Hold That Channel

  • August 3, 2000
  • Dave Baker

It seems that right now, although we are not seeing many breakouts, we are
seeing a lot of channel formations. Many of the stocks in these
“channels” have come significantly off their highs and are now trying
to return to them.

Today’s Watchlist: 
(
NETE |
Quote |
Chart |
News |
PowerRating),
(
ERTS |
Quote |
Chart |
News |
PowerRating),
(
SANM |
Quote |
Chart |
News |
PowerRating),
(
PEP |
Quote |
Chart |
News |
PowerRating)

Netegrity
(
NETE |
Quote |
Chart |
News |
PowerRating)  has been trending in a channel back toward its
previous highs for the last few months. It hit a high back in March and then
began to plummet. Since moving off its lows it’s shown several bounces. Ideally,
a stock traveling in a channel will bounce several times.

Electronic Arts
(
ERTS |
Quote |
Chart |
News |
PowerRating) has also been trending upward in a channel. Like
the other similar patterns, watch for bounces off the lows. Another thing to
watch for within the channel is consolidation patterns, followed by breakouts
and breakdowns. 

Sanmina
(
SANM |
Quote |
Chart |
News |
PowerRating) broke down from one channel, but has started
to trend along another.  Former support has become resistance, so it may be
creating a secondary channel. As always, you can play this either by catching
the bounces off the trendline, or by waiting for a breakout of the trading
range.

Keithley
(
KEI |
Quote |
Chart |
News |
PowerRating) is not trading in a channel formation, but
rather may be breaking down from a pennant. Many of the instrument companies
that ran up in the last few months are slowly dying. KEI traced out a pennant
over the last four days and is not breaking down at the apex. Watch for a
possible move to the next support level. It may also fill the gap from early
June.

Should it continue to head lower, watch for it potentially break
support and provide a second opportunity. 

On the non-tech Watchlist, take a look at Pepsi
(
PEP |
Quote |
Chart |
News |
PowerRating),
because it’s traveling along two trendlines as well. After one trend
failed, it began to enter a new one. It’s currently consolidating, so watch for
it to break out of this formation and set new highs, especially while tech is
weak.

Until later, 

Dave Baker

 

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