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  Jim Brown   9/18/02,  11:49:26 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   9/18/02,  5:18:09 PM
Aetna (AET) $39.49 +2.7% .... stock traded up today ahead of tomorrow's 09:30 AM EST scheduled presentation at the Bear Stearns Healthcare Conference.... Technically, today's rally back to $40, puts in place the bearish vertical count colum (O's from $43-$37) of $29. As such, risk/reward for bearish trader from $40 to a stop at $45 is risking $5 to potentially make $11 to bearish of $29. Link

Still like this one short/put and will keep an eye on the stock tomorrow. Never sure what type of news (good/bad) could be released.

On September 13th, after initial bearish profile here in market monitor and triple-bottom sell signal at $40, stock was hit lower near $37 on trading floor rumor that the company would lower their guidance at the Bear Stearns conference.

 
 
  Jeff Bailey   9/18/02,  5:05:12 PM
S&P 500 futures (sp02z) 859.40 -0.5% ... down roughly 4.4 points from close, but holding above Wednesday's low of 856.80.

 
 
  Jeff Bailey   9/18/02,  5:00:42 PM
Intl. Bus. Machines (IBM) $69.55 -3% Link ... stock trading -$2.20 from the close at $67.35 after Electronic Data Systems (EDS) $36.46 -3.4% Link said that it expects revenues and earnings for its third quarter "to be lower than previous guidance." EDS sees earnings in the range of $0.12-$0.15 versus current analyst's consensus of $0.74. EDS sees revenues of $5.3-$5.5 billion, versus consensus estimate of $5.7 billion.

Several of the one-time charges to earnings appear to be "WorldCom related."

 
 
  Jim Brown   9/18/02,  4:09:22 PM
Swing Trade Signals
The Swing Trade game plan will be posted very late tonight. It will be very simple. Stay short unless stopped ! I have some appointments this afternoon that will seriously delay the recap. Sorry.

 
 
  Jim Brown   9/18/02,  4:05:22 PM
Swing Trade Signals
I am glad we got short before the close. The bounce during the day was totally technical and from oversold conditions. Now we are setup for the next major profit warning. IBM would be my target. With ORCL having trouble and Intel seeing no IT spending increases I expect IBM is struggling. Their take over of the consulting company could give them additional revenues but there are going to be some charges in digesting them.

Considering we were looking for a bounce to short from the opening disaster I think things worked out well. We got a nice gain off the bottom and a new short entry right where we exited last night (438). While we did not participate in the drop we recovered all of it on the rise. We are right back in the down trend and waiting for the next disaster to break. Life is good!

 
 
  Jim Brown   9/18/02,  3:53:53 PM
Swing Trade Signals
It is official. Ralph Bloch has gone on record as calling the 8051 low today the double bottom retest of the August lows. "Now we will see how much of a rally we can muster from here" but he still threw in his catch phrase of "myself and several others 'were' looking for a retest of the 7500 lows." Now he has covered both possibilities. If we go up he called the double bottom and if we go down then he is "looking" for a double bottom at 7500. I am really relieved now to know where the market is going. (grin)

 
 
  Jim Brown   9/18/02,  3:49:54 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the SHORT signal entry at 15:44:00 when the OEX traded below 438. (SPX 873.83, DIA 82.37, SPY 87.92, DJX 82.15, NDX 898.39, Compx 1256.69, QQQ 22.33, Emini 873.50. The initial stop loss will be OEX 442. (SPX 880, DJX 83.00)

 
 
  Jim Brown   9/18/02,  3:46:23 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the trailing stop at 15:43:20 when the Dow fell below 8215. (OEX 438.43, SPX 873.83, DIA 82.37, SPY 87.92, DJX 82.15, NDX 898.39, Compx 1256.69, QQQ 22.33, Emini 873.50.

 
 
  Jim Brown   9/18/02,  3:41:12 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Do not hold the LONG signal over the close. If the trailing stop (Dow 8215, OEX 438) is not hit and the profit stop at Dow 8275 is not hit then close the signal between now and the close of trading.

 
 
  Jeff Bailey   9/18/02,  3:37:47 PM
The 3:15 PM intraday update has been posted. Link

 
 
  Jim Brown   9/18/02,  3:36:58 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Sorry for the conflicting signals. Several asked for an OEX level instead of Dow. Let's raise the stop loss on the Dow to 8215 to correspond with the OEX 438 level.

Repeat: Close the long with a trade at OEX 438, Dow 8215.

Go SHORT the broader market with an OEX trade at 438.

 
 
  Linda Piazza   9/18/02,  3:36:05 PM
MACD turned down on daily charts, RSI neutral and below 50, RSI down on weekly charts and weekly stochastics rolling over, hesitation at prior support, fundamental news mostly bleak: While I worry about those daily stochastics buried in oversold and wish the hourly stochastics were turning down, I think a short play at Jim's trigger offers a player like me a good risk/reward parameter. Ample overhead resistance makes it easy to set a stop loss.

 
 
  Jim Brown   9/18/02,  3:27:51 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Close the long play with a trade at OEX 438

 
 
  Jim Brown   9/18/02,  3:27:13 PM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
The markets lost their steam. Lets go short with an OEX trade below 438.

 
 
  Jonathan Levinson   9/18/02,  3:25:31 PM
The COMPX at 1257 is turning that big white candle into a big narrow spike as the 5(3) stochastics, 30 minutes and shorter, all begin to give bearish crosses. The TRINQ has crept up to 1.39 on this pullback. The biggest impediment to playing moves such as these is that after a selloff of the magnitude we saw this morning, the breadth indicators become difficult to read effectively. Normally, the top of a 25-30 point move will bury the TRINQ to .30 or below, which, when combined with topped out stochastics, becomes a clear signal to get short. However, here the bottom of the TRINQ's range never got below 1 for longer than a few ticks, making it impossible to confirm the top of the move as signalled by the topping oscillators and price at resistance.

 
 
  Jim Brown   9/18/02,  3:18:33 PM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
Looks like we are running into some resistance here and we are pressing our luck. Change in plans. Let's set a profit stop at Dow 8275. If we hit it we are out and ready to go short at a failure of 8300 or above. Let's raise the stop loss to Dow 8195. This will take us out on a drop and on a rise.

 
 
  Steven Price   9/18/02,  3:13:32 PM
Reader Question: Steve, What is it going to take for MSFT to break down? So goes MSFT so goes the nasdaq. Your opinion? Rick

Response: $48.07 (+0.78) MSFT was dropped as a long play not because we were afraid of it going down, but because of its current sideways movement and time decay in the options. It has tremendous PnF support above $46. The bullish support line (now at $47) has served as support on its last six pullbacks. A trade of $46 would be needed to break this support line. I agree that MSFT and the Nasdaq are closely linked, however MSFT has shown better resilience lately. I'm not a buyer just yet, because I'm still bearish on the market overall, but if I turn bullish, MSFT will be one of the first stocks I play long.

 
 
  Jim Brown   9/18/02,  3:11:03 PM
Swing Trade Signals
OEX 442 is the 5-DMA and 444 was strong afternoon resistance yesterday. I would love to see the Dow break 8305 which is the 50% retrace level but I remember well the 8350 resistance for the last week. Time to snug up that trailing stop!!

 
 
  Jim Brown   9/18/02,  3:04:38 PM
Swing Trade Signals
Nice little stutter step there as we filled the gap and now the A/D ratios are moving quickly toward positive. Advancing volume is going vertical as we pass the 3:PM turn. A positive close should trigger a positive open. If we don't get a sell off in the last 15 min of trading I am planning on holding the LONG signal overnight.

 
 
  John Seckinger   9/18/02,  3:00:36 PM
Per earlier post, I would really like to see the Dow test 8280 by session's end. What do we need to accomplish this feat? More bidding in Utilities (UTY), and definitely less bidding in the five-year note (FVZ2). Fortunately, the bond pit closes in just a few minutes. Anything else? Sure, more weakness in Gold and a stronger dollar. Ok, that might be asking for too much. On a practical side, I do believe watching the UTY makes sense during the last hour.

 
 
  Jonathan Levinson   9/18/02,  2:53:13 PM
The twitchy 5(3) stochastics are trying to cross from overbought on the 30 minute COMPX chart, while the 5 day stochastics started a preliminary bullish cross on this move upward. Of course, the stochastics can "undraw" themselves if the move reverses, but for the moment we have overbought intraday stochastics, and oversold daily and weeklies. The COMPX peaked at 1255, which makes sense, being the only number I didn't list as a resistance line, and is trading just south of it at 1253. The TRINQ is still in sell territory, just north of neutral at 1.31, while the QQV has gone negative at 50.32, down .70 on the day.

 
 
  Steven Price   9/18/02,  2:53:12 PM
Panera Bread (PNRA ): $25.55 (+1.31) The rebound in PNRA has been quite strong today and reached higher than the previous three red candles. This engulfing pattern has me looking for a break back under $25 for a new entry, rather than jumping in here. I'm not ready to close the play just yet, with the stock up against its 10-dma of $25.96, which acted as resistance on the last failed rally attempt.

 
 
  John Seckinger   9/18/02,  2:49:00 PM
Utilities higher by 2.90 percent, and should be one of the reasons for the underpinning bid in the Dow. Speaking of the Dow, the 22 PMA on a five-minute chart crossed above the 50 PMA. This should take the Dow towards 8200. Other sectors outperforming the Dow include Biotech, Semiconductors, and Pharmaceuticals.

 
 
  Jim Brown   9/18/02,  2:48:16 PM
Swing Trade Signals
We are closing in on resistance from yesterday. OEX 438 will be a filled gap from this morning and will either crash the current rebound or accelerate it. Once past 438 there should be resistance at 440-442, which was strong support for the last two weeks. We are far from out of the woods and while we would love to see a nice rebound to something in the 450-460 range for our next short entry I think that would be too much to hope for. We are 17 minutes from the 3:PM turn and I would love to see some green before then. That could energize some more short covering to avoid a gap up tomorrow. That thought is laughable since the possibilities for bad news clearly outnumber the possibilities for good. We will be happy to take what we can get today even if it comes 10-15 crawling Dow points at a time. Every tick up just sets up a stronger fall when it reverses.

 
 
  Jeff Bailey   9/18/02,  2:35:13 PM
Biotech's and Semiconductors ... Biotech Index (BTK.X) 332 +0.09% and Semiconductor Index (SOX.X) 263 +0.02% edging green here. Software Index (GSO.X) 89.97 -1.8% still red. Action between the three has the QQQ trading $22.22 +0.13.

Per Index Trader Wrap .... QQQ bear has come pretty close to our swing-trader's bearish target of $21.35 at today's intra-day low. Market looking like it wants to bid near-term and QQQ bear may look to lock in some gains here.

 
 
  Jim Brown   9/18/02,  2:32:58 PM
Swing Trade Signals
Don't look now but there is a distinct possibility that we could close positive today. That would be an amazing comeback considering the magnitude of the JPM news. There will be a flood of analysts claiming that 8050 level as a successful retest and a new bottom. Needless to say I don't believe them but being long I will be glad to watch them stumble over themselves trying to claim it.

Personally I don't think we will have a retest until as see something in the 7500 range. This bounce today is just an oversold relief rally and will provide us with a new short entry point. One of the factors powering the gains is speculation that the bad news will cause the Fed to cut rates next Tuesday. That is also a slim chance but it won't stop traders from betting on it.

Back to the JPM news. There has long been rumors of major exposure of JPM to the gold market through its lending and derivatives divisions. There is an article on CBS MarketWatch today that outlines it could be as high as $20 billion. The market cap of JPM yesterday was $37 billion. Read it here: Link

 
 
  Steven Price   9/18/02,  2:32:40 PM
Reader Question: Hi Steve, A few days ago you commented about a possible short on IBM. Any thoughts here at 69.30. Thanks, Steve

IBM: $69.69 (-2.06) I liked IBM as a possible short, but it has support at $67. I'd prefer a failed rally at the 50-dma ($72.79) for a better entry.

 
 
  Steven Price   9/18/02,  2:25:44 PM
Reader Question: Steve, I noticed that there has been large volume today (5K) on each of two November SMH strikes 20 & 25 puts. Does this look to you as though someone is putting on a bullish spread? Your comments would be appreciated. Jim

Response: This does look like a bullish spread, with the 25's trading on the bid ($4.70)and the 20s trading near the offer ($1.75). Unfortunately it traded on the AMEX (where I don't have a contact in that pit) and I'm not sure if it was traded with the underlying or not, but I would assume it was not. One red flag is that the open interest on the Nov 20 puts is only 302, which would indicate that the trade may have been closing out an earlier position for a profit.

 
 
  John Seckinger   9/18/02,  2:21:07 PM
What do you think of General Electric (GE)?

Response: This recently successful OI put play most likely has to close beneath 26.90 before selling pressure will begin to accelerate. Here is a possible caveat: The low on July 24th at 23.02 will eventually be the beginning of a trend line. The 64,000 dollar question is, "What will the other point be?" Right now we will have to use today's low of 26.90 as the other point until proven otherwise. Problem is, objective to upside only looks to be to near 28. The 22 DMA is much higher at 29 and shares could also retrace back up to the July 29th low of 28.84. With that said, a trader could actually take a bullish stance with a stop at 26.90. A move under 26.90 should put shares closer to 26.25.

 
 
  Jonathan Levinson   9/18/02,  2:06:18 PM
The COMPX has already exceeded 1 billion shares' volume, which looks heavier than usual to me. If today closes positive, bulls will have a potential short term bottom on which to hang their hats. A negative close on heavier volume will have bears snarling with glee.

 
 
  Jim Brown   9/18/02,  2:00:08 PM
Swing Trade Signals
That dead stop at OEX 435 was a bounce off resistance from Sept-5th lows. I don't always remove old trend lines from all my charts. Once the price moves out of range they are just forgotten. On both the OEX and SPX a trend line appeared today as we dropped through 435. That was just below the intraday dip on Sept 5th. If you look on a 5 min chart that resistance served as the top between 10-10:30 today. I never cease to be amazed at the long term correlation between current prices and some insignificant (now) move weeks, months and even years prior. An example was the SOX fighting the 258 level today which is a seven year trend. (chart from this morning Link ) Old technicals always come back to haunt us, sometimes when we least expect them.

 
 
  Linda Piazza   9/18/02,  1:59:36 PM
Entry Point, Entry Point: In the past, Jim has written about the importance of entry points. Today, it's been possible to make money on both sides of the trade, depending on your entry point, and I wish all you longs a big run all the way up to resistance this afternoon. Because I'm one of those deer-in-the-headlights people who likes to make a reasoned decision about entries and exits, I usually enter only on the side of the prevailing trend (down until proven otherwise), but you quick-on-the-draw people can take advantage of both sides.

 
 
  Steven Price   9/18/02,  1:58:12 PM
Barr Labs (BRL): $65.40 (-0.92) New OI put play BRL is still close to its lows of the day, and did not take part in the market bounce. This is a bearish sign, as sellers continue to pile on, with a series of lower highs and lower lows throughout the day.

 
 
  Jeff Bailey   9/18/02,  1:56:08 PM
The 1:00 PM intraday update has been posted. Link

 
 
  Jonathan Levinson   9/18/02,  1:50:47 PM
The COMPX is back up to this morning's gap (non)resistance at 1245. For whatever reason, be it a fib retracement level (eyeballing it to 38%) or a lunar imbalance, the gap fill reversed at 1251, which I'll watch as next resistance before 1260 COMPX, after which we have light resistance at 1265, then 1270, then 1277-80... you get the picture. I think that with the herd so bearish (as indicated by the p/c ratio), some positive news could spark a rise sufficient to challenge the numerous resistance levels above. Absent that, I'll write off the high p/c ratio to (a) op ex week shenanigans; and (b) a brief panic flurry caused by the JPM/FNM/ORCL debacles from yesterday. Either way, barring some external bullish news, I don't expect this upmove to get very far.

 
 
  Steven Price   9/18/02,  1:47:00 PM
Reader Question: Any comments on PNRA jump. Does this totally negate the put play? Regards, James

Response: Panera Bread (PNRA) $25.10 (+0.86) I actually like the fact that the rebound has slowed at $25 again. A look at the daily chart shows three straight candles with failed rebounds at $25, each with a lower low. Each made it over that level briefly, before falling back. This will be the fourth if the rebound fails once more. The high of those failed rebounds was $25.48 on Sept 13. Conservative investors may want to wait for a break back below $24 as an entry, but I don't see anything that conflicts with the reasons we put the play on.

 
 
  John Seckinger   9/18/02,  1:42:49 PM
After the first 45 minutes of trading, the Gold Index (XAU) has steadily moved downward from 75.80 to near 74.50. Currently at 74.63, this weakness, unfortunately, is not bringing cash to the dollar market. If it did, the move in the Dow might be able to accelerate higher.

 
 
  Linda Piazza   9/18/02,  1:38:50 PM
I'm out of my put play when OEX hit my stop at 433.50 for a 5.5 point move from my entry. Both 5-minute and 15-minute stochastics were turning up again after appearing to roll. I'll watch to see what happens this afternoon.

 
 
  Jim Brown   9/18/02,  1:30:21 PM
Swing Trade Signals
Those heavy sellers are still lurking at the Dow 8100 level. We are seeing an instant replay of yesterday afternoon's scenario. Higher lows meeting lower highs and an apparent heavy supply on the upside. We have the same war in progress only yesterday the lean was to the downside after a spike up. Today the lean is to the upside after a spike down. If it was so easy to apply logic to the cycle it would appear that the afternoon breakout would be to the upside. We all know logic does not apply to the markets.

The buyers are there every time we break below 8090 but the sellers are at 8110. This is a very narrow range! Either way we should de directional in a little more than 30 minutes at 2:PM. Traders will be back from lunch and I doubt the range can hold until the 3:PM turn. Fasten your seatbelts, stow those tray tables and put those seatbacks in the full upright position. It may get bumpy soon.

 
 
  Steven Price   9/18/02,  1:26:53 PM
Reader Question: hi jim i'm long on INVN what do you think, it will rebound or should i take the losses ?

Response: INVN $33.64 (-0.89) Right now the stock has found support $1 above of stop loss of $32.50. The previous relative high, before the recent rally was on Aug 30. The low of the day was $33.60 and I actually like the hold above that level. There has been talk of giving airports additional time to comply with new baggage screening rules, as many will not be in compliance with the December 31 deadline. There will still need to be 1,000 more screening machines up and running by the end of the year to comply with that deadline. The Transportation Department's Inspector General described Congress's deadline requirements as "unprecedented and monumental" and questioned whether enough machines could even be produced by the deadline date. While extension of the deadline may slow down INVN's production schedule, it will not affect overall demand. Right now I plan on keeping the play open until it breaks our stop loss, which may indicate the pattern of higher highs and higher lows is on its way to being broken. The 10-dma has also provided support in the past, mostly throughout the month of August, and the current level is $33.53, which appears to be providing support once again.

 
 
  Jonathan Levinson   9/18/02,  1:11:43 PM
This last half hour's p/c ratio came in at 1.42. The herd is still bearish.

 
 
  John Seckinger   9/18/02,  1:10:33 PM
Patience is a virtue. Dow is back above 8100, a good thing for bulls. I would be surprised if 8050 is tested again today, but there could be resistance near the 8125 area. Yield curve still slightly bearish, Oil Index is lower, and Nasdaq underperforming blue chips. I personally would like to see the Dow retrace back up to near 8280. A move under 8050 should nullify those expectations.

 
 
  Linda Piazza   9/18/02,  1:04:21 PM
Don't you hate that time when you know you're probably going to be stopped out, but you haven't been yet, and signals are mixed enough that it's not yet time to close out the play? We're all feeling that way during this lunchtime lull, both shorts and longs.

 
 
  Jonathan Levinson   9/18/02,  12:51:05 PM
That little bounce eased the 30 minute 5(3) stochastic out of oversold, but it doesn't change the character of the COMPX, which still looks in most timeframes as if a bomb went off on it. QQQ is back to 21.90, and the TRINQ never made it below 2 on that move, although the CBOE p/c ratio never made it below 1.36 either. This is one of those most unpleasant moments when I happen to agree with the crowd, and have to either trade against my opinion or trade against the crowd. Usually both can coexist, but not so today. I bidded on some OTM back month QQQ calls but then took the order off when I saw the bounce starting to move, and didn't chase it when I saw the price rolling over. We'll have to see how that small runup affected the p/c ratio- hopefully it was enough to turn everyone bullish again, but we'll have to see. One strategy I like when confused is to take some profits off the table, which to me is the same as hedging. In this manner I can stay in a bearish position, but can still make a "bullish" trade by selling some puts at these low levels and thus limiting exposure to upside if it comes.

 
 
  Jim Brown   9/18/02,  12:42:57 PM
Swing Trade Signals
The "shorts racing to cover" turned into a sack race as the Dow passed 8110. The A/D ratio is declining again as it appears sellers were waiting for the bounce. I am still going to hold the LONG signal until we see the 8030 level hit. The short pressure is easing and internals are very oversold. We may end up trading in a range around 8100 and I am in no hurry to switch sides. Futures are still well above the lows of the day and are not showing serious negativity. The extreme put/call ratio of 1.45 is very tough for shorts to overcome. This is a level rarely hit and after a big drop all ready it should act as a hedge against a further decline. Nothing says it can't get worse but it would take some serious selling to push it higher. Patience is the key here.

 
 
  Jeff Bailey   9/18/02,  12:42:29 PM
Celestica (CLS) $14.82 -21.2% ... ooooo, this one ticks me off. Was looking at CLS Oct. $20 puts last week, but premiums were jacked up big time. Link

Interesting how "rally" to $26 stopped dead in its tracks at bearish resitance trend. Also note how another rally to bearish resistance of $42 got shoved down a bull's throat. Old point and figure saying is "the first test of bearish resistance can be painful for a bull." I say ... "sometimes the second test is a bear's dessert."

 
 
  Linda Piazza   9/18/02,  12:37:51 PM
That was close for my OEX put play. I've been setting trailing stops, and had decided 433 was the appropriate pivot point to exit the play. Just in time, Jim signed on with his key pivot point of 433.50. I deferred to his greater judgment (grin) and am still in the play as the five-minute stochastics turn down again. I'll want to see OEX reach a new low as the five-minute stochastics reach oversold again. I rather suspect I'll be stopped out during lunchtime lull instead, as sellers go to lunch.

 
 
  Jeff Bailey   9/18/02,  12:35:58 PM
QLogic (QLGC) $29.13 -5.18% .... lots of e-mails from bears in this one from past bearish comments today, but a concerning e-mail from a subscriber long (hopefully a new subscriber that wasn't with us over the past couple of months.)

After giving a sell signal at $36 and breaking a triple-bottom on its point and figure chart, the bearish vertical count became $27. Also, the triple-bottom sell signal now carries weight according to Professor Davis' study with the triple-bottom at $36, seeing a 93.5% chance of a 23% decline in 3.4 months on average.

Combined (bearish vertical count and Professor Davis' study) downside risk must be assessed to a range of $27-$27.72 at a minimum. Again, bearish vertical counts and Professor Davis' study can and should be used to asses risk. Would be defensive with the stock. Link

 
 
  John Seckinger   9/18/02,  12:24:53 PM
As the Dow leaves the intra-day low of 8051 behind, bids seem to be entering the ten-year sector at the expense of five-hear holders. It has turned the yield curve from bearish towards more neutral levels. In the green is both the Utility and Gold Index, while Oil and the Dollar still outperforms the Dow but stays slightly in the red. I am still waiting for a move in the dollar above 108. The Greenback is currently at 107.51.

 
 
  Jim Brown   9/18/02,  12:14:48 PM
Swing Trade Signals
Surprise, surprise! Shorts are racing to cover and if we break OEX 433.50 on the upside it could accelerate. Dow 8100 could also act as a trigger point.

 
 
  Jeff Bailey   9/18/02,  12:03:44 PM
NVIDIA (NVDA) $9.30 -4.82% .... HI jeff iam long in NVDA do you think its going to make new lowes? i was thing to take the lost ...what is the support?

Not sure of subscriber's cost basis or size so not much help. However, NVDA Link setting up triangle pattern right now. Trade at $8.50 would be "bearish triangle" while trade at $12 would be "bullish triangle."

If not for jacked up volatility, decent straddle/strangle trade.

For bull holding long and thinking of sell, depending on cost basis, would currently look to hedge with a protective put option. For example. Say my cost basis is $10.00 and I own 500 shares. Could buy protective put in the Oct. $10 (UVAVB) for $1.60. In essence, if cost basis in stock is $10, then I'm consigning a loss at $8.40, which is right where the p/f chart would give the bearish triangle.

Current pattern in NVDA is "neutral" so protective put on long in underlying stock is neutral.

 
 
  Jonathan Levinson   9/18/02,  11:57:13 AM
The CBOE put to call ratio has reached 1.41 in the past half hour, which is an extreme bearish reading, and from a contrarian perspective, good reason not to join the flood of put buyers at this time. Link

 
 
  Jonathan Levinson   9/18/02,  11:52:10 AM
This just received from reader Marc. Great observation:

QQQ intraday lows below 21.93:

7/24: 21.64

8/2: 21.82

8/5: 21.30

8/6: 21.79

Price has memory, witness the battle around 21.80 (8/2 low and 8/6 low as well as today low so far of 21.78)

 
 
  Jonathan Levinson   9/18/02,  11:50:47 AM
There are 581M declining shares vs. 71M advancing on the COMPX. QQQ has been rangebound between 21.80-21.90 for the past... forever it seems, but 40 minutes according to my chart. The TRINQ is staying north of 3 now, which coincides with the observation that selling had been accelerating, though it seems to have reached a peak during this range and is so far staying constant. The QQV is remaining steady too, and we have a definite showdown at this level, just above support as identified in my earlier post. It looks to me as if the oversold readings on the oscillators are putting bids under the downmove from this morning, but if price remains at this levels, we could see those readings ease off and clear the way for further downside. GE is now trading below 27, currently 26.96.

 
 
  Jeff Bailey   9/18/02,  11:47:38 AM
The 11:00 AM intraday update has been posted. Link

 
 
  John Seckinger   9/18/02,  11:47:33 AM
Volatility Index (VIX) higher by 5.02 percent to 44.07. Dow still has not broken underneath 8050 area (probably just jinxed that), and the Semiconductor Index (SOX) looks like it might make an attempt back to 260 (currently at 257.90).

 
 
  Jim Brown   9/18/02,  11:45:53 AM
Swing Trade Signals
We just can't seem to get to the 8050 level to trigger those buy programs. That last dip hit a low of 8056 before rebounding slightly. Actually the low from August 5th is 8030.82 so we could drop all the way to there before any lingering programs kick in. Then there is the affinity for round numbers that takes us all the way to 8000. You can drive yourself crazy trying to pick numbers.

 
 
  Steven Price   9/18/02,  11:35:36 AM
Reader Question: Mr.steven thanks for all your input. I am short QCOM and VRTS would like to get your idea thanks.

Response:

Vertitas (VRTS): $15.47 (-1.21) Veritas was turned back decisively on repeated attempts to break through and hold above its 50-dma, just below $18 at the time (now $17.50) and has rolled over back down toward $15.00. There is support at $15 from Aug 5 and Sept 3, as well as on the PnF chart so I would watch that level closely. There is also some support between $14-$15 from back in 1999, so the stock will have to break down below there before heading toward $10, which is the next level I see. The PnF bearish vertical count is $10.50

Qualcomm (QCOM) $26.28 (-0.68) QCOM rolled over right around $31.00 for the third time in a row. It has broken down below the 50-dma ($27.85) and looks headed to at least $25.00. It attempted a rebound to the 50-dma but was turned back yesterday and this morning. There is a lot of PnF support at $25. If it can make it down to $24.50, $23.20 is a resonable possibility, where it found support on Aug 5.

 
 
  Jim Brown   9/18/02,  11:33:49 AM
Swing Trade Exit Point Alert - OEX/SPX/DJX/DIA/SPY
A reader pointed out that the 71% retracement level for the Dow is at 7985 and could act as support. I am going to change the stop to Dow 7965 instead of 7990. It is a small detail but it could prevent us from being stopped out just before another buy program kicks in.

 
 
  Jim Brown   9/18/02,  11:19:00 AM
CPB Inc - CPB just announced a 2:1 split. This was a headline that just crossed my screen. I thought maybe Jeff got an unexpected boost to the Pork and Beans play but on closer inspection it was symbol CPBI (Central Pacific Bank Inc) that announced the split. Sorry Jeff, you are going to have to wait for that historical trend!

 
 
  Steven Price   9/18/02,  11:17:04 AM
Temple Inland (TIN): $45.39 (-1.13) New OI Put Play TIN established a new sell signal on the PnF chart with the trade through $46 this morning. While the Dow is showing a bit of a rebound, I still like the short entry point on this stock. More conservative traders may want to wait for the Dow to roll back over, or for signs of a failed rebound at $46.00

 
 
  John Seckinger   9/18/02,  11:08:25 AM
With the Dow down 1.52 percent and Nasdaq lower by 1.96 percent, sectors outperforming both major indices include Gold, Utilities, Oil, and Biotech Issues. If long the market, it is encouraging to see the Dollar bounce from near the 50 DMA (107.56). The Greenback should find more buyers once above 108 (currently at 107.80).

 
 
  Steven Price   9/18/02,  11:02:56 AM
Avery Dennison (AVY): $58.38 (-0.90) OI put play AVY should find its next level of support around $57.00. Below that is $52.00. This morning's trade through $59.00 completed the breakdown of PnF bullish support.

 
 
  Linda Piazza   9/18/02,  11:02:51 AM
Still short from yesterday's break of 440 OEX/8250 DJI, I'm watching carefully for a bounce from this area, ready to bail out of the short position, protect my profits, and wait to see how the markets behave from here. I'm not fast on the draw, so don't typically scalp for quick profits. Think about your own trading style when you choose plays.

 
 
  Jonathan Levinson   9/18/02,  11:02:17 AM
GE has been sitting on support at 27. This level has held during the past 2 weeks, but if it breaks, Dow bulls will want to watch their stops.

 
 
  Jonathan Levinson   9/18/02,  11:01:03 AM
The COMPX is leading us lower, printing fresh lows as I type, now 1234. QQQ is trading below 21.90 and the TRINQ is flirting with 3. This tells me that the selling is actually accelerating on the way down, but the QQV at +1.46 shows that it has yet to turn into panic. The TICK.NQ is reading -619, which is a reasonably broadbased selloff taking place.

 
 
  Jim Brown   9/18/02,  10:54:45 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
We were triggered on the broad market long at 10:50:18 when the Dow traded at 8075. (OEX 431.55, SPX 860.32, DIA 80.98, SPY 86.58, DJX 80.74, NDX 879.24, Compx 1236.63, QQQ 21.90, Emini 859.50) The initial stop loss will be Dow 7990. I do not have an OEX/SPX equivalent for this stop. Now, where are those buy programs at 8050?

 
 
  Steven Price   9/18/02,  10:52:40 AM
Reader Question: Hi Steve,it seems that qlgc finaly broke down,what are your thoughts on shorting it at this level?????thanks

QLogic (QLGC): $29.52 (-1.18) QLogic has broken down below support of $30.20 from Aug 14. There is not much support between this level and $20 and the trade of $30 also created a breakdown on the point and figure chart. I like it short from this level.

 
 
  Jim Brown   9/18/02,  10:48:42 AM
Swing Trade Entry Point Alert - OEX/SPX/DJX/DIA/SPY
Let's go LONG the broader market with a Dow trade at 8075. I will set a tight stop at Dow 7990. This is only a short term technical bounce target and may only be good for a few points. Still 8050 should be decent support and could attract a few buy programs. I want to enter early at the 8075 level. If you are not willing to exit quickly don't act on this signal.

 
 
  Jim Brown   9/18/02,  10:44:11 AM
Swing Trade Signals
If I was a bull I would be going long here at 432. This is the second time we have visited 433 today and it could be seen as double bottom support. I had hoped to see a gap fill on the OEX to reenter the short but the last downdraft on the Dow has killed those immediate hopes. I can't find any news that may have triggered this last drop.

Support for the Dow is 8050 and I am thinking a long position on a bounce from 8050 may catch a few points before we reverse and go short again. The oversold levels are building again and this would be just a short term technical bounce.

I don't see any future in a short from these levels before that 8050 test.

 
 
  John Seckinger   9/18/02,  10:40:33 AM
It certainly looks like the Dow wants to test support at the 8050 level. Confirmation of the weakness includes more selling in the dollar and a strong bid in shorter-dated maturities. Networking issues are, once again, not working. The NWX.X index is lower by 4.18 percent at 101.16.

 
 
  Jeff Bailey   9/18/02,  10:39:06 AM
PeopleSoft (PSFT) $13.40 -5.8% ... notable new 52-week low in this resource management software maker. Most likely attributed to Oracle (ORCL) $8.05 -11.06% earnings from last night.

Index traders that are short/put like this action as both are components of QQQ and SPX. ORCL is component of OEX, while PSFT is not.

 
 
  Jonathan Levinson   9/18/02,  10:36:25 AM
The COMPX is below its September lows, and has just broken down to new lows of the day below 1240. QQQ is trading under 22 and found resistance on the last run up to 22. The TRINQ is very tame at 2.16, showing selling but nothing extreme, and the QQV is now up 1.01 on the day, not extreme either. COMPX 1225-30 should be the next support, below which is 1200.

 
 
  Jim Brown   9/18/02,  10:31:32 AM
SOX - There is a very key signal here for the Nasdaq. The SOX has dropped to support on the longer term chart dating back to 1994. A reader from Germany sent me this. Despite the multiple chip warnings this week there is a point where the buyers will step in for the long term. This has got to have a lot of technicians thinking that future drops will be harder to make. With MCHP raising guidance and CSCO lowering its backlog by 30% we are setting up for an inventory rebuild cycle soon. Link

 
 
  Steven Price   9/18/02,  10:13:14 AM
Reader Question: Steven: Thanks for all the GREAT commentary. My partner and I are new subscribers and are looking at a possible H&S pattern on the Q's on a 6 month daily chart. Having read Leigh Stevens traders corner article on this subject, we think we have identified this potential pattern from mid-July through present. Based on our projections and realizing that 21.30 has been a previous low, we show a price objective for this pattern at 17.79. Do you believe 21.30 is a point of major support and could produce a bounce, or could we believe that the 17.79 is a real target over the next few months. I realize Leigh is out of pocket and hoped you or one of the other experts at OI could answer this question. Thanks, A&E

Response: The head and shoulders pattern you are referring to can be seen in the Qs, as well as the COMPX, Dow, and NDX. There are a couple of different ways to draw the neckline in the Qs. 21.30 is a point of support from Sept 5, and would signal a definitive neckline break. $17.79 would be the approximate downside target when measuring from the top of the head to the neckline, for the downside measuring objective. I generally don't pin the objective at quite that finite of a number, since the neckline is angled and can be interpreted from a couple of different points, but your approach seems right on target.

 
 
  Jonathan Levinson   9/18/02,  10:10:01 AM
The Fed added 2.75B in overnight repos, which is a net add after the 6.5B drain from yesterday. 2.75B will expire tomorrow, as will an additional 3B from a six day repo added on September 13th, for a total expiring tomorrow of 5.75B.

 
 
  Jeff Bailey   9/18/02,  10:02:45 AM
Agilent Tech (A) $14.55 -1.42% ... stock hasn't traded above the previous day's high for last three sessions. Good looking short here, stop above yesterday's high of $15.05.

Disclosure ... I currently hold bearish position in the A Oct. $15 puts.

 
 
  Jim Brown   9/18/02,  10:02:25 AM
Swing Trade Signals
Nice bounce underway but I am not yet ready to pull the trigger on a short. After the initial bounce we should get a second dip (now) as new shorts hit the tape and then hopefully another round of buyers to fill the opening gap down. This may be wishful thinking but I am in no hurry to enter early.

 
 
  Steven Price   9/18/02,  9:58:58 AM
Loews (LTR) $48.59 (-0.03) New OI Put Play LTR broke down below its 50-dma ($49.10) yesterday. The stock opened this morning at $48.00 and has bounced from that point. A failed rally at the 50-dma is the entry point I am looking for and more conservative investors may want to wait for a break below this morning's open of $48.00

 
 
  Jonathan Levinson   9/18/02,  9:56:06 AM
This gap fill on the COMPX will be a gift if we actually get it. The accelerating slope on the 1 minute chart makes me hopeful, as does the collapsing TRINQ, now at 1.17. If we can blow off the oversold stochastic readings, we should have a beautiful opportunity to get short, just as Jim predicted. Watch for the advance to slow- hopefully we'll see the rise in price begin to round out, and use the stochastics to confirm the reversal with a bearish cross on the shorter intraday timeframes. Patience.

 
 
  John Seckinger   9/18/02,  9:52:40 AM
Side Notes: The Mortgage Bankers Association (MBA) refinancing index fell 7.9% this week from a record high reading of 6104 to 5625. Low interest rates evidently are providing consumers with cash which will hopefully be spent on goods in the U.S. Speaking of spending money and housing, housing costs did rise 0.3% in Wednesday's CPI report and has a 40% weighting in the overall report. Moreover, the lower deficit does give reason to believe Q3 GDP will be slightly higher than expectations. Lower interest rates, more spending power, higher GDP.

 
 
  Steven Price   9/18/02,  9:47:58 AM
If there was any question about a head and shoulders neckline break in the Nasdaq Composite, that doubt has been removed as we gapped through the 1251 support level from Sept 5. A close below this level would look even more bearish than the intraday trade.

 
 
  Steven Price   9/18/02,  9:44:07 AM
Panera Bread (PNRA): $23.83 (-0.41) New OI put play PNRA now trading below its July lows. It is now below support on daily, weekly and monthly charts. I like this level for new short entries, down to $20 initially

 
 
  Jeff Bailey   9/18/02,  9:42:13 AM
Alert! The NYSE Composite ($NYA.X) 469.88 -0.85% just broke a triple-bottom sell signal at $470 on its $5 box chart. This is important technicals to be monitoring. Expect bears to get more aggressive in the markets and legging into bearish positions. Will also expect institutional bulls to begin looking for rallies in weaker stocks they hold as sell candidates. Especially those names trading below trend, on sell signals, where bearish vertical counts hint of excessive downside risk. Link

Internally, we turn to the NYSE Bullish % ($BPNYA) Link which still shows this market "bull confirmed" at 41.67%. However a reading of 40% would have this market reversing back into a "bull correction" fase, which would be more defensive. Currently, until the NYSE bullish % reversed back into "bull correction" the trade at 470 could be a "bear trap" unless the 465 level were traded.

Subscribers will remember previously alerted to triple-bottoms in the Dow Industrials (INDU) 8,120 -1.05% at 8,750 Link on its conventional $50 box scale. And our downside alert in the SPX 863 -1.17% at its triple-bottom sell signal of 930, from non-conventional $5 box scale. Link

 
 
  Jonathan Levinson   9/18/02,  9:40:08 AM
The TRINQ is up there at 3.07, but not showing the kind of selling frenzy out of the open that we might have expected. The QQV as well is up only .88 to a tame 51.9. Gold, however, is up nicely, +3.69 for the HUI so far and +2.2 for XAU. There is a 16 point gap to fill, but the 1260 s/r line should keep a lid on any upside, or at least, that's how it looks from here.

 
 
  John Seckinger   9/18/02,  9:38:34 AM
Note: December Treasury bond, higher by six ticks at 113-03, is currently setting a new contract high. This is bearish for stocks. Ticker: USZ2

 
 
  John Seckinger   9/18/02,  9:35:45 AM
With the dollar down 0.38 percent at 107.86, support below is felt at the 50 DMA at 107.56. With a lower dollar, in theory, comes higher gold prices. The XAU index is currently higher by 2.11 percent.

 
 
  Jeff Bailey   9/18/02,  9:34:07 AM
4 sell programs out of the gate at premium level of $-1.60.

 
 
  Jeff Bailey   9/18/02,  9:32:29 AM
Silicon Valley Bancshares (SIVB) $20.11 ... stock getting hit lower in pre-market at $17.54 after reducing Q3 EPS guidance to $0.27-$0.31 from $0.32-$0.36. Blames shortfall on higher-than-expected churn from clients renewing fised-rate loans. Additionally, "The yield cure has flattened compared to the second-quarter, which has inhibited our ability to improve investment portfolio yields as much as we previously expected," the said. Link

 
 
  John Seckinger   9/18/02,  9:31:48 AM
Negatives for equities include the Dollar back under 108, a solid bid in five-year notes, and continued weakness in both oil and utility issues.

 
 
  Jim Brown   9/18/02,  9:31:42 AM
Yo! You need some protection! - It appears Dennis Kozlowski and Mark Swartz are going to jail early. They have been unable to come up with the bail money since all their assets are frozen by either the government or Tyco. Prosecutors will not let the defendants use assets acquired with Tyco money so it looks like they will be sent to Riker's Island, one of the countries toughest prisons. I am sure Dennis can take his $16,000 umbrella stand and $17,000 toilet bag. He might be able to trade them for a package of cigarettes or some short term protection. The $600 million man would probably not be a star behind bars.

 
 
  Jim Brown   9/18/02,  9:20:48 AM
Swing Trade Signals
The markets are going to open down this morning as we expected but not as negative as many feared. The CPI was neutral at +0.3% vs estimates of +0.2%. The July trade deficit was less than expected at $34.6 billion vs estimates of $37 billion. The big news is still the warning from JPM and ORCL earnings. Eastman Kodak actually affirmed earnings estimates and raised cash flow by 25%.

The futures are continuing to improve with the Dow expected to open around 8120 and the S&P 865. Support for the S&P is 870 so we will see if the futures improves to support before the open.

We will be looking for a failed bounce after the open to go short again. With expiration two days away we should be careful about this entry and try to avoid any intraday chop. It is entirely possible the opening low could be the low for the day as positions are squared before Friday.

 
 
  Jeff Bailey   9/18/02,  9:17:35 AM
The 9:00 AM intraday update has been posted. Link

 
 
  Linda Piazza   9/18/02,  9:08:34 AM
Jeff Bailey offers an interesting perspective on correlating an OEX trade with DJI’s behavior. When early-morning commitments kept me from jumping on board the swing trade put play yesterday, I looked for another entry. For two days, doji or doji-like formations in the OEX chart had signaled a draw between bulls and bears. OEX 440 had provided support again and again, so naturally a firm break below that level might indicate a shift in power. I wanted more confirmation, so I looked to DJI. I decided that indecision would probably be broken when DJI traded below the 8250 area, and that’s when I entered. As Jeff mentions in his article, I’ll watch DJI as it nears 8050, unless I get stopped out on an early bounce, of course. If DJI blows through 8000-8050 without stopping, I’ll stay in my OEX put play. If it bounces, I’ll exit and wait for a clear direction again, my favored tactic near key pivot points. OEX traders might read Jeff’s article in preparation for today’s trading. Link

 
 
  Jonathan Levinson   9/18/02,  8:35:47 AM
The US Dollar Index is up to 108.20 after a volatile night. Equity futures are down, NDX -12.50, S&P -7.20. QQQ is trading 21.92. While we may get a bounce from what looks like a certain gap down open, I find that the confluence of bad corporate news bodes ill- witness the action in FNM yesterday, followed by JPM's news after the bell.

 
 
  Jim Brown   9/17/02,  9:35:50 PM
The Swing Trade Game Plan has been posted: Link

 
 
  Jeff Bailey   9/17/02,  9:26:55 PM
The Market Monitor has been archived. To view today's compelling comments, simply click this Link

 
 

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