Home On The Range

• June 13, 2000
• Dave Baker

Make sure to register for the
upcoming course “The Baker/Ten Electronic Trading Course”, starting
July 7. Click
here to go to the registration page.

My latest trading lesson, Finding
Intraday Trendlines for Daytrading Part I, is also available now.

---

Each night I read at
least 20 different financial publications and websites. I love to read the
headlines after the Nadsaq moves more than 50 points in any one direction. On
Monday I saw exactly what I expected, (paraphrased) “Tech Sector
Slaughtered,” “Tech Investors Run for Cover,” and my favorite,
“Investors Flee the Nasdaq Once Again.” Without even reading the
articles, there’s one thing that I can tell you about these authors: They are
not traders.

Traders would take a
look at the Nasdaq Composite and the Nasdaq 100 and see two trading ranges: a bigger-picture range, covering the last few weeks, as well as a near-term range
between 3725 and 3892. Most importantly, I see a trading range following a gap,
suggesting a possible continuation. The moral of the story: Don’t believe the
hype. 

Today’s Watchlist: 
(
MACR |
Quote |
Chart |
News |
PowerRating),
(
VRTX |
Quote |
Chart |
News |
PowerRating),
(
Q |
Quote |
Chart |
News |
PowerRating),
(
TEVA |
Quote |
Chart |
News |
PowerRating),
(
GSLI |
Quote |
Chart |
News |
PowerRating)

Macromedia
(
MACR |
Quote |
Chart |
News |
PowerRating)
is not exactly a textbook cup-with-handle pattern, but it’s good enough for me.
In this pattern we see exactly what we want to when searching for good breakouts
(aside from strong volume). Macromedia put in a high in March, tumbled downhill
over 50%, and then went to retest its high again. Finally, after testing the
all-time closing high once again, it was able to break through. On Tuesday
we are seeing a retest of the breakout level. Let’s set our alerts just over
Monday’s high. Traders may consider taking long positions on a continuation.
We’ve already seen the breakout, so that’s our signal, now we must wait for the
trigger (confirmation).

Let’s continue to practice our cup-with-handle skills on Vertex
(
VRTX |
Quote |
Chart |
News |
PowerRating). Vertex showed traders how seriously it takes this formation when it
broke out from its low-level cup with handle, when it moved roughly 20 points on
the breakout. With this in mind, we should be prepared for the even more
exciting high-level breakout, where there is no overhead resistance. Following
the bump against the all-time high, Vertex is now pulling back. Set your alerts
just over the recent high as we watch for a breakout and continuation.

Qwest Communications
(
Q |
Quote |
Chart |
News |
PowerRating), our low-level non-four-letter tech
play du jour, is testing a key resistance level for a third time. Short-term
aggressive players should watch this one for a break above 49 1/2, while the
conservative traders may want to wait for a move above 50 1/4. Look for
resistance at the peaks from early and late March.

Teva Pharmaceuticals
(
TEVA |
Quote |
Chart |
News |
PowerRating), in the biotech group, broke
out from its cup-with-handle formation two weeks ago and has now entered a
consolidation. Set yours alerts at 57 1/2, which is 1/4 point over the intraday
high  from Friday. Look for a move above this level, on strong volume.
Aggressive traders may try to catch an initial breakout while the conservative
trader will wait for a continuation on the following day (a move above
the breakout day’s intraday high).

GSI Lumonics
(
GSLI |
Quote |
Chart |
News |
PowerRating) is setting up for two different trading
opportunities. First, aggressive traders can watch for a break above the first
resistance level, looking for a roughly 3 point or 10% move. The conservative
trader will wait for the more secure break above the all-time high, followed by
a continuation. Should it break above 30, we’ll take another look at GSI. Add
this one to your list.

 

Until later,

Dave Baker

Check back at 2:00PM ET
for Trading the Techs PM.

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