You Gotta Believe
I’m reminded
of ’69, when
a certain team that no one believed in went on to win the World Series.
Early in any market advance, I’m
always on the lookout for a couple of days that show an index rising solidly on
strong volume.
I’m not necessarily referring to an
O’Neil follow-through day, but rather a few days that occur
“upstream,” perhaps a few weeks later.
Ideally, there will be two days in a
row of this type of behavior.
A plus would be for the index to close
in the upper quintile of its intraday range on this day or days.
The Naz did just this on Wednesday and
Thursday.
These two days, then, are the most
important since the June 2 melt-up.
The fact that gobs of high-octane
burners acted so well on Wednesday and Thursday just adds more credibility to
what the Naz itself did this past week.
One of the more interesting aspects of
the current seven-week run off the May 24 low is that, even if you’re sitting in
a 100% cash position, there are still plenty of opportunities to climb aboard
leading issues.
This is because the March-May sell-off
created three- and four-month bases in many glamours, an opportunity the likes
of which we haven’t seen too often in recent years.
Compare this with the February-March
tech surge that gave you precious little time to jump back off the sidelines
(assuming you’d raised cash in January when many techs corrected) before many
names became extended.
Then, the vogue names paused for all
of five or six weeks before leaving the station.
I.e., you had to be much more
“on” with your entries in February.
This time around, you have the luxury
of picking your spots without the pressure of getting in at just the
“right” point.
Friday, in the benchmark set, Intel
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broke out of a 16-week cup-with-handle…over the past seven days, the
accumulation/distribution score has been 3 to 0.
Not all stocks worked.
For example, Cal Amp
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down on sheets of volume as it failed on Monday’s breakout of a four-month cup.
Copper Mountain
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its four-month cup on strong trade.
In the bios, Myriad Genetics
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pulled back for the second day, perhaps beginning construction of a handle.
Following Thursday’s major gap
opening, Applied Micro
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Centillium
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45% run over three days.
Ciena
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handle construction, now in the third day.
Cor Therapeutics
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lighter volume for the second day following Wednesday’s high-volume breakout of
a four-month base.
Exar
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convincingly on Thursday’s breakout of a three-month base.
Ditto for Flextronics
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PowerRating).
Friday, 5:23
p.m. ET update: I was visiting with a fellow trader last night, a guy who
ran his account up over 70,000% in the 4 1/2-year period ended June 30, 2000.
He presented me with some charts from
nearly 40 years ago, one of which I found particularly interesting.
There were two things of note about
the chart of Syntex, one of the biggest winners of the ’62 market: 1) Much like
the electronics-related stocks of the current advance, Syntex, broke out of a
cup-without-handle in the spring. Three
weeks and 50% past the lip of the cup, the stock pulled back to build a handle
before running again; and 2) the stock jumped 773% over the 34 weeks subsequent
to the breakout of the cup. Thus, as I’ve mentioned before, the early leaders in
a fresh bull run often pile up gains well beyond most expectations. This was a
good example of that.
As for this fellow trader, he’s part
of the book on top traders that I’ve co-written with Marc Dupee for publication
in a few months.