Heed Market, Not Heads

Earnings warnings from Computer
Associates and BMC Software sent software stocks lower on Wednesday. Predictably,
the hard action flushed out the analysts to defend their faves. Ignore the
analysts. Listen to the market.

Database titan Oracle
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dived 7 7/8 to 72 5/16, knifing through its 50-day moving average on double
normal volume. The stock closed bearishly near the low of the session.

Oracle shares began running into
headwinds after the resignation of Ray Lane as Oracle’s president and COO and
revelations that private investigators hired by Oracle rummaged through the trash bins of
Microsoft lobbyists.

Analyst Bob Austrian of Banc of America
Securities, in an interview with Reuters, dismissed the recent news a
sensationalism with little business impact. Credit Suisse First Boston reiterated a “strong buy” on
Oracle.

Oracle had been forming a 14-week
base. The base still has not failed. It never tagged its March 28 high of 90 a
share, But there’s definite repair work ahead before it becomes attractive
intermediate-term momentum traders. Monday’s decline on heavy volume shows
plenty of concern among the institutions. That’s “analyst opinion”
backed by real dollars. That’s the kind of analysis I listen to!

Abbott Laboratories
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said it
filed an application to European regulators seeking approval for AIDS and HIV
treatment ABT-378/r. The application is based on trials involving more than 700
patients, including people who have failed other drug regimens.

The stock showed some churning signs
Wednesday. Ideally, I’d like to see the stock back and fill, giving us a nice,
downward drifting handle before attempting to play a fresh breakout.

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