Dynegy, NPS Form Up
The market passed another test Monday
as continued presidential uncertainty failed to derail strong tape action on the
Nasdaq. Meanwhile, more of our news movers are forming constructive chart
patterns and nearing entry points.
I know that it feels early. It was
only last week that Nasdaq Composite printed a new low, representing a 50%
decline from its March 10 peak. But don’t get caught off guard if and when
the high RS basers start breaking out in earnest. Now is the time to make sure your watch
list is up to date with well-researched buy candidate.
Dynegy
(
DYNB |
Quote |
Chart |
News |
PowerRating) rose 4 3/16 to 53
3/4. The wholesale natural gas and electricity marketer said its Dynegydirect
Internet trading system handled $1.5 billion in notional transaction values
since launching on Nov. 1. Dynegydirect brings together buyers and sellers of
more than 300 energy-related products. The company said it plans to add coal,
emission allowances and weather derivatives in the first quarter of 2001 and
international energy products and telecom bandwidth in Q2.
The
company enjoys superior quarterly earnings growth and intermediate-term relative
strength ratings on the TradingMarkets StockScanner:
EPR 93, RS12 95, RS6 86 (as of Friday’s close).
As
an intermediate-term trader, I would need to see the stock clear resistance at
54 1/2 (see Point A in the above chart) and
its relative strength line take out the Sept. 27 high (Point
B). For more on
relative strength, see my tutorial, Relative
Strength: The Profitable Trader’s Edge.
NPS
Pharmaceutical
(
NPSP |
Quote |
Chart |
News |
PowerRating) is forming a similar base. The stock Monday gained 4
7/8 to 49, clearing it’s 50-day moving average. The stock faces possible
resistance at 52 1/2 (Point A in following
chart). I also would want to see its RS line exceed the Sept 29 high (Point
B) on or before any breakout entry.
King
Pharmaceutical
(
KG |
Quote |
Chart |
News |
PowerRating) followed through on Friday’s breakout.
In
another healthy sign, online advertising company DoubleClick
(
DCLK |
Quote |
Chart |
News |
PowerRating) managed
to pare intraday losses, close near the top of the day’s range and close down
only 1/16 to 11 15/16 after issuing an earnings warning. Not that I’d ever
consider going long DoubleClick. The stock is in a major downtrend, its RS
ratings are in the junk pile and above it is enormous overhead supply. But
holding up in the face of bad news is a good sign for the overall market. We saw
similar action in Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) on Friday when the stock rallied after its
own warning. Intel followed through Monday, gaining 3 7/16 to 37 7/16.
The company, which reported a loss of
3 cents a share in last year’s fourth quarter, also said fourth-quarter revenues
would be 8 to 10 percent below current expectations at between $126 million and
$129 million.
The top field of all charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. In the second field, a
blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
Remember
that all stocks are
speculative. On any new trade, be sure to limit your risk by limiting your
position size and setting a protective price stop where you will sell your 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.