Intermediate-Term Report
With the S&P500
and Nasdaq Composite both finishing down on the week, between .80% to .93%
lower, and both indices effectively trading back into their multi-week trading
ranges–a good defense really was a
trader’s best offense, as the environment made trading a bit less ‘EASI’ once
again.
Growth stocks were finally
attempting to do the right thing, and the Nasdaq Composite was even
demonstrating leadership going into this past week’s trade. Unfortunately, this
cautious bull’s fear of less-than-conducive technicals (that had been an ongoing
concern beneath the market’s surface) became a bit more noticeable by week’s
end. Brief leadership in issues like Engineered Support Systems (EASI) have once
again failed to live up to growth stock investors’ expectations of what
constitutes a healthy market environment. EASI is an excellent example of why
trading light and tight and being aggressive with partial profit-taking is
paramount if one is trading breakouts at this juncture.
Of course, the fact that this type
of money management policy is so crucial right now, is also telling of the
ongoing problems within the market. Under the rules for IT breakouts, EASI has
not done anything wrong technically. After breaking out above its
weekly chart pivot zone (54.97 – 55.49), and onto gains of over 8%, the stock
pulled back to test its prior breakout levels, before reversing handily off the
daily support zone. Many growth stock traders would consider that a solid
sign, and it is–if viewed in isolation, akin to a vacuum. Unfortunately, this
type of action has been an ongoing theme within growth stocks, and as Jack
Nicholson said, ‘that’s as good as it gets.’ The fact that our leader list of
growth stock breakouts have still, yet to make gains of 20%
or more out of their weekly triggers, is what matters more within the market’s
intermediate downtrend–at least in this cautious bull’s most humble opinion.
It is our own personal risk
tolerance levels within the market waves that ultimately dictate how well we
fare during both the great investing climates, as well as those that will be
considered less-than-perfect ‘sailing conditions. When the breakouts stop
triggering consistently–it’s time to focus your energies on existing positions.
Bottom line–as technicians, we know where we like to make adjustments, either
adding to, or decreasing our portfolio, but it doesn’t mean that the decision is
the same for every trader. While the markets are sailing high, we realize that
between the peaks, troughs do exist, and it’s always in our best interest to
stay prepared for whatever comes our way.
Swing Trade Setups: Potential
position plays that are expected to last 2 to 7 trading days, using key
technical levels for entry. These stocks do not necessarily meet all of our
stringent Intermediate Term requirements, but are demonstrating many of the same
strong criteria. Due diligence on the individual traders part is an absolute
requirement!!! Proper money management rules are emphasized in scaling out of
profitable positions, as is, the setting of prudent stop losses, on the
establishment of any positions taken. The list is not maintained on a weekly
basis as trades are considered, at time of entry, short term in nature.
| Company Name |
Symbol | 3- Month RS |
ADX/DMI |
Price | Pivot +.10 |
Technical Perspective |
| Valueclick | ( VCLK | Quote | Chart | News | PowerRating) |
84 | 15/up | 11.80 | 12.85 | 5-month lateral base |
| William Lyon Homes | ( WLS | Quote | Chart | News | PowerRating) |
50 | 8/up | 90.60 | 93.70 -93.85 | 3.5 Month lateral base w/ handle |
| Lca-vision | ( LCAV | Quote | Chart | News | PowerRating) |
88 | 23/up | 28.34 | 30.05 | 2-Month cup and handle |
| Altiris | ( ATRS | Quote | Chart | News | PowerRating) |
39 | 16/down | 26.85 | 29.45 or 30 | 5-month W Reversal bottom w/ midpoint and handle triggers |
| Doral Financial | ( DRL | Quote | Chart | News | PowerRating) |
59 | 11/up | 35.27 | 35.78 | 11-Month Ascending Triangle |
| Electronics For Imaging | ( EFII | Quote | Chart | News | PowerRating) |
68 | 16/down | 27.20 | 28.91 | 5-month Cup b/o |
| Hyperion Solutions | ( HYSL | Quote | Chart | News | PowerRating) |
74 | 12/up | 42.59 | 44.10 – 44.35 | 2-Month cup and handle |
| Kyphon | ( KYPH | Quote | Chart | News | PowerRating) |
90 | 16/up | 27.98 | 29.87 | 5-Month cup and handle |
| Multimedia Games | ( MGAM | Quote | Chart | News | PowerRating) |
77 | 27/up | 26.73 | 27.58 | 3.5-Month cup w/ high 3 week handle |
IT Watch List Action:
As always, the search goes on for top stocks meeting our fundamental and
technical criteria, but issues may still show ‘flaws.’ The most common ‘flaw’
being ROE, according to strict IBD-style investing . Always do your own
homework before entering a trade .Stocks forming bases or handles are monitored, and put on
our watchlist, and then moved to our position list of recent breakouts, on price
triggers above resistance pivots.
Stocks Forming Handle Or Basing Patterns
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| Open Text | ( OTEX | Quote | Chart | News | PowerRating) |
90 | 30.90 | 3-Month base and pivot | 500 | 32.45 or 33.06 |
| Central Euro. Distr. | ( CEDC | Quote | Chart | News | PowerRating) |
86 | 25.44 | 8-Month cup and handle | 173 | 26.70 |
| Cognizant Technology | ( CTSH | Quote | Chart | News | PowerRating) |
77 | 24.76 | 5-Month cup and handle | 1,937 | 28.60 |
| Open Solutions | ( OPEN | Quote | Chart | News | PowerRating) |
81 | 25.44 | 4-Month lateral base | 204 | 26.07 |
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Recent Breakouts
We monitor the action of Recent Breakouts as an
indicator of the market health for IT traders. When breakouts are acting well,
this is a good sign for the likelihood of further sustainable breakouts. When
breakouts are failing, IT traders should be even more cautious. Due to
additional ‘fresh’ candidates making the grade–stocks on the breakout list will
be dropped after six months or a pullback of greater than 25% from highs.
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| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day in 000’s |
Pivot | 52-Week High |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
89 | 88.12 | 389 | 56.18 | 90.06 |
| St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
76 | 73.92 | 1,216 | 58.89 | 79.03 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
93 | 95.53 | 826 | 56.34 | 96.74 |
| Guitar Center | ( GTRC | Quote | Chart | News | PowerRating) |
85 | 44.34 | 479 | 37 – 37.20 | 47.42 |
| Engineered Support Systems | ( EASI | Quote | Chart | News | PowerRating) |
85 | 57.54 | 381 | 55.07 – 55.59 | 61.93 |
| Chicos FAS | ( CHS | Quote | Chart | News | PowerRating) |
81 | 43.94 | 1,114 | 45.32 | 47.60 |
| Cognos | ( COGN | Quote | Chart | News | PowerRating) |
71 | 35.75 | 836 | 35.39 | 36.46 |
| Gilead Sciences | ( GILD | Quote | Chart | News | PowerRating) |
71 | 67.42 | 3,176 | 67.90 | 70.61 |
Breakouts that may
require extra diligence. Those issues that are near pivot entries or 15%
or more, from established highs.
This list accounts for those issues that have performed strongly, but may
require position management due to deteriorating technical condition before
pivot price is reached. If an issue pull backs 36% or more from highs, the stock
will be removed from our lT lists, so we can make room for more compelling trade
candidates.
| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day |
Pivot | 52-Week High |
| NA | NA | NA | NA | NA | NA | NA |