Can You Count to 4?
At first
blush, one would be tempted to say that the action of Monday and
Tuesday in the Naz was a big disappointment.
A big disappointment because there was
no follow-through to the explosion of late last week.
This misses the point.
The point being that when an index
blasts off to the tune of 17% bottom to top over just three days, a pullback is
healthy, and to be expected.
Ideally, the pullback should come on
drying turnover, and with range compression.
Which is just what we saw Monday.
Tuesday, however, was a slightly
different story.
Both range and volume expanded, though
not to troublesome levels.
At the same time, the average stuck a
4 on its Connors/Cooper 1-2-3-4.
Of the top performing glamours, only
Veritas
(
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short-term peak on volume.
For the most part, other high relative
strength numbers didn’t come off more than 4%-5%.
And another breakout fails, if only
for a day…Micromuse
(
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jolt on good turnover.
Ditto for Transwitch
(
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PowerRating).
As an intermediate-term trader of
growth stocks, your job now, as always, is to ignore the headlines and just
focus on what the tape is saying day in and day out.
This involves a study of the price and
volume bars of the Nasdaq, or The 100, and the individual leaders, a few of
which are beginning to make their presence felt daily.
After you do this for a while, you
will find that this sort of analysis is all that is needed in order to be on the
right side of the tape most of the time.
As I mentioned @ The Venetian, volume
is an important weapon in the arsenal of the position player.
Research In Motion
(
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example of what I’m talking about…scads of volume began appearing in late
September which changed the whole tenor of the stock…something’s "going
on." I’m not aware of the fundamental reason for this, nor do I
care…what’s important is that the volume adds to the legitimacy of the right
side of its eight-month base…i.e., there is big money interest.
PeopleSoft
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yesteryear, is one of the only stocks to show some follow-through after breaking
out in the past week…this is one to watch from a sentiment standpoint.
Over in the bells, sun wasn’t to be
found — except in Sun
(
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PowerRating), off just 1% as it clings to the thick gains
of the past week.
Meanwhile, EMC
(
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In Sun’s case, it put on 28% in six
days bottom to top, quite a feat for a $191 billion market cap…You can
understand why institutions love this stock: Quarterly revenue growth has
accelerated from 27% to 35% to 42% to 60% and earnings from 24% to 44% to 63% to
88%…these are Cisco-like numbers…in fact the earnings dope is better than
Cisco’s…and the shares are as liquid as they come, to boot…for the
medium-term trader, however, it, like most everything else in tech, is simply
not ripe for picking.
The same goes for EMC, which shows 54%
earnings growth in its most recent quarter along with 34% revenue growth and a
market cap of $215 billion…stocks like these don’t grow on trees, which is
exactly why they remain big money faves.
The rest of bellwetherland, though, is
shrouded in clouds.
In all, not an overly negative day
given the blastoff of last week, and certainly not one to draw any conclusions
from.