Muddy Bottom

  • October 18, 2000
  • Loren Fleckenstein

It was a muddy Wednesday as tradable
funds in the Internet, telecom, and biotech stocks made gains while Internet
infrastructure and architecture HOLDRs, as well as the Broadband HOLDR, registered
losses. October tends to be a bottoming-out month. So this kind of turbulence,
combined with the bounces in the index, raises the likelihood that we’ll begin
at least a short-term rally this week. 

The Internet HOLDR
(
HHH |
Quote |
Chart |
News |
PowerRating) rebounded
off an all-time low to close up 2.5%, the day’s sharpest gain among the exchange-traded
funds. The basket of Internet stocks got a large boost from its
two biggest components, America Online
(
AOL |
Quote |
Chart |
News |
PowerRating) and Yahooo
(
YHOO |
Quote |
Chart |
News |
PowerRating), which
both snapped back.

The Biotech HOLDR
(
BBH |
Quote |
Chart |
News |
PowerRating) rose 1.7%,
tacking on its fourth straight gain and forming a bullish engulfing. Among its components,
Alkermes
(
ALKS |
Quote |
Chart |
News |
PowerRating) added 5.2%, Amgen
(
AMGN |
Quote |
Chart |
News |
PowerRating) 5.8%, Biogen
(
BGEN |
Quote |
Chart |
News |
PowerRating)
4.6%, Human Genome Sciences
(
HGSI |
Quote |
Chart |
News |
PowerRating) 5.3% Chiron
(
CHIR |
Quote |
Chart |
News |
PowerRating) 4.6%.

The Cyclical Transportation SPDR
(
XLY |
Quote |
Chart |
News |
PowerRating)
moved ahead 2.0%. The Basic Industries SPDR
(
XLB |
Quote |
Chart |
News |
PowerRating) added 1.3%, the Telecom
HOLDR
(
TTH |
Quote |
Chart |
News |
PowerRating) 1.1%, the Dow Jones Telecommunications iShares
(
IYZ |
Quote |
Chart |
News |
PowerRating) 0.9%.

 

On the downside, the Internet
Infrastructure HOLDR
(
IIH |
Quote |
Chart |
News |
PowerRating) fell 6.8%, the Broadband HOLDR
(
BDH |
Quote |
Chart |
News |
PowerRating) 6.7%,
the Internet Architecture HOLDR
(
IAH |
Quote |
Chart |
News |
PowerRating) 5.4%, the Dow Jones Consumer Cyclical
iShares
(
IYC |
Quote |
Chart |
News |
PowerRating) 3.7%.

If you’re new to exchange-traded funds,
be sure to visit TradingMarkets’ Knowledge Center,
dedicated to explaining the basics of trading and active investing in ETFs and
mutual funds. Just click on the Funds tab
near the top of this page, then click on the Knowledge
Center tab. 

You also will find lessons on trading
exchange-traded funds in the Stocks Education area of TradingMarkets.com. In
particular, check out my three-part series on trading ETFs, starting with href=”/stocks/education/strategies/05262000-6129.cfm”>Moving
Average Crossovers. I also recommend newcomers read my tutorial, href=”/.site/stocks/education/strategies/06272000-6815.cfm”>Trading
HOLDRs: Unique Opportunity And Risk.

All stocks and exchange-traded funds
are risky. In any new trade, reduce your risk by limiting your position size and
setting a protective price stop where you will sell your new buy or cover your
short in case the market turns against you. For an introduction to combining
price stops with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
you’ll find extensive lessons in the Money
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