News Movers Do 180s
The news movers on Thursday staged turnarounds on high volume, adding to the picture that a few battered market niches may have at last found their footing. But watch out. The number of high relative strength stocks setting up
in sound bases remains scarce. Until the setups multiply, the intermediate-term
trader should look to cash.
After closing Wednesday at 147 7/16,
Internet security firm VeriSign
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PowerRating) reported pro forma operating net of
18 cents a share in the third quarter vs. 1 cent a year ago and blowing away
analyst estimates averaging 6 cents a shares, First Call/Thomson Financial. On
Thursday, shares dropped to an intraday low of 120 by 11:18 a.m. before
reversing to close the session at 142 5/16, off 5 1/8.Â
VeriSign’s close in the upper 11% of
the day’s trading range and upper 19% of the day’s true range on huge volume
suggests mean that VeriSign has put in at least a short-term bottom.
JDS Uniphase
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PowerRating) reversed off
its lows to close up 3 7/16 to 74 7/16. While volume was less than prior
session, the huge trade — nearly 93 million shares, four times the stock’s
usual trade — combined with a close in the upper quarter of the day’s range and
a gain over the prior session close spells massive accumulation in my book.
The move came ahead of first quarter
earnings reported late Thursday that beat Wall Street estimates by 2 cents. The
fiber-optics giant posted pro forma net income of 18 cents a share vs. 8 cents a
year ago and expectations of 16 cents.
While intermediate-term traders wait
for signs of a nascent rally, now is the time to accumulate a list of high RS
stocks that are fighting the market downtrend and trying to complete bases. One
example is PE Corp.’s PE Biosystems Group
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PowerRating). As of Wednesday’s close,
the stock had a 91 RS for the past 12 months.Â
PE Corp. executives said Thursday that
Foster City, Calif.-based PE Biosystems will grow about 20% in the current
fiscal year 2001, thanks to sales of new equipment to analyze the structure of
proteins. PE Biosystems makes equipment used by sister company Celera
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PowerRating)
to decode the human genome. PE Biosystems reported Sept. 20 first quarter
earnings of 19 cents a share, excluding capital gains. The results came in a
penny above expectations.
All stocks, of course, are risky. On
any new trade, be sure to limit your position size and set a protective price
stop where you will sell your buy or cover your short to protect yourself
against severe losses. For an introduction to combining price stops with
position sizing, see my lesson,
Risky Business