Fading The News
Tuesday’s pullback was in keeping with
a nascent rally. After strong gains over the prior two sessions, the Nasdaq Comp
pulled back on a decrease in trading volume.
Meanwhile, beaten-down issues continue
to fade negative news Ã
la Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) and DoubleClick
(
DCLK |
Quote |
Chart |
News |
PowerRating). This latter phenomenon is
consistent with a market bottom. The market is guessing that the stocks
displaying this behavior have already priced in the bad news.
This
doesn’t mean that I would trade these stocks. I watch them as a means of gauging
market conditions. As an intermediate-term momentum trader, I usually limit my
buys to stocks with high relative strength scores that are trading above their
50- and 200-day moving averages.Â
Eastman Kodak
(
EK |
Quote |
Chart |
News |
PowerRating) Tuesday warned
that softening consumer demand would cut Q4 earnings to 65 cents to 75 cents per
share. That compares to analyst expectations averaging $1.07, according to First
Call/Thomson Financial. Shares in the film giant and Dow component rose 1 1/2 to
41 1/16 on volume of nearly 6.2 million shares, three times its usual trade.
General Motors
(
GM |
Quote |
Chart |
News |
PowerRating) said that Q4
earnings per share would come in between $1.10 to $1.20 vs. vs. a Street
consensus of $1.70. The auto giant said it would cut its North American and
European salaried workforce by 10% and phase out the Oldsmobile line. The stock
tried to rally but ran into a wall of selling. Shares gave back nearly all the
day’s gains to close at the bottom of its range. GM closed up 3/16 to 51 3/4.
Volume nearly doubled to 4.7 million shares.
Well, that’s it for
today’s column. What? Not enough? You want a base builder, too? Okay. Aeroflex
(
ARXX |
Quote |
Chart |
News |
PowerRating)
today appeared to come out of cup-with-handle base. However, the relative
strength line has just a tad more work to do. I’d like to see the RS line move
into new high ground either before or with a breakout. Aeroflex’s RS line is
just shy of its Oct. 19 high (see Point A in
the following chart). Ideally, the stock would consolidate here and form a new
handle before surging higher on strong volume.
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.
All stocks, of course, are risky. 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.