Monday’s Intermediate-Term Report
With the first
part of the week dedicated to some solid testing by the Nasdaq Composite,
firming institutional
volume statistics, and price action that saw gains between .60% to
1.2% on the week for the Naz and S&P500 respectively–things are looking better
once again within the market’s ‘confirmed rally.’ It wasn’t without incident, as
more ‘plunging and flying’ type action was witnessed, and other leading issues
are closer to price supports, rather than outright breakout levels within their
respective weekly bases. But, the evidence does point to being ready as it
pertains to our style of growth stock trading, as quality triggers continue to set up in a
healthy market environment.
‘Cautious Bull’ was treated to some
very nice retracement action in the Nasdaq that should serve as a springboard to
higher prices. As mentioned last week, ‘…with the Nasdaq Composite off some
3.5% approximately and the S&P500 down less than 1.5% from their respective
highs–price as far as the averages are concerned is well within bull
territory–unfortunately, other very technically important factors are telling
this particular bull (Mr. Cautious Bull) to steer clear of any position
purchases coming into Monday’s trade. My personal attitude is to take the
triggers, but initially look at each new position as a daytrade (assume less
than the traditional 7% stop loss and use a money stop, perhaps one point for
instance), until proven otherwise.The technical clues continue to tell me that
we are in a period of consolidation or ‘pullback mode’ within the market’s
‘confirmed rally.’ The signs that started to appear last week, such as
distribution figures, and the Nasdaq not leading the latest
leg up, have continued to add weight to my opinion of stressing caution before
looking for the next breakout trigger. Until further testing of price
supports is apparent, and the health of the market’s ‘confirmed rally’ is
hopefully once more in a stronger position from which to launch a potential next
leg up it’s imperative that we continue to keep what is rightfully ours through
the use of proper money management techniques.’
It was our leading index the Nasdaq,
filled with the majority of growth stock issues that has swayed this ‘Cautious
Bull’ to put back on the hide, rather than run and hide. We outlined technical
levels last week for the Naz, that should prove critical within the market’s
confirmed rally, and by Wednesday’s trade, we were treated to an excellent
technical reversal slightly above the 1866 – 18881support zone (less than .05%)
by way of the 30 and 60-minute charts. The lows happened to be confirmed by the
normally leading, but recently lagging semiconductor sector (SMH), as this group
also tested, and reversed strongly off its own technical supports. With a hold
of key supports and accumulation vs. distribution statistics looking as strong
as they have in well over a month, it’s time to keep the horns tilted upwards
for any proper breakouts that might trigger in the coming one to two weeks.
My technical take coming into Monday
is to ‘take the trade’, and give it some room, once again. I’ve stressed
the use of intraday risk management the past couple of weeks, which has served
the breakout player well–at least in my humble opinion, as the action could be
described as less-than-consistent. But, if we now take a step back and look at
the evidence within the market’s confirmed rally, it does look like we are in
another ‘window’ with which to trade the breakouts more aggressively. Some of
the factors in this decision include: 1. After a period of nearly two months,
the Naz is actually off by approximately .75%, while 3% from its 52-week highs,
suggesting that price action has been confined to nothing more than an orderly
consolidation within the confirmed rally. 2. Institutional volume statistics
over the past three weeks are weighted firmly by accumulation in both the Naz’
and S&P. It will be said that I am not a strict disciple of ‘the count’, as I
use a more practical, technical based approach (such as using hammer reversal
days as accumulation, even if price is down at the end of day) to evaluating the
real buying and selling pressure. Using my methodology, both cash indices are
clearly in favor of accumulation. The S&P is at a 6:3 ratio (1 day being an
‘unofficial count’ day in favor of buying), while the Naz’, (which has been
under considerable more price pressure) shows a 6:3 ratio as well. With the Naz’
though, the interpretation is definitely geared towards the ‘unofficial count’,
as four of the accumulation days would not be considered by strict IBD standards
(oh well, welcome to my world). 3. During this period of consolidation, most
leading stocks have put in established high-level bases, and have not broke
down. Mnay have taken substantial hits from their recent highs, but are hanging
tough within the 35% guideline for leading growth stocks, so technically–the
market’s continuing ‘confirmed rally’ still has all of the key ingredients in
place, meaning: indices within 10% of highs, accumulation vs. distribution in
good condition, and most leading growth issues still in sound basing patterns.
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. While the markets are sailing
high, we also realize that between the peaks, troughs do exist, and it’s always
in our best interest to stay prepared for whatever comes our way. We have to
remember, that when the next round of classic triggers does emerge out of our
leading growth stock candidates–they will be doing just that…leading. While
the indices are ‘precariously’ testing levels of support, many of the
stocks we watch, will actually be breaking out to fresh highs, from solid weekly
basing patterns. All that we can do to take advantage of the high-probability
trade is continue to keep ready, and dare to prepare for the next quality
breakout within the market’s ongoing ‘confirmed rally.’
New Category:
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.
None Today.
| Company Name |
Symbol | 12 Month RS |
Price | Pivot +.10 |
Technical Perspective |
| Yahoo | ( YHOO | Quote | Chart | News | PowerRating) |
83 | 42.91 | 44.87 | 9-Week high level base |
| Dot Hill Systems | ( HILL | Quote | Chart | News | PowerRating) |
94 | 16.30 | 18.05 | 3-Month High level base w/ right side consolidation entry |
| Secure Computing | ( SCUR | Quote | Chart | News | PowerRating) |
90 | 14.68 | 15.85 | 2-Month lateral base |
| Novell | ( NOVL | Quote | Chart | News | PowerRating) |
95 | 9.42 | 9.95 to 10.10 | 5-week high level base |
| Mercury Interactive | ( MERQ | Quote | Chart | News | PowerRating) |
47 | 47.56 | 48.64 | 2-Month triangle and triple pivot b/o |
| Ati Technologies | ( ATYT | Quote | Chart | News | PowerRating) |
90 | 15.24 | 16.51 to 16.60 | 4-month lateral base |
| Amdocs | ( DOX | Quote | Chart | News | PowerRating) |
81 | 26.20 | 26.62 or 27.35 | 5-month cup and handle |
| Celgene | ( CELG | Quote | Chart | News | PowerRating) |
73 | 45.59 | 48.25 to 48.98 | 3-month cup and handle |
Watch List Action:
As always, the search goes on for top stocks meeting our fundamental and
technical criteria. 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 Building A Base
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| Quality Systems | ( QSII | Quote | Chart | News | PowerRating) |
74 | 43.49 | 4-Month Lateral base | 72 | 49.85 |
| Chicago Bridge & Iron | ( CBI | Quote | Chart | News | PowerRating) |
66 | 27.60 | 4 Month Lateral base | 170 | 28.60 |
| Altiris | ( ATRS | Quote | Chart | News | PowerRating) |
90 | 33.43 | 7-Week High level lateral base | 350 | 36.15 |
| Merge Technologies | ( MRGE | Quote | Chart | News | PowerRating) |
90 | 19.51 | 12-Week high level base | 104 | 20.78 |
Stocks Forming A Handle
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| UT Starcom | ( UTSI | Quote | Chart | News | PowerRating) |
74 | 38.45 | 4-Month basing pattern w/ right side ‘handle’ entry |
3,425 | 39.17 |
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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.
| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day in 000’s |
Pivot | 52-Week High |
| Apollo Group |
( APOL | Quote | Chart | News | PowerRating) |
54 | 68 | 2,068 | 46.89
|
72.89 |
| Coach Inc. |
( COH | Quote | Chart | News | PowerRating) |
82 | 36.30 | 1,641 | 14.18 | 40.84 |
| Boston Scientific |
( BSX | Quote | Chart | News | PowerRating) |
58 | 34.69 | 5,592 | 23.83 | 36.47 |
| International Game Technology |
( IGT | Quote | Chart | News | PowerRating) |
78 | 34.72 | 2,627 | 18.71 | 35.39 |
| UCBH Holdings |
( UCBH | Quote | Chart | News | PowerRating) |
77 | 39 | 241 | 22.60 | 40.10 |
| Corinthian Colleges |
( COCO | Quote | Chart | News | PowerRating) |
51 | 55.65 | 913 | 43.09 | 66.94 |
| Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
82 | 25.32 | 15,991 | 15.85 | 26.34 |
| Gtech Holdings |
( GTK | Quote | Chart | News | PowerRating) |
67 | 48.60 | 496 | 37.05 or 40.80 |
51.19 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
84 | 107.39 | 1,239 | 59.80 & 79.52 |
113.08 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
83 | 103.60 | 2,411 | 78..84 | 108.88 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
51 | 64.39 | 759 | 56.34 | 66.13 |
| Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
85 | 26.56 | 1,032 | 26.05 | 31.95 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
67 | 29.30 | 332 | 27.85 | 32.70 |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
75 | 54.85 | 590 | 46.85 | 57.84 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
63 | 61.73 | 522 | 56.18 | 64.43 |
| St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
49 | 60.25 | 1,616 | 58.89 | 64 |
| San Juan Basin | ( SJT | Quote | Chart | News | PowerRating) |
66 | 21.58 | 181 | 19.18 and 20.12 | 21.60 |
| Aaipharma | ( AAII | Quote | Chart | News | PowerRating) |
87 | 24.97 | 527 | 20.15 | 25.52 |
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 |