Institutions Sit It Out
The intermediate-term trader can
sometimes justify buying off lows or in the bottom half of a correction-recovery
pattern. A marked expansion volume, on the reversal to the upside and subsequent
follow-through, can signal a bullish turnaround.
Some of the mighty fallen have shown
signs of putting in bottoms, but volume remains anemic. So no sign yet for the
bullish intermediate-term play.
Motorola
(
MOT |
Quote |
Chart |
News |
PowerRating), the giant telecom
and semiconductor company, said Monday that it will soon sign 10 new cellular
network expansion contracts with China Unicom
(
CHU |
Quote |
Chart |
News |
PowerRating), China’s
second-largest telecommunication service provider.
As you can see, Motorola shares have
pulled higher from their May 10 session low of 27 9/16 (see Point A in
the chart). However, note the recent price progress has come on light trade.
Meanwhile, the last two high-turnover days coincided with price declines. No
high volume reversal. No high volume follow-through.
Alteon WebSystems
(
ATON |
Quote |
Chart |
News |
PowerRating) said it
achieved operating profitability in the June 30 fourth quarter. The company
makes Web switches and network traffic management software. The company will
report complete results on July 20, 2000 after the market closes. Analysts
expect the company would report a loss of a penny a share, according to First
Call/Thomson Financial.
The stock has staged a
substantial recovery over a base of nearly four months. However, here’s an
example of a price pattern than can fool cup-with-handle traders. The trading
action over the past six sessions (underlined in green on the chart) does not
constitute a valid handle. A proper handle should drive down as indicated by the
daily price lows.
This handle is moving
sideways, a failure-prone structure from a short-term perspective. That doesn’t
invalidate the overall bullish picture. But it does mean that buying off this
structure could get you stopped out rather than putting you into a explosive,
short-term breakout that would get into a position with a profit cusion.