Option Investor
Printer friendly version
  Leigh Stevens   8/23/02,  4:08:52 PM
Subscriber QUESTION: "When a bear flag or bull flag set up and break in the direction of the move, is there a way to measure the next move up or down?"

RESPONSE: Yes - there is a measuring implication - best explained on my Trader's Corner column on "FLAGS" at Link

  Jim Brown   8/23/02,  3:58:26 PM
Our thanks to Valter for promising us a -200 point day. Our thanks to Weldon for playing golf and letting us enjoy the down market. Our thanks to John for volunteering to keep Weldon on the links. Our thanks to CNBC for the overly bullish "now in a new bull market" commentary Thursday night. Our thanks to Ralph Acompora for predicting Dow 10050 this week. And thanks to all our readers for putting up with the conflicting views, bad jokes and endless boring market internals comments. Have a great weekend!

  Leigh Stevens   8/23/02,  3:54:57 PM
Subscriber QUESTION: "Could you comment on the suggested play on SMH from last night?"

RESPONSE: I had a long position in the Semiconductor HOLDR's (SMH) suggested from days ago per my SECTOR Trader column - I was long SMH at 27.90, with a stop at 26.90. The Chip sector and market weakness today took me out on my stop. SMH is now back into its downtrend channel, so I don't want to play this sector on the long side. The Semiconductor Index (SOX) has taken out a "line" of key support at 344 where it has a number of prior lows, as well as being its Sept low.

SOX is also now back into its downtrend channel. I would rather be short on a rally now than look to buy this sector again anytime soon.

  Jim Brown   8/23/02,  3:53:24 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We will be holding this SHORT signal over the weekend. My market view is coming to pass and I expect it to continue on Monday.

  Jeff Bailey   8/23/02,  3:52:09 PM
Program Trading Shorter-term traders that are focusing on a few select stocks every day, may be interested in a new page that HL Camp & Company has put up on their web site. I get tons (well, maybe 10) of questions every day regarding this and while I can try and answer specific question, this page Link may help with a lot of general questions. Maybe some good reading over the weekend. This is NOT the END ALL solution to trading. It is but ONE tool in your toolbox that may be of help from time to time.

  Jeff Bailey   8/23/02,  3:48:02 PM
The 3:15 PM intraday update has been posted. Link

  Leigh Stevens   8/23/02,  3:39:09 PM
Subscriber QUESTION: "A couple of weeks ago you had set a short term target for BBH of 90. Would you take profits here? Would you dare short BBH here? "


  Steven Price   8/23/02,  3:37:02 PM
Reader Question: Hi Steven! I am amazed by strength of GS. Do You think that $78 level hold? Stoch. on daily are turning south as MACD does.Technically looks like is weakening. Martin

Response: Goldman Sachs (GS) $77.52 (-2.39) I guess its easy to answer this question an hour after I received the email (in a meeting, sorry). I like the short on this stock, even though it showed some strength on the heels of yesterday's rebound. MACD and Stochastics both turning down and $78.00 was a 3-box reversal on the PnF. Sector downgrades the last two days have finally caught up to this overextended play. I see an initial target around $75, and $71 after that. Conservative traders might take partial profits around $75.

  Steven Price   8/23/02,  3:35:44 PM
Reader Question: Hi Steven! I am amazed by strength of GS. Do You think that $78 level hold? Stoch. on daily are turning south as MACD does.Technically looks like is weakening. Martin

Response: Goldman Sachs (GS) $77.52 (-2.39) I guess its easy to answer this question an hour after I received the email (in a meeting, sorry). I like the short on this stock, even though it showed some strength on the heels of yesterday's rebound. MACD and Stochastics both turning down and $78.00 was a 3-box reversal on the PnF. Sector downgrades the last two days have finally caught up to this overextended play. I see an initial target around $75, and $71 after that. Conservative traders might take partial profits around $75.

  Leigh Stevens   8/23/02,  3:30:40 PM
Subscriber QUESTION: "I wanted to know if there was anything of impotance showing up on why Phillip Morris was moving downward, a big switch from Tuesday's trading. Thanks!"

RESPONSE: This note came in the other day and wanted to show the Phillip Morris (MO) chart as another of the recent bearish rising wedge patterns. This one formed in the stock BEFORE it broke sharply - the last stage of the recent rally was on declining volume, anothere tip off to a possible downside reversal and a less than "quality" rally.

Cisco Systems (CSCO) has a similar rosing wedge pattern before a sharp downside break, if you want to look at another example - the rising wedge pattern shows "compression" as succeeding rally swings carry less far and the distance between highs and lows NARROWS in -finally, the buyers who have been purchasing on the way up, bail out and the stock breaks.

See the MO chart pattern that I'm talking about at Link

  Jonathan Levinson   8/23/02,  3:28:13 PM
QQQ has returned to the 25 s/r line we remember so well. The 50 day sma is at 24.69. The COMPX printed a low of the day at another familiar number, 1377, and a close below these support levels would be very bearish indeed. The TRINQ is at 2, QQV up 2.72 to 40.92, and total volume is up to just over 1.2B. Still a light day, not showing the convictiont that a bear is hoping to see.

  Jim Brown   8/23/02,  3:08:16 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the new SHORT signal at 15:02:08 when the OEX traded below 474.50. SPX 941.90, DIA 88.81, SPY 94.62, DJX 88.71, NDX 1009.59, Compx 1382.68, Emini 941.25. Maybe Valter was right! We lost -2.5 points on the stop at 477 but we could have gone up just as easily. The stop loss for this signal will be tight at OEX 476. SPX 945. We do not want to get caught with a big loss on a surprise bounce.

  Jeff Bailey   8/23/02,  3:04:55 PM
Sell Program at premium $-1.30

Dow -183, SPX -21, NASDAQ Comp -40

  Jeff Bailey   8/23/02,  3:01:59 PM
Day Trader short in General Electric (GE) $32.19 -1.68% might look for a break of this morning's low of $32.00. Stock has held together rather well up to now.

  Jeff Bailey   8/23/02,  3:00:58 PM
10-year YIELD ($TNX.X) 4.24% ... breaking below trending higher 50-pd MA on 60-minute interval chart. Rather negative for stocks into bond market close.

  Jeff Bailey   8/23/02,  2:57:58 PM
Day-trader stop Blowing out day-trade bull in CTXS here on strength at $6.10. Not to be it doesn't look like today.

  Jeff Bailey   8/23/02,  2:50:26 PM
Sell Program at premium $-1.30

Dow Indu -145, S&P 500 -16, NASDAQ Comp -32

  Leigh Stevens   8/23/02,  2:48:46 PM
Subscriber QUESTION: "Thanks for your response earlier. There is so much talk about weakness ahead due to declining Q3 earnings and anniversary of 9/11. Where would you put your Stop to protect your gains? Would you put Stop at $9, a bit under the up trendline from June low?

Would you automatically take profit when ORCL hits your target at $11.65? Or would you use a trailing stop to let market take you out?"

RESPONSE: Well, the recent sideways to lower move has put Oracle (ORCL) down below its hourly up trendline which intersects just under $11 currently. To most aggressively protect profits I would be concerned if 10.50 was pierced, which implied a possible close stop at 10.40. 10.50 - was also the previous daily up swing high that was exceed on the latest rally - also suggesting that 10.50 should be support. However, if you want to know the level, below which, there would be a trend reversal - that would be a close under 9.00 as you suggest.

I tend to take profits when a stock hits my objective OR takes me out on a trailing stop, whichever comes first. In this market especially, I would not necessarily wait for "ideal" objectives, given the potential for another move down in tech before a more sustained rally sets up later in the year.

  Jim Brown   8/23/02,  2:42:33 PM
Trading Station I constantly get emails about my computer setup. I just got a new digital camera so I can easily answer it today. The first picture is my daytime desk with the ever present CNBC noise in my left ear. (This is where I get my humor) I have a four monitor Colographic video card on my 2.2 GHZ P4 PC. I have four 20 inch monitors, 3 are flat screen NEC-LCD 2010. I keep Qcharts up on two, monitor, email, Interquote, Preferredtrade on the other two. Link

Note the number of emails in my inbox. At over 850 unread today there is no way I can ever answer all the mail I get. I try to catch quite a few during the day if the market is slow but I never get caught up. Please do not get your feelings hurt if I never answer your email. Link

  Jonathan Levinson   8/23/02,  2:37:00 PM
Is THIS somebody's idea of a joke? Get that guy back out on the golf course, NOW.

Volume breadth has improved, with 804M declining shares to 223M advancing. It's a magnificent day here on the east coast, but not enough so to justify the light total volume of 1,045M on the COMPX. This tells me that the big blast south of which bears have been dreaming for days and weeks now has yet to arrive. A close friend just called and asked if I think he should take his profits off the table on an OEX put play, or whether to hold over the weekend. We agreed that because of the light volume so far, there's no real convinction being demonstrated on the short side. Put another way, I think there's going to be another push upward. Given that the daily uptrend has yet to be violated, I will continue to watch the weekly stochastic for confirmation of a rollover. Alternately, a strong break below the moving averages outlined in Jeff's latest email update for confirmation to the downside. But right now, at these levels, it feels like a gamble in either direction. I would be using a trailing stop in a case like this, to let the machine make the decision that I might otherwise hesitate to take.

  Jim Brown   8/23/02,  2:18:10 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's go SHORT the broader market with an OEX trade below 474.50. (SPX 942) This is the lows of the day and would represent a complete failure of the 1:30 bounce and an acceleration of the morning trend change. If we do get a bounce we will look to enter on any higher failure as well.

  Jim Brown   8/23/02,  2:15:56 PM
TODAY could be the day that we see a reverse in trend at the close. Down instead of Up. I did close 1/2 of my OEX position, however will ride the rest all the way down. If we do get the reverse in trend I will be licking my chops for the upcoming next couple of weeks (grin). Kyle

I am beginning to agree with you. The bounce failed and everything is going sideways. If you read my Swing Trade wrap last night you saw the historical significance of lateAugust, early September. I am going to issue a breakdown signal just in case it goes your way.

  Jim Brown   8/23/02,  2:10:52 PM
Valters baaaaaaack!

Jim, you forgot that today is the "D" day......We are going to have -200+ on the dow and at least -50+ on nasdaq.......good luck......keep up the faith.....Valter

I am sorry Valter. I saw that strength building in the internals and lost my mind for a minute. We will get back in, I promise.

I can't afford to aggravate Valter, we need to get short again real soon if the internals roll over again. If he is going to promise us a market move then we need to listen. (just kidding Valter! Keep up the good work!)

  Jim Brown   8/23/02,  2:04:49 PM
OK, OK!!! I got the message! Stop the insanity!

There has to some very frustrated traders out there if they can't appreciate the humor. Please do not stop the emails because the silent majority very much appreciates them. Jane

Keep it up! Life's no fun if you can't have a laugh or two! Hollis

Please don't stop the humor. Thanks. RC


Jim: I enjoyed the jokes-keep em coming. Coy

Don't let a couple of emails spoil the market monitor...It is not getting carried away, and it beats not having anything updated for long periods of market stagnation!! thanks..keep it up Gary L

Keep the humor coming -- it does help break the tension. . . mikey likes it! MGM

Keep up the humorous E-Mails. In this market we can use all the laughs we can get! If we don't laugh, we'll cry. Craig

Jim et al, As for myself I got a good and necessary chuckle over the comments. I grabbed a couple and posted them to the traccy list - after the fact and without any information content other than that you guys were in great form! I hope that was an abuse. I actually found your site from recommendations on that list and/or the holygrailsm. nuff babble. Keep the sense of humor. Cheers, Richard

Please don't let complainers change your mind! I for one love to have a little humor injected into the process - it's wonderful! I s'pose you can't please everybody - but they need to relax a little - let the rest of us enjoy some laughs now and then. Keep up the good work! It's always amazing to me that you can find the time in the midst of all this to do that! Thanks! Dennis

Keep it Up ! John

Keep doing what your doing. A grin is great but laughter is better, much better. Dave L.

Jim, Keep the humor coming. I was personally down on my OEX position yesterday (not today ) and actually enjoy the comments. Kyle

I like the humor. Can't be too serious all the time. Keep it up. With all your subscribers there is no way to please everyone. In fact, if you only had 3 subscribers one of them would probably be unhappy. Russ

We need a laugh ...now and then. Especially when so many of us have been leaning short. Laughing out loud in a room by myself has to be a sign of appreciation for your humor Barry N

Tell the complainers to get a life!!! I enjoyed them so much! It helps to laugh!! B

Jim, I'm appalled that anyone would complain about your posts from yesterday. I suppose y'all get labeled "market geeks" or something like that, but obviously there are folks out there who need to get a life! The more jokes the better in my opinion. CC

Its ok. just easy up. bud Jim Please keep printing the humor. It does lighten up the day. Some people are never happy. David

Jim, Humor is good. For those negative people that don't like it, I would say get a life. Yes the market is challenging, but like my lovely says, that's the career you chose. Thanks for listening. Herm

Jim, Please don't stop the humorous e-mails. They were the only thing that kept me going yesterday. Helps to know I'm not the only one on the wrong (right side, now) side of the trade. Please don't stop. I love them. Tell the old foggie to lighten up!!! MAC

  Jeff Bailey   8/23/02,  1:56:00 PM
The 1:00 PM intraday update has been posted. Link

  Jim Brown   8/23/02,  1:52:46 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were stopped out of the SHORT signal at 13:45:42 when the OEX traded above 477. SPX 946.30, DIA 89.30, SPY 95.21, DJX 89.14, NDX 1017.43, Compx 1390.46, Emini 947.25. Looks like somebody pulled the trigger on a buy program and that could bring the retail crowd back into the game. Looks like we bailed at exactly the right time!

  Jonathan Levinson   8/23/02,  1:51:52 PM
Declining volume is ahead of advancing volume 742M to 149M on the COMPX. The TRINQ is at 2.21, the highest we've seen in days, but far from the extreme selling that gave us readings of 3.5+ that we saw last month and on a few occasions in August. The QQV is up 2.09 to 40.29, and QQQ is back above 25.30. The COMPX is either basing here or just pausing for its next slide. All intraday 5(3) stochastics are running back up from oversold, with the 60 minute just starting to turn up. Note that today's action has not been sufficient to violate the uptrend on the daily candles, and there is still bullishness in the air. I point this out as a cautionary statement for bearish traders, because I remain convinced that the greater risk at these levels is with long trades.

  Jim Brown   8/23/02,  1:41:58 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Contrary to my earlier stop loss plan I am seeing some strength building in the market. Lower the current stop on the SHORT position to OEX 477 and let's see if we can get a better entry later. Maybe the dip buyers are going to race the covering shorts to the close.

  Jim Brown   8/23/02,  1:36:22 PM
This is the last one of the Weldon emails I am going to print but I could not pass this up.

Jim, For a price, greater than what I'm making in the market, I'll play golf with Weldon everyday to help stabilize the market. It's hard duty but someone has to do it. John B.

John, we recognize the sacrifices you are making to allow us to profit from the market. Unfortunately there may be some travel involved to places like Pebble Beach, Castle Pines, Maui, etc. Are you sure you are up to it? We thank you for your dedication to OIN.

  Jim Brown   8/23/02,  1:29:02 PM
Jim, Just closed my short from yesterday so markets are now given permission to go into free fall (hit MY stop of 476). Didn't think last night I'd be taking a profit from this one! DOW -20pts and OEX -1 pt and sinking since I closed.......SEE!

Wow! help coming from all sides now! (grin) I have to admit I was worried too!

I got a couple emails last night complaining about the 4-5 humorous emails I printed yesterday afternoon. If everyone feels this way I will quit printing them. I just thought a little humor would ease the tension of being in a frustrated market.

  Jim Brown   8/23/02,  1:17:33 PM
Jim: Do something about Weldon. Pay him to go away!! ML

  Jeff Bailey   8/23/02,  1:17:05 PM
Day Trader's Word of caution ... if you enter a trade and then go an place your stop loss out there for the market makers to see, just 5 or 10-cents away, plan on them coming to get it.

  Jim Brown   8/23/02,  1:16:51 PM
Weldon, just emailed me. He is going to try and make up for not playing 36 holes today by going long some Emini futures. You can see the downturn at 1:07 where he made his buy. Thanks Weldon, glad we can count on you!

  Jim Brown   8/23/02,  1:14:43 PM
Swing Trade Signals
Volume is very weak but strongly negative. The down volume on the NYSE and Nasdaq is beating up volume by better than a 4:1 ratio. The TRIN has risen to 2.35 indicating the growing oversold conditions. The VIX is back from the brink at 32.50 after coming very close to breaking 30 yesterday. The A/D line is still better than 2:1 in favor of decliners.

  Jeff Bailey   8/23/02,  1:05:58 PM
Activision (ATVI) $30.52 +0.3% .. getting upside alert here to break above 4-day consolidation. Good looking long stop, under $30. Link

Per yesterday's market monitor... Wednesday was "inside day" that was broken to upside yesterda, nice to see some follow through today on short-term basis.

Prior observation from p/f chart was "bearish signal reversed" at $30. Bulls want a break at $31 to get above bearish resistance. Link

  Jim Brown   8/23/02,  1:04:48 PM
Sorry guys, games over. I'mmmm baaaaaaaaaaaaaaaaaaaaaaack. Weldon

Quick - close the short position! (grin) It was good while it lasted!

  Leigh Stevens   8/23/02,  12:48:02 PM
Subscriber QUESTION: "Just wanted to comment further on these rising wedges we're all seeing. Using your Elliott Wave knowledge, you're probably familiar with "throw-overs".

These particular wedges look like they've got their 5th & final up waves completing and these typically "throw over" the top of the wedge (or under in the case of an descending wedge) as their final hurrah. The price then reverses and "completes" the pattern. Looks like what may have occurred yesterday and today's price action could mean the reversal down has begun.

As always, thoroughly enjoy all of the work you guys do. Great work!"

RESPONSE: Yes, a fake out type move - same principle seen in an exhaustion gap; or, a bull (or bear) trap reversal; e.g., a move to a new high - DOW 9050 - followed by an immediate or fairly immediate downside reversal.

Looks like DJX would break its support up trendline at 87.5 today and 88.3 on Monday - where its 50-day moving average is today.

  Jeff Bailey   8/23/02,  12:47:40 PM
Day Trade Bull Bidding some Citrix Systems CTXS $6.14 here at $6.14 target $6.21 day's end. Using Novell (NOVL) $2.68 +28.2% and better than expected earnings there as catalyst. Link

  Jim Brown   8/23/02,  12:41:48 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
OK, now that the fun is really beginning let's lower the current stop loss to OEX 478. (SPX 948). Hopefully that will keep us from being stopped out but provide plenty of room to wiggle.

The initial target for those wanting to take a profit would be OEX 472. This is just above the Tue/Wed intraday lows and could be a bounce point. Traders may want to take a profit here and look to reenter on a bounce or Monday morning whichever comes first.

I am not going to squeeze the stop and close the play because I think our downside risk is substantially lower. I would rather stay in the play and risk some profits with a much lower target in mind for next week. This is just my opinion and how I am playing it. Feel free to exit or hold as your risk profile dictates.

  Leigh Stevens   8/23/02,  12:33:41 PM
Subscriber QUESTION: "I am a new subscriber. How should I do settings for the 5-hr and 21-hr. stochastic. Is it 5(3)3 and 21(3)3 ?? "

RESPONSE: Yes - 5,3,3 and 21,3,3

The "3's" are simply the smoothing factors to smooth out or "slow down" the value generated by the stochastic formula. "3" is the common "smoothing" default and I find no significant refinement in using a value other than 3 for most users.

On the other hand, the "length" setting or number of trading periods that the stochastic formula uses in its calculations - where the current tick or trade is relative to the lowest low and highest high of X (e.g., 5, 10 or 21) number of trading periods, such a hours, half-hour (30 min.), days or weeks - IS a significant variable.

For example, on an hourly basis I like a length setting of "5" for a short-term momentum & overbought/oversold indicator and "21" for a longer range hourly indicator. For a daily chart, I tend to use "14" as the length; for a weekly chart, "8", or "13".

  Jeff Bailey   8/23/02,  12:29:53 PM
InVision Tech. (INVN) per 12:13:44 Link

  Jim Brown   8/23/02,  12:29:30 PM
Swing Trade Signals
S&P futures are setting new lows as well as total declining stocks. The dip buyers are getting run over by the sellers so far today. If the OEX holds under the 476 break then my next target is around 471 which was the intraday levels from Tuesday/Wednesday. Do you think it is safe to lower the stop loss from 488? (grin)

  Steven Price   8/23/02,  12:13:45 PM
Reader Question: Do you consider the "Greeks" when you do your analysis on the play of the day? Technical and fundamental analysis are superb. thks j

Response: We usually pick our plays based on the stock itself. Greeks are usually used to manage an account once you have put a position on. However, in deciding which options to highlight for the play, I do choose those options that have an appropriate delta (and gamma for strike crossovers) for the time window we are aiming for on the play. For instance, a short term play will lend itself to high delta options that are more costly, but move right along with the stock. For a longer term play I may choose an out of the money, low delta, low cost option. In this case, if I am targeting a strike crossover as my target, the option's gamma will kick in when we approach the strike and the delta (and option price) will increase at a much faster rate at that point, while the initial investment was lower.

  Jeff Bailey   8/23/02,  12:13:44 PM
InVision (INVN) $32.59 +1.21% ... Jeff: INVN ( OI previous recommendation ) showing breakout. What would be your near term target Thanks for a tremendous job from all of you guys

Stock continues to work its way higher and now testing longer-term downard trend on p/f chart at $32. The "first buy signal" off the bottom, which has not yet been negated by a sell signal has the bullish vertical count at $39.50.Link

Also note the "triple-top buy signal" at $26. From Professor Davis' study, pattern is profitable 87.9% of the time, average gain of 28.7% over 6.8 months time. From $26, that would be a target of about $33.46.

Combine the vertical count $39.50 and Davis' study $33.46, then bull has a range to target. Hmmm.... stock traded $33.45 today. Not sure where/when OI profiled, but if from $26, would look to take some gains off the table even though its only been less than 2 months since the triple-top.

Also... I've got retracement on INVN from $48.96 to $2.93, which has 61.8% at $20.51, 50% at $25.96 (nice tie in with triple-top at $26) and 38.2% at $31.38. Further upside retracement at $40.17 may tie in nicely with the vertical count.

If that retracement is too "wide" then I've also got a retracement from the recent low close of $17.80 to the all-time high close of $48.29. 38.2% at $29.44, 50% right here at $33.04, 61.8% at $36.64. I'd sure look to sell a spike higher at $36.64 should it happen. Link

  Leigh Stevens   8/23/02,  12:07:31 PM
Subscriber QUESTION: "Someone pointed out to me stock charts containing rising wedges with declining volume - examples being Dell, Microsoft and Cisco as bearish patterns setting up for failures. He didn't specify what time frame but I assume he 's refering to hourly charts. Do you see any of these? I think I see the CSCO wedge, not sure."

RESPONSE: I've been commenting on the possible bearish rising wedge on the S&P 500 (SPX) DAILY chart - yesterday's rally and close appeared to have broken out above this bearish rising wedge - now I'm not so sure that this was the case - variations in the way of drawing the upper trendline could have Thursday's high just AT the trendline or slightly above it - with today's break, the ascending wedge pattern may still be signaling an impending downside reversal, "confirmed" by a break of the lower trendline of the wedge.

By Monday key SPX support, at the lower up trendline of the daily chart "wedge", is at 923 - by Tues, that support trendline is up to 928 - the same level as the pivotal 50-day moving average. A bearish rising wedge, while not seen all that often, tends to have good predictive value for bearish reversals and this chart pattern is being reflected in the S&P 500, the stock group leading this market rally.

On the stocks you mention - Microsoft (MSFT) has this wedge pattern on its DAILY chart. Cisco Systems (CSCO) today has broken down below the lower trendline of its daily rising wedge pattern - after making a double top in the $15 area. DELL also broke on Wed. to the downside, falling out of its bearish rising wedge pattern, suggesting that the stock is headed still lower.

  Jim Brown   8/23/02,  12:07:24 PM
Swing Trade Signals
Here is what I am looking at for intraday support on the OEX. If this 476 level fails it would be a critical change in trend. Link

  Steven Price   8/23/02,  12:04:06 PM
Reader Question: Would you comment on the current outlook for VRTY. I am cuurently long the stock and it has just printed $12.00 giving it a "bullish catapult". Just what does this catapult signify other than the double top breakout after a bear trap and prior to that a triple top breakout? Jim

Response: Verity (VRTY) $12.29 (+0.29) The bullish catapult is really a strong confirmation of the triple top. The stock has recoiled with a reversal, but not achieved a sell signal, and then exploded out to the upside, nuch like pulling back a catapult and letting it fly. I like this stock as a long play, but keep in mind that the bullish vertical count of $15.50 is above the triple top percentage target of $14.80 (within 6.8 months). The stock is now above $12 resistance and showing great relative strength today. VRTY has pulled back from today's high of $12.73, but a hold above $12 looks bullish with new support.

The 200 dma of $13.86 could give it some problems to the upside, as it provided support on a couple of occasions on the way down. I don't normally recommend deep options, but in a play like this, with a slow moving stock, and a 6 month time window to achieve its count, new entries may want to look at deep calls, which don't have much time premium to erode while waiting for the stock to move. If a trader employs this strategy I recommend a stop just below support, as deep options can be costly when they move in the opposite direction.

  Jonathan Levinson   8/23/02,  12:02:00 PM
Looks like I hit the "submit" button too soon! The SPX has just begun printing freshing lows of the day, and appears to be trying to pull the COMPX down with it, now currently 1391.

  Jonathan Levinson   8/23/02,  12:00:30 PM
The COMPX has been parked at 1393 and the QQQ at 25.33-25.35. It feels almost like an op-ex day. Resistance is overhead in the 1405-1410 area, then at 1425. Support is at 1380 then 1355-60. The TRINQ at 1.97 is reflecting steady selling pressure, slightly heavier than the spot where it was last pinned, around 1.70-1.75. The QQV is dancing around the 40 level, currently up 1.7 on the day. This feels to me like a day that wants to go down further, but it was this same feeling that lost me money last week and the week before. We'll see.

  Jim Brown   8/23/02,  12:00:19 PM
Swing Trade Signals
Looks like the short term support at 476 is about to break. This could signal a new leg down and might be a good entry point for anyone still flat.

  Leigh Stevens   8/23/02,  11:44:14 AM
INDEX Comments: OEX - Looking again at technical support implied by its rising hourly up trendline, current trading is below this. OEX would not climb back above it support unless it gets back above 478-479. Nothing magical about this number, just another way of measuring the loss of its upside momentem. Which is also measured by falling stochastic levels on both a 5 and 21-hour basis. The 14-day stochastic has rolled over also and the daily lines have crossed over to the downside.

SPX is right at its hourly support trendline - a break of 946 would likely signal or suggest further weakness in SPX.

  Steven Price   8/23/02,  11:41:52 AM
Citigroup (C): $34.05 (-1.13) I've been looking for a reason to short this stock, and with this morning's news I thought I finally had it. However, I am amazed at the support the stock is finding just below $34. I wouldn't consider this a bullish play just yet, but I'm losing faith in my convictions as a short.

  Jim Brown   8/23/02,  11:13:05 AM
Swing Trade Signals
The OEX has short term support at 476-477 and that appears to be the current battle ground. The bulls attempt to rally off the lows was weak at best and it appears the trend has changed in the shorts favor.

  Steven Price   8/23/02,  11:07:56 AM
Brooks (BRKS): $20.63 (-2.68)

Asyst Technologies (ASYT): $12.10 -0.89

Reader Question: steve, I'm currently short brks and asyt...very happy today......thinking of adding some more short(you know greed)...how would you play it? Thank you for your valuable comments....

Response: Good eye.

ASYT appears to be flatlining just above $12.00 (on daily and short term charts). I would wait for a break below $12 to add to the position.

BRKS also found round number support at $20 on the 5 minute chart. After a 10% drop in one day, I would wait for a break below $20 before adding to the position. It looks like a dead cat bounce to $20.70 , as this rebound is running out of steam.

  Jonathan Levinson   8/23/02,  10:55:51 AM
QQQ is struggling with 25.50 from underneath now as the COMPX moves sideways following its morning dive. The TRINQ remains glued at 1.73, showing steady moderate selling pressure, and the QQV is up above 40 now, up 1.92 on the day, as option traders demand higher premium on the contracts they sell.

  Leigh Stevens   8/23/02,  10:37:20 AM
INDEX Comments: QQQ - has pierced its hourly up trendline - the Nas 100 tracking stock looks like it could fall to next chart support between 24.8-25.25

  Leigh Stevens   8/23/02,  10:33:12 AM
INDEX Comments: S&P - OEX & SPX have come down to their hourly up trendlines just under intraday lows so far, at 945 in SPX and 477 in OEX - a break of these trendlines would set up possibility for retreat to lower technical support at 470-472 area in OEX and to 940 to 935 in the SPX.

  Jeff Bailey   8/23/02,  10:31:20 AM
Intl. Paper (IP) $38.28 -0.8% ... Jeff: I appreciate your comments regarding the CYC.X as an index to keep an eye on regarding the IP lottery call play. Would you sell this lotter play for small loss, or hold it and still target your $41-$42 target range?

Hmmm.... lottery plays are "risk capital," but I too have been thinking about this simply from an account management type issues. I personally bought and hold 10 calls at the Sept. 40 strike and I'm dealing with the "do I really want to risk the $700.00 with CYC.X as it relates to account?

I can't answer this question for anyone, but you won't hurt my feeling if you part ways and perhaps review if CYC.X gets above the 505 level. We've seen some stocks in recent sessions rally to their 50-day MA and play catchup with the market averages. IP's 50-day MA is at $40.38 and current GUESS is that these calls might trade $1.00 on such a rally. As such, I like you am beginning to question whether or not this lottery ticket is going to pay. I profiled at $0.65/contract and not really liking $0.35 reward for current $0.65 risk. You think about this and make your own risk/reward decision as it relates to a "lottery play."

  Jonathan Levinson   8/23/02,  10:25:12 AM
I'm watching the premium on the contracts I had been targetting fading fast as the California mudslide this morning slows. The shorter intraday 5(3) stochs are turning back up from oversold here, but the TRINQ is staying steady at 1.73.

  Jonathan Levinson   8/23/02,  10:21:55 AM
Don't feel too too bad, Weldon. I'm still waiting for my gap fill!

  Jim Brown   8/23/02,  10:20:54 AM
Good morning. I slept in a little and when I got up the first thing I thought I should do was thank Valter for promising a down day! Grant

Jim, We should appreciate Valter's promise that market will go down on Friday. As it getting closer to reality. We should consider his market prediction everyday and forget about CNBC. AP

I am trying to get him to sign a long term contract as we speak but our salary cap keeps getting in the way. Is $20 million too much? Grubman got more than that to hype a few telecoms. If Valter can promise market moves how much is that worth? (grin)
We also can't forget Weldon who elected to play golf today instead of staying SHORT. Thank you Weldon!

  Jim Brown   8/23/02,  10:15:09 AM
Swing Trade Signals
Looks like the hedgies are joining the party with that last leg down. The A/D line broke 2:1 in favor of decliners. Dip buyers have been noticeably absent so far. The futures are dropping like a rock with the NDX at 1026 and S&P at 949. Both are now below their short term averages.

  Jonathan Levinson   8/23/02,  10:12:41 AM
After the 1st half hour of trading, we've seen no strength whatsoever. The break below 1400 violated the recent ascending trendlines on my 15 and 30 minute COMPX charts. The TRINQ broke 2 only briefly and is currently at 1.88. The QQV is up 1.43 on the day to 39.63 and QQQ is struggling to hold 25.50.

  Steven Price   8/23/02,  10:09:57 AM
Citigroup (C) $33.99 (-1.19) A look at the 10 min. chart shows $33.80 as support from the end of the day Wed and Thurs morning. This looks like it is serving the same purpose this morning. Traders looking to short (C) after this morning's news about the investigation into CEO Sandy Weill should wait for a break below this level.

  Jeff Bailey   8/23/02,  10:01:21 AM
WebEx (WEBX) $15.00 +4.96% ... I sense a short-squeeze here, or a pick up near-term in any short covering. Link . Yesterday, shares of fellow web-conferencing stock ACTT Link jumped more than 100% on a deal with AT&T.

Subscribers that have been with us awhile remember Fulcrum Global Partners and their reiteration of "sell" rating every time shares of PHSY would rally (4/4/02, 3/6/02, 2/20/02, 2/12/02)? Last night I saw the above mentioned ACTT web-conferencing stock surge and immediately thought of WEBX as potential bullish play. Looked through some news and see that Fulcrum has reiterated "sell" rating on WEBX multiple times as if they're big short and talking stock lower. On July 22, Fulcrum reiterated "sell" saying they believe competitors such as MSFT are accelerating their efforts to offer collaborative functionality that overlaps with WEBX conferencing products; also, firm cites deteriorating accounting fundamentals, and believes 2002-03 estimates could be at risk. Price target $10.

Feb 5th, WEBX $24.16, stock fell sharply for a couple sessions after Fulcrum claimed that WEBX was vulnerable to competition from ORCL and MSFT.

Dec. 18th, WEBX $27.35, Fulcrum believes ORCL is going to stop using WEBX product and use their own iMeeting software; finincial impact to WEBX could be less that $200K-$300k, but ORCL would become formidable competitor as it releases iMeeting in Q1. MSFT is another worry, as WinXP collabroative features could eventually penetrate the market at WEBX's expense.

Note: Level II traders may note that Fulcrums market maker ID is FLCR and I do not see them on Level II right now. I think not too long before we hear from Fulcrum again regarding WEBX. If so, will monitor stock closely and if a trader sees ANYTHING similar to what we saw in PHYS from April 4th, then watch Level II or stock action.

  Steven Price   8/23/02,  9:59:29 AM
Pixar (PIXR) $49.43 (-0.67) New OI Put Play PIXR continuing its rollover after breaking below $50. A look at the short term (10 min.) chart shows a break below the 200 period moving average for the first time since Aug. 9. (with the exception of what looks to be a bad tick on Aug 13)

  Steven Price   8/23/02,  9:53:37 AM
Goldman Sachs (GS) : $78.51 (-1.40) OI put play GS rebounded yeswterday on the strength of the broader markets. It's giving back this morning and is now below its 10-dma ($78.79), which gave it some support yesterday. The stock has been downgraded by Salomon and Merrill the last 2 days.

  Jonathan Levinson   8/23/02,  9:52:21 AM
These guys are good. The temptation to buy puts is very strong, yet the price is so far holding on this support just below this morning's gap resistance.

  Jim Brown   8/23/02,  9:51:05 AM
Swing Trade Signals
That was a nice dip at the open and hopefully enough to deflate some of the bullishness. The key now will be to see if they buy the dip in volume or shy away because of not wanting to hold over the weekend. The continued downgrades of the chip sector has to start weighing on traders eventually. If you saw the charts in my Swing Trade wrap last night you know what institutional traders are thinking about the next three weeks. Once trends become defined there is normally a rush to beat the clock and move in or out earlier each year. Time will tell if that will happen today.

  Jeff Bailey   8/23/02,  9:38:59 AM
Treasury Watch seeing some modest buying in Treasuries this morning with YILEDS lower in the 5, 10 and 30-year.

Day trader shorts may want to look at short in General Electric (GE) $32.29. Stock just hasn't been able to trade $33.00, thus stop just above $33. Look for short entry above $32.50, then target 60-minute chart interval at 50-pd of $32, but some downside on daily chart to $30 under two or three day's of market weakness. (tie in with CYC.X type action). Link

  Jim Brown   8/23/02,  9:31:58 AM
Swing Trade Signals
This is a real no news morning. There are no economic reports and downgrade comments were very slim. The markets are left to trade on their own merits and it looks like they are having second thoughts about holding stocks in the last week of August. Semiconductors including Intel were cut again. INTC was cut by Bear Stearns on worries the Sept quarter was running below estimates. AMAT was cut by BAC along with several other chip makers based on a continued slowing in capital spending. How many more downgrades must occur before traders start taking it seriously?

We are currently SHORT the broader market from OEX 483 and the current stop loss is OEX 488. Maybe things are going our way today!

  Jeff Bailey   8/23/02,  9:31:34 AM
The 9:00 AM intraday update has been posted. Link

  Jonathan Levinson   8/23/02,  9:29:27 AM
We're going to get a gap down open on the COMPX, with QQQ currently trading down around 30 cents from yesterday's close, currently 25.82. While the potential for a breakaway slide exists, I'll personally wait to see if the gap fills before putting on today's short positions. We can expect covering from nervous shorts on the open, and this could potentially fuel another move up. I won't guess at the magnitude, but it's easier to buy puts with the stochastics rolling over from overbought than with them buried in oversold. In particular, the weekly 5(3) stochastic is in overbought territory but not yet rolling over. That stochastic has been dominant through the entire bullish move this month, and I'm going to try to base my trading on it and the daily candles to avoid further whipsaws.

  Jeff Bailey   8/23/02,  9:27:09 AM
Key economic sector/index to be monitoring closely over next several sessions in the Morgan Stanley Cyclical Index (CYC.X) 502.71. On July 29th, rallied right up to 505, failed and broader market went with it. On pullback, MARKET was trading the longer-term trend and now right back at 505 level. Equity bulls want to see a break higher and some leadership from these more economically sensitive stocks, bears want to see a failure. Technically, I still consider this a LEADERSHIP group as it is one of few sectors/index that hasn't violated September lows. Link Equity bears may come in and start shorting, using CYC.X and 505 level as potential alert for strength. Not only in sector, but signal from the MARKET that it believes in growing economy.

  Steven Price   8/23/02,  9:24:11 AM
Citigroup (C) $35.19 CEO Sanford Weill is apparently a target of the investigation by NY Attorney General Eliot Spitzer, that previously focused on Salomon Smith Barney analyst Jack Grubman. Citigroup has been turned back from its 50-dma ($35.76) the last several days, and this may put the ceiling on it for a while.

  Leigh Stevens   8/23/02,  9:20:51 AM
Pre-Opening INDEX Comments - Looks like traders are pausing and saying "now what!", as the Dow has gotten above 9,000 - but what is going to propel it higher now? No economic news today to do that, but plenty in the way of economic reports next week:

July existing home sales and new home sales; July durable goods orders, August consumer confidence, the revision to Q2 GDP; final reading on the U of M consumer sentiment index and July personal income and spending. Stay tuned!

  Leigh Stevens   8/23/02,  9:14:38 AM
Pre-Opening, Stock INDEXES - Good Morning!

Index FUTURES snapshot: S&P 500 > -5.80 at 955.30; Dow Industrials > -45.00 at 8995.00; Nasdaq 100 > -11.50 at 1040.50

S&P Futures "fair value" numbers: S&P ($SP02U) = +.34 -<>- Nasdaq 100 futures ($ND02U)= +1.70

  Jonathan Levinson   8/23/02,  8:36:08 AM
The US Dollar Index ramped higher and has settled around the 108.20 level. NDX futures are -10, and SPX -5.10. CNNfn has a story that made me laugh, titled "You've Got Sale?", referring to news that AOL is considering selling off some of its non-core assets. This reminds me of an article by Futrelle entitled "You've Got Jail!" also referring to AOL, and one of the funnier ones I've read. For those looking for an out-of-date laugh, here's the Link

  Jim Brown   8/22/02,  9:27:36 PM
Swing Trade Game Plan - Click here: Link

  Jim Brown   8/22/02,  9:27:23 PM
The Market Monitor for Thursday has been archived. Click here to view it: Link


Market Monitor Archives