trader to understand risks and gives a trader the ability to capture an even greater move once the pattern fails. If the pattern holds, fine, that position was on in the first place. Intrigued? I hope so.

  John Seckinger   8/19/02,  1:09:56 PM
Per 12:52:27 post, with the Dow now above 8931, I will now expect the Dow to hold above 8916 in the short term. It is my opinion that the longer the Dow stays at these levels, the more likely that there is another wave higher - most likely during the last hour of trading.

  Leigh Stevens   8/19/02,  1:09:04 PM
Subscriber QUESTION: "I'm not a real sophisticated trader. While I intentively read just about everything from the analysts at OI, I see patterns, projections, etc. fail in spite of the great degree of sophistication involved with the analysis.

So I'm wondering what you think would be the winning percentage of a simple strategy that just buys or sells the OEX when both the 5 and 21 period stochs are either emrging from either oversold or overbought extreme in unison? Do you think I could consistently day-trade profitably just waiting for this setup? "

RESPONSE: Well, I don't know about just day trading, as you get some of the best price swings over a few day period sometimes. The strategy of using both the 5 & 21-bar stochastic extremes when both are consistent on the hourly chart, works a lot of the time - when it doesn't AND if you always use a stop, I think you could maintain an overall winning strategy.

The main thing I find with trading is to HAVE a strategy, and be consistent with it. At least, give it a fair trial. One of the reasons I happen to like TradeStation, is that I can test such a rule-based strategy, at least on past data.

  Leigh Stevens   8/19/02,  1:01:09 PM
SECTOR Update: Semiconductor Index (SOX) - sector may not be better-looking, even after a couple of beers per Steve's comment, but there was technical buying as the sector climbed above it's Sept. 344 low on Friday, then today cleared a "line" of resistance at the July lows in the 350 area. Now, the SOX is bumping up against its down trendline in the 358 area (at 28.15 in the SMH HOLDR's) - then, not far above this level, is resistance implied by the 50-day moving average at 363.3 in SOX. I figure that, given the upside momentum, that SOX may be able to climb above these resistance levels and maybe make it back up to 407-408 to retest the July highs. Stay tuned!

I suggested buying SMH on a buy stop, above the Friday close, based on a breakout above its flag pattern on the 60 min. charts - per my commentary on Link

  Jim Brown   8/19/02,  12:57:21 PM
Swing Trade Signals
The VIX is hovering just over 31 and drifting lower. The TRIN at .43 is very near dangerous territory. A close in the mid 30s guarantees a bout of selling in the very near future. Both of these indicators are reflecting the current bullish conditions but also telegraphing trouble ahead. Art Cashin mentioned 9000 as a likely trigger point for a new wave of selling. Right now we would just like to see a new intraday high above 8942, then worry about the next sell signal!!

  Jonathan Levinson   8/19/02,  12:54:39 PM
Good for a laugh- The LA Times has run an article beating up on Kudlow and Cramer. Here's an exerpt:

Messrs. Cramer and Kudlow should, by all rights, have been sentenced to some kind of lengthy intellectual exile, required to spend the next decade in a defunded public library somewhere, reading the complete works of John Maynard Keynes.

The complete article is at this Link

  John Seckinger   8/19/02,  12:52:27 PM
Might be time to take a chance and get even more bullish here. Aggressive? Yes. Reasoning? Last weakness took the Dow under the 8900 area (last pullback low on 5-minute chart) and most likely hit stops and trapped some shorts. The key now is for a move above 8931, which should eventually lead to a new intra-day high. When is this aggressive thinking wrong? I would say at 8890.

  Jonathan Levinson   8/19/02,  12:49:59 PM
Virtually nothing has happened during the past hour, except that QQQ option traders relaxed a bit, the QQV easing down to flat-negative, currently down .03 on the day. MSFT is trading at 51.30, and QQQ 25.15. The COMPX remains comfortably within its ascending channel on all but the shortest (1 min and 5 min) timeframes, so it looks like Mr. Bull is taking a well-deserved breather. Bond yields are flat-negative as well, and the TRINQ is at .42. The low TRINQ with the absence of price action shows a battle between buyers and sellers, with relatively heavy buying required to maintain price at its currently level. Whichever side of the transactions dries up first will determine if this is another pause in the uptrend or a short term top.

  Jim Brown   8/19/02,  12:33:10 PM
LOL Very good point Steve!

  Steven Price   8/19/02,  12:26:16 PM
Just noticed that CNBC released the results of a study that showed consuming alcohol makes others better looking. I'm not sure how CNBC is relating this to today's market action, but maybe it has something to do with investors buying semiconductor stocks in spite of a lack of IT spending and reduced forecasts for 2003. (SOX.X 358.18 +9.70)

  Leigh Stevens   8/19/02,  12:20:28 PM
SECTOR Update: Biotech sector index (BTK) , which has been best performing sector in the current quarter so far - off 1.8% today - last at 372.7 - BTK intraday low at 366.8 down nearly to its up trendline. Biggest weakness is in Abgenix (ABGX: -19%), ImClone (IMCL: -12%) and a number of others off 2-4%, such as Genentech (DNA), IDPH (IDEC Pharmaceuticals), and Cephalon (CEPH); Biogen (BGEN) off less than 1% and Amgen (AMGN) is off 1.3%.

I think profit taking is part of the reason, but there was an influence from extreme weakness in OSI Pharmaceuticals (OSIP)which is off a whooping 48%, down $15.83. The stock was hurt because U.K.-based pharmaceutical company AstraZeneca (AZN) announced disappointing results with its anti-cancer drug, Iressa. Iressa and OSI's key experimental compound, Tarceva, both belong to the same class of drugs known as epidermal growth factor inhibitors. These drugs are supposed to interfere with cancerous growth. Genentech, which has been helping OSI with development of Tarceva was off 8% but has pared those losses. By the way, OSIP is NOT in the Biotech (BTK) index.

  Steven Price   8/19/02,  12:19:02 PM
Reader Question: Hi Steve,how about shorting klac- and qlgc?????????thanks....

Response: KLAC 39.80 +0.72 is still showing an upward trend, so I would wait for a rollover below $40 and a sell signal before going short. KLAC established a triple top breakout buy signal with the trade of $39 on the PnF chart, however, the stock needs to trade $40 before getting through the possibility of a bull trap. There is bearish resistance at $41, so I'm not a buyer here either.

QLGC $36.25 -0.21 is at the top of a descending channel, with weaker volume on the recent upward bounce, which is bearish. With the market strong, and the stock recently rising, I would probably put on only 1/2 of a short position right here. The top of the channel is $37.80, and PnF bearish resistance at $39. I would probably use a trade of $38 as a stop loss in case of a breakout from its descending channel to the upside. The PnF bearish vertical count is still $27.

  John Seckinger   8/19/02,  12:04:27 PM
The Dow did in fact soften to near 8907 before turning higher; therefore, bulls are still in control. Objective is actually for a test underneath the intra-day high of 8942, a shallower pullback than just seen, and then hopefully a move higher. Back underneath 8907 should turn things neutral at best.

  Steven Price   8/19/02,  12:00:57 PM
Electronic Data Systems (EDS) $40.28 +1.36 New OI Call Play EDS now above round number resistance of $40.00 and its 50-dma of $37.90 (closed above here on Friday). The top of its rising channel is just under $41, so this should be the next level of resistance on the current breakout.

  Steven Price   8/19/02,  11:56:45 AM
IBM As IBM $81.52 +2.17 is now approaching our initial target ($82), and the market seems to be consolidating, I would raise the stop to $79, just below today's low (79.01). Let's not let our profits slip away on a market reversal.

  Jim Brown   8/19/02,  11:54:34 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Let's raise the stop loss on the current LONG signal to OEX 474. (SPX 937) Internals are really starting to weaken. This will put us right under the 10:40-11:00 lows. Don't wait for the stop loss to be hit if you are concerned about the LONG signal. I place the stops based on a best guess of where support/resistance should be, not based on how much money you can afford to lose. We still have the SHORT signal active at OEX 473.

  Steven Price   8/19/02,  11:48:33 AM
Northrop Grumman (NOC): $117.65 +0.50 NOC had found resistance at its 50-dma (currently $115.58) throughout the first part of last week. Friday's break above this level has held. Next resistance should be round number $120.00. Look for the 50-dma to provide support to the downside now.

  Jonathan Levinson   8/19/02,  11:43:34 AM
I have been receiving emails from readers asking about going short. The COMPX is showing as much strength as it did weakness just one month ago. Every apparent top for the past week has been a pause in the uptrend, and for that reason, I would not short without a clear violation of the uptrend. Given the whipsaws we've been seeing, any print above today's low looks risky for anything more than a scalp. The QQV is still positive, but less so, currently up just .48 on the day, as even the option market is beginning to believe the move today. Bond yields are positive, and the TRINQ is at .54, showing sustainable buying pressure. The TICK.NQ is -61.

  John Seckinger   8/19/02,  11:40:31 AM
Well, the Dow did get two consecutive red candles (5-minute chart) and the market does seem to be consolidating. How can a trader use the consolidation? It should offer more liquidity; thus allowing a larger position to be bought/sold without much slippage or jolt to the market. Possibly the market pulls back to 8907; however, I do not see a clear cut relative high or low. Therefore, I will give the market TIME to define such short term boundaries.

  Leigh Stevens   8/19/02,  11:40:16 AM
Subscriber QUESTION: "Leigh, are you still looking at short the Q's around this area? we hit 25.25."

RESPONSE: Well, revising the upper end of my hourly up trend channel on the Nasdaq Composite & Nas 100, these indices are up against some resistance here and are overbought on a both hourly stochastics that I use - 5 & 21 length. I think that we're in an area in QQQ where a set back can be increasingly anticipated.

However, you may have also noticed that I have not put out a specific short suggestion here (at 25.25 or higher) in QQQ - am reluctant to short such a strong trend until I see the Q's falter and indicate that a correction might be starting.

  Jim Brown   8/19/02,  11:35:46 AM
Swing Trade Signals
Our long signal has acted as an anchor to the market as the bullishness is appearing to fade. That is the problem with going long on extended breakouts, You don't want to stand on the sidelines in case the short covering catches fire, we have seen quite a few +300 point gains on that in the last several months. But you also want to be very cautious in case you bought the top. It is a classic quandary. Stand on the sidelines and you can guarantee a +20 point gain. Go long and the reverse is true. We are seeing new resistance appear about every 25 Dow points as prior sell stops are hit. We have not been at this level in quite a while there are likely to be quite a few mine fields in our path.

  Jeff Bailey   8/19/02,  11:26:10 AM
The 11:00 AM intraday update has been posted. Link

  Steven Price   8/19/02,  11:22:10 AM
IBM: $81.37 +2.02 IBM is steaming ahead. I would raise my stop from $74 to $75.75, just below Friday's low of the day (75.98).

  Steven Price   8/19/02,  11:18:28 AM
One more note on JNJ. The 200-dma of $54.90 should provide additional support if the stock were to trade below $55.00

  Steven Price   8/19/02,  11:16:04 AM
Johnson and Johnson $55.72 +0.40 OI call play JNJ appears to have established a new support level at $55.00. This was this morning's low of the day. The stock saw resistance here at the beginning of last week and end of the previous week, but now that it has broken above that level, it has found support there on Thurs, Fri and today. Previous support was just above $53, around $53.40

  John Seckinger   8/19/02,  11:12:52 AM
There still has not been two consecutive red candles on a five minute chart of the Dow. Usually, two red candles on a five minute chart gives a signal that this vertical move higher wants to consolidate. Evidently, this market "needs" to get to some level above that represents value for both short and long traders. The 9084 to 9115 area might be the short term objective for bullish traders.

  Jim Brown   8/19/02,  11:08:39 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The entry numbers for the current LONG signal were OEX 476.24, SPX 940.96, DIA 89.25, SPY 94.65, DJX 89.08, NDX 1010.07, Compx 1378.50, Emini 942.00. Looks like we are hitting new highs despite a follow though in the A/D line. Futures are also rising strongly.

  Jim Brown   8/19/02,  11:04:56 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Sorry about that last entry signal. Qcharts went gray on me just as I hit the submit button. My browser also hung up. Must have been a hiccup in my internet path somewhere because when it came back a couple minutes later the OEX had spiked to 476.04 about the time it appeared on the monitor.

  Steven Price   8/19/02,  11:04:35 AM
Reader Question: Dear Steven: Your advice prior to FOMC day last week, I believe, was to wait for the market to choose a direction and jump in. I would appreciate your advice on how to do that. Specifically, do you suggest market or limit orders when the market is moving fast. Regards Jim

Response: Usually following an FOMC rate announcement there is quite a bit of whipsawing in the next few minutes. The market jumps back and forth before picking its true direction. Last week this was true immediately following the announcement. The S&P 500 traded as high as 910 in the first 3 minutes following the announcement, then back down to 899 in the next 8 minutes, then up to 908 in the next 13 minutes, than fell to finish the day at 884. My advice was to let it shake out for a few minutes, which in this case would have avoided buying on the way up immediately following the announcement. Waiting a few minutes and then going short when the direction had been chosen, after the news had settled in, would have worked for the rest of the day (There would have been a whipsaw back up to 908, before the drop resumed). Hopefully, after a 20+ point gain on the short side, a stop would have been placed to lock in some gains before the next day's rebound. Playing the jumps directly following an announcement can be dangerous, so advising on which type of order to use (market or limit) really isn't relevant to this type of play. If you want to play with fire, you can get burned. My advice to traders looking to catch the trend following the announcement is to let it shake out and then jump on.

  Jim Brown   8/19/02,  10:57:16 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's go LONG the broader market with a trade above OEX 476 (SPX 942) with a tight stop loss of OEX 473. (SPX 936)

  John Seckinger   8/19/02,  10:52:02 AM
There are times when the bond market and equities get disconnected, and it seems like today is one of them. The September Bond is currently up 4/32nd's at 108-22. The short term pivot is at 108-25 and that may explain lack of movement - since contract in efficient area and waiting for a catalyst besides equities, oil and dollar. Puzzling. Yield curve is just fractionally steep with Five year and ten year notes up 2 ticks. Therefore, I keep asking myself: Do bond traders not believe the rally in the Dow? My answer, "No, they don't believe equities will continue upwards." This gets back to Jim's quote..."Trade what you see." Will be interesting to see what resistance 8907 offers in the Dow.

  Jonathan Levinson   8/19/02,  10:42:13 AM
QQQ is trying to gain the 25 level, with the TRINQ at .69 and, of course, all of the daily and shorter 5(3) stochastics overbought. The QQV is still up 1.36, which flies in the face of this move up. As noted earlier, last week the QQV tended to prevail, but it's just one indicator among many. Bond yields have recovered from their worst levels, with the five year yield slightly positive on the day. I'm siding with the QQV on this move, and don't believe it will hold, but have been humiliated by the market last week and love the sidelines as a position for those without strong stomachs.

  John Seckinger   8/19/02,  10:41:44 AM
Just an observation: There has not been two red candles in the Dow on five minute chart. I bring it up now because either 8900 or 8925 area will most likely stall the rally and consolidate prices.

  Jim Brown   8/19/02,  10:40:03 AM
Swing Trade Signals
I have had a LONG signal queued up for 20 minutes but I just keep doubting the attempted move. The indexes are having trouble maintaining any momentum as each tick to a new high is met with new selling. However, with every move up there is a new wave of what appears to be short covering. I am going to pull the trigger on the signal if this continues but I am less than convinced. Trade what you see, not what you believe

  Leigh Stevens   8/19/02,  10:33:57 AM
Lowe's (LOW), the second biggest home improvement retailer, reported record earnings this morning - 59 cents versus .42 in Q1, as Steve noted earlier. Speculation today in some of the financial press that LOW is gaining a permanent advantage over #1 Home Depot (HD), which is of course in the Dow 30 - it reports tomorrow. HD has experienced management defections and continuing complaints related to customer service - what customer service? Well, maybe some need it more trying to find things in these warehouses.

Lowe's may have the MO (momentum) now as it gives more consumers more of what they need - like an envionment more friendly to the less than accomplished do-it-yourselfer's like woman and men like me, stores that are well lit, with better layouts and fewer items out of stock. Tomorrow will tell the story on Home Depot's sales and profits.

  Jim Brown   8/19/02,  10:31:28 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's go SHORT the broader market with an OEX trade below 473, SPX 936. Internals are slowing and this early entry could reduce the possibility or a snap back since we are at failing highs. The stop loss will be tight at OEX 475, (SPX 940 est)

  John Seckinger   8/19/02,  10:21:32 AM
Oil futures approaching recent highs of 29.45 and up 11 percent since late-June. This could put a cap on Treasury prices; thus increasing yields. However, negative talk out of Japan is buoying the U.S. dollar and could offset weakness in the bond pits. Getting to the Dow, now above 8854 at 8867, next level is just underneath 8900. Not sure if a move back under 8854 will entice short sellers.

  Jim Brown   8/19/02,  10:16:24 AM
Swing Trade Signals
I am skeptical of this spike above 473. It looks like a buy program of some sort and I want to wait a minute to see if it sticks

  Jim Brown   8/19/02,  10:14:16 AM
Leading Economic Inidicators Down -0.4 for July and June revised lower as well. Consensus opinion was for -0.5 so not much movement here. This means the recovery is having a tough time and while it does not mean a double dip is imminent it does mean the weakness is continuing. It has been down 4 of the last 5 months. The market appears to be moving up despite the lower numbers.

  Leigh Stevens   8/19/02,  10:13:04 AM
Wall Street Journal (WSJ) - This morning's WSJ has a feature story on how federal regulators have new regulations taking effect soon that will force leaders to modify practices related to "marginal" credit risks - what the industry calls "subprime" loans.

Such companies as Holdhold International (HI) & MBNA Corp. under pressure last week and today, along with others in this group - the Fed measures involve changing inconsistent accounting methods, slowing issurance of new credit to people who shouldn't be assuming debt or new debt, and requiring more reserves against bad loans. The increased Fed regulation and scrutiny partially brought on by several of the subprime credit card issuers running into financial trouble in recent months. Good that the recepients of the flood of easy credit in recent years should also feel the pinch too!

You may have noticed the major increase of offers for credit cards in recent months and years. Total consumer offers for cards have gone from a billion a year to around 5 billion in 2001, a forest of paper. Lo & behold the default rate during the same period has doubled to 7%. I love it when my sons, who can't balance their checkbooks or won't, get offers of credit cards. Unfortunately, I don't have a person that I can find to throttle for making these wonderful offers to them.

  Jeff Bailey   8/19/02,  10:11:14 AM
JetBlue Airways (JBLU) $37.18 -4.91% ... notable new lows since IPO of 04/12/02.

  Jeff Bailey   8/19/02,  10:05:47 AM
OSI Pharma (OSIP) $16.85 -48% ... stock down after disappointing Iressa trials. Link

Has pressure on Imclone (IMCL) $8.02 -13% Link and Genentech (DNA) $33.10 -6.73% Link

  Steven Price   8/19/02,  10:02:30 AM
Goldman Sachs (GS): New OI put play GS is finding resistance at $80. I would like to see a rollover and breakdown from this level. Watch for a rollover before initiating new short positions.

  Steven Price   8/19/02,  10:00:19 AM
IBM $80.08 (+0.73): OI call play IBM just broke $80. Our initial target on this long play is $82, which is the minimum measuring objective based on the rectangle it formed over seven weeks prior to its breakout. However, $85 is the PnF bullish count and new entries here, now that the stock has broken $80, may use this as an initial target. We initiated the play at $76.50 and conservative traders who entered at that point may want to take partial profits here.

  Jim Brown   8/19/02,  9:59:54 AM
Swing Trade Signals
I am really glad to see a calm open and no rush off in either direction. This may allow us to make a more rational decision when the time comes. We are only minutes away from the Leading Economic Indicators report at 10:AM. The markets are trending up as we approach the numbers, which could indicate bullish expectations.

  John Seckinger   8/19/02,  9:54:18 AM
Per 09:28:21 Post, it was nice to see the 8750 hold; however, the Dow must test levels over 8800 in the near term or we will either (a) be put in a tight range, or (b) become slightly bearish. Note: mid-Bolliger Band on five-minute is 8792 (intra-day high 8794).

  John Seckinger   8/19/02,  9:49:46 AM
Profiled Friday, the Networking Index (NWX.X) at 124.23 seems poised to trade higher towards the 130 level. Dowside risk should be to 121. Longer-term bullish traders will need the key relative low of 113.91 to hold, with 143 becoming the objective. Note: 22 DMA is currently at 126.84.

  Jonathan Levinson   8/19/02,  9:44:42 AM
A neutral open, with the COMPX trading in a 4 point range, and the TRINQ at 1.1 is reflecting that. The QQV is up .91 to 42.85, and indicates that the option market is feeling cautious this morning. I noticed last week that the QQV tended to "be right" in advance of some of the surprise moves that we had. This is a bare observation from last week, and I wouldn't use it an excuse to load fresh short positions, but it hints at potential downside to come. As I'm typing, the QQV has moved up some more, now up 1.65.

  Jeff Bailey   8/19/02,  9:40:05 AM
Toys R Us (TOY) $13.80 +7.64% ... Reports Q1 loss of $-0.08 per share, $0.03 better than the Multex consensus. Revenues rose 2.4% to $2.07 billion versus the $2.08 billion consensus. Link

  Jeff Bailey   8/19/02,  9:33:29 AM
The 9:00 AM intraday update has been posted. Link

  Jeff Bailey   8/19/02,  9:32:11 AM
Treasuries see modest buying in early going, with YIELD lower across the board. May have higher stock open a bit suspect early.

  Jeff Bailey   8/19/02,  9:31:02 AM
Logitech Intl. SA (LOGI) $35.55 ... Stock trading lower at $34.92 in pre-market after SG Cowen downgrades to "buy" from "strong buy" due to transition risk associated with extensive new product cycle in the quarter. Believes new products add risk to story near-term and will not hit full volume in Q3. Link

  John Seckinger   8/19/02,  9:28:21 AM
Looking at a five minute chart of the Dow, resistance should be seen near 8811, 8854, just underneath 8900, and at 8945. There should be slight support at 8750 with the downside pivot at 8687. Please see chart: Link

  Jim Brown   8/19/02,  9:27:27 AM
Swing Trade Signals
Wal-Mart warned this morning that sales are slowing with back to school off to a slow start and warm weather slowing fall apparel sales. Futures are well off their highs and would indicate a lack of conviction by the bulls.

The gains from last week are due to come under pressure soon. As I indicated in my game plan for today the indexes are right at resistance and appear ready to swing back to a cycle retest of rising support. See the game plan charts for those levels.

A light bounce this morning and a failure below Friday afternoons low (OEX 467) might give us an entry point for a short. If we suddenly show some strength then a breakout over OEX 473 would also indicate a breakout from the present range and give us a long entry. With September options expensive this morning I would rather see some sideways trading for several hours before a directional trend emerges but we are not likely to have that luxury.

  Steven Price   8/19/02,  9:26:47 AM
Retail Sector: Should be and interesting day for this sector. Lowe's (LOW) $36.79 beat earnings estimates by 0.05, while Wal Mart guided lower, stating that back to school apparel sales are being hurt by warm weather. The Retail Index ($RLX.X) is just below resistance at 300, so keep an eye on this level to see whether Lowe's numbers create across the board buying in the sector, or whether Wal Mart can hold the rest of the group back. The group had a huge week last week,with the index gaining 20 points as it followed WalMart's gain of over $5.50 before WMT gave back almost a dollar on Friday.

  Jeff Bailey   8/19/02,  9:26:24 AM
Dynegy (DYN) $1.69 ... Salomon Smith Barney says Friday's sale of DYN's Northern Natural Gas pipeline for $928 million in cash and the assumption of $950 million in debt is significant positive for DYN, and should provide a near-term bump in the stock given that it eliminates DYN's immediate concern of bankruptcy. Stock trading up at $2.54 in pre-market. Link

  Jeff Bailey   8/19/02,  9:21:41 AM
Cautious on Semi-equipment Deutsche Securities sees a number of issues continuing to weigh on the semi-equipment group for at least the next several months; key issues are: 1) a high likelihood that many co's miss Q3 order guidance; 2) checks suggest continued deterioration in Q4 forecasts provided by large equipment co's; 3) believes 2003 will be the year of 300mm, but likely not until second-half of 2003; and 4) valuation analysis suggests there could easily be 30% downside in many names. Trimming LTX Corporation (NASDAQ:LTXX) $10.91 estimates to $-0.82 from $-0.72 and 2003 to $+0.11 from $+0.40 (both above consensus. Link

  Jeff Bailey   8/19/02,  9:15:44 AM
Emulex (ELX) $15.50 ... Upgraded to "hold" from "sell" at Legg Mason on valuation. Link

  Leigh Stevens   8/19/02,  9:13:55 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > +2.20 at 930.20; Dow Industrials > +20.00 at 8785; Nasdaq > +5.00 at 1000.50

S&P Futures "fair value" numbers: S&P ($SP02U) = +.46 -<>- Nasdaq 100 futures ($ND02U)= +1.90

Note: complete explanation of program trading & index futures arbitrage buy/sell programs can be found in my Trader's Corner article at Link

  Jonathan Levinson   8/19/02,  7:19:56 AM
3AM seems to be a good time to get long US futures and the US Dollar. The US Dollar Index is well off its lows of 106.50 and is currently trading just over 107.10. NDX futures are up almost 20 points from their midnight lows at + 7, S&P futures +4.10.

  Jim Brown   8/17/02,  4:40:31 AM
Swing Trade Game Plan - Click here: Link

  Jeff Bailey   8/16/02,  12:46:53 AM
Market Monitor has been archived. To view Friday's comments, simply click this Link

Have a great weekend!


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