Accumulation Detector
We’re a long way from seeing the multiplication
of stocks completing sound bases, the clearest sign of a vigorous rally. And earlier this week, the tape invalidated the Oct. 31 follow-through day on the Naz. However, some past leaders Wednesday came under strong
accumulation.
TriQuint Semiconductor
(
TQNT |
Quote |
Chart |
News |
PowerRating)
gained 6 7/16 to 39 1/4 on triple average volume. The news media attributed the
move to bullish remarks and a new “buy” rating from CS First Boston.
But a look at the above chart shows
TriQuint has come under powerful institutional buying since rebounding off a low
of 21 on Oct. 18. (See green arrows in chart.) Since then, the trading has
expanded by at least 40% above average volume on four occasions. Three of those
day’s coincided with price gains. Only one (see red arrows) saw a price decline.
TriQuint cleared its 50-day moving
average. But from the point of view of the intermediate-term momentum player, it
still must clear its 200-day moving average and its mid level of 44 3/8 (March
31 high of 67.75 plus Oct. 18 low of 21 = 88.75; 88.75 divided by 2 = mid level of
44.375). I also probably would wait for the stock to clear resistance at 55 1/2
before considering entry points (assuming a healthy market on the Nasdaq
Composite).
All charts in this commentary use a
logarithmic scale. Daily charts display 50-day moving averages of price (in red)
and of volume (in blue). Some daily charts may also display a 200-day moving
average (in black).
You can pick up occasional ideas from
analysts, but the market should always be your first and last guide. If my read
of the market says short and an individual analyst says long, I go short or, at
minimum, I stay away. Broadly speaking, I don’t fade corporate fundamentals, but
I will the opinion of an individual analyst. (For some frank talk about brokerage analysis,
check out Kevin Haggerty’s remarks in his Nov.
13 commentary.)
Whatever draws my attention to a
stock, my read of the technicals and often the fundamentals as well decide. For
example, CSFB also put out “buys” on two other semis, Micrel
(
MCRL |
Quote |
Chart |
News |
PowerRating),
up 3 1/8 to 42 7/16, and Anadigics
(
ANAD |
Quote |
Chart |
News |
PowerRating), up 2 to 24. Holding both ideas
under the same technical lens, Micrel and Anadigics are much weaker, Both stocks
must recover even more in price before becoming potential momentum candidates.
Micrel and Anadigics also lack signs of powerful accumulation as evidenced by
sharp price gains on expanding volume.
All stocks are speculative. 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,
check out the Money
Management area of TradingMarkets’ Stocks Education section.