Monday’s Intermediate-Term Report

• October 25, 2003
• Chris Tyler

In the past two
weeks since our last report, the ETFs and their cash equivalents ‘mooved’
higher, but subsequently turned tail as our bullish friends decided to ‘hide.’
For the past 10 trading days this has our
bovine friends, the Spyder and the Q’s, off approximately 1% and 2% respectively
after last weeks climb to fresh 52-week highs within the market’s
‘still-confirmed rally.’

I think the saying goes, ‘what a
difference a week makes.’ In case I’m wrong though, two weeks can most
definitely make a difference–especially for growth stock investors. As stated
in our last report, this cautious bull was trimming down on the ol’
grazing activities due to ‘an overbought market, with prices wedging into daily
technical resistance levels and setting themselves up as possible double
top-type formations. I might have missed the top (once again), but with seven of
the last 10 sessions resembling a staircase down, and price pulling back by 7%
in the Naz’, and over 3% in the S&P–the horns are getting primed once again to
do some business. Besides the fore mentioned price action, volume for the past 3
weeks of trade looks to be saying that the ‘confirmed rally’ is indeed still
with us. Absolute numbers of accumulation and distribution show a 5:3 ratio in
favor of the bulls, for the leading Naz’, while the S&P comes in at a
respectable 4:2. For the record, I don’t go with official numbers as I look at
price action for the day in question as well. For example in today’s trade the
Naz’ flashed a day of distribution, but if you look at the price action you’ll
see that this ‘so-called’ distribution has occurred while price has established
a ‘hammer low’, after reversing off the 38% (August), 62% (Sept) Fibonacci
levels, and the 50-Day EMA (for the S&P the test was the 38%,50%, 50-Day EMA). I
don’t know about you, but for me this comprises a very major support zone and
pricing decision for the technical traders of the world. And if that doesn’t
work for you, I’ll just throw in a little bit pseudo-psychology about how all of
a sudden bad and good news is getting punished, instead of the not so long ago,
‘everything is golden in the world’ school of investing. Personally, this only
adds confidence to the pullback theory within our ‘confirmed rally’, and keeps
me thinking, ‘who needs a Magic Bullet theory anyhow?’

As alluded to in the above, price
action has done some solid testing, and confirmed those levels of support
successfully, as evidenced by both price and volume. I personally think these
levels should hold. We might do a little back testing or pullback into Friday’s
range, but that’s conjecture at best right now. What isn’t prone to investors’
whims, panics, and hallucinations is that with price and volume still intact,
and hopefully your portfolio too–that we have another high-probability area of
entry in our ‘confirmed-rally.’

Within our own list of potential and
ongoing prospects there were two casualties of the latest ‘pullback’ with the
market’s ‘confirmed rally.’ Apollo (APOL) which had triggered out of a high
level base a few weeks earlier exceeded the 7% threshold for stop losses below
pivot entries. The issue does however, maintain it’s status on our list of
confirmed breakouts, as its first official trigger from much lower levels is
still showing the stock to be in excellent form. A salute also goes out to Endo
Pharmaceutical (ENDP), which although still above pivot levels ever so slightly,
did break lower than our official 36% from highs threshold with its recent gap
below the 50-Day EMA. Three stocks from our list of recent breakouts have also
(at least temporarily) been moved to our due diligence list as they test their
recent breakout pivots.

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 within the
‘confirmed rally.’ With the most recent voyage back into the trough, we now look
to enter the high seas once more as we look to set sail with the best provisions
for the conditions at hand. Have a great weekend.

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
Polymedica	( PLMD | Quote | Chart | News | PowerRating)	82	26.35	28.93	7-week high level base
Middelby Corp	( MIDD | Quote | Chart | News | PowerRating)	86	21.75	22.15	10-Week ascending base **this is a thinly traded issue**
American Power Conversion	( APCC | Quote | Chart | News | PowerRating)	43	17.05	18.77 – 18.96	10-week high level angular base with pivot zone entry
Kyphon	( KYPH | Quote | Chart | News | PowerRating)	90	22.61	23.70 or 27.10	3-month high level double bottom w/ handle entry or 52 week basing entry
Christopher & Banks	( CBK | Quote | Chart | News | PowerRating)	77	28.08	31.22	8-Week Cup & Handle pattern
Alliance Data	( ADS | Quote | Chart | News | PowerRating)	55	26.85	29.84	15-Week lateral base
Hyperion Solutions	( HYSL | Quote | Chart | News | PowerRating)	51	32.35	35.60	15-week symmetrical triangle
Advance PCS	( ADVP | Quote | Chart | News | PowerRating)	80	49.05	49.53	8-week high level base
Packateer	( PKTR | Quote | Chart | News | PowerRating)	86	16.32	18.15 or 19.05	3.5 month Cup & Handle pivot entries
Veritas	( VRTS | Quote | Chart | News | PowerRating)	81	34.75	37.06	8-week reverse head and shoulders pattern

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
Sharper Image	( SHRP | Quote | Chart | News | PowerRating)	51	25.54	20-Week High Level base w/ right side of base consolidation entry or 52-week base b/o entry	283	27.85 or 31.25
Axcan Pharma	( AXCA | Quote | Chart | News | PowerRating)	30	12.97	5-Month high level base	200	14.86
Guitar Center	( GTRC | Quote | Chart | News | PowerRating)	72	33.85	3-month high level base	278	36
Sohu.Com	( SOHU | Quote | Chart | News | PowerRating)	0	37.20	4-Month Ascending Triangle base	0	43.50
Gevity Hr Inc	( GVHR | Quote | Chart | News | PowerRating)	0	16.85	3-Month lateral base	0	20.05
Invitrogen	( IVGN | Quote | Chart | News | PowerRating)	0	61.72	9-Week high level lateral base	0	63.15

*Axcan Pharmaceutical
ROE at 8% is lower than typical 15% to 17% threshold that many IT investors
accept.

Stocks Forming A Handle

Company Name	Symbol	12 Month RS	Price	Technical condition	Average Volume in 000’s	Pivot
Fresh DelMonte	( FDP | Quote | Chart | News | PowerRating)	30	25.71	11-Month Cup and Handle	418	29.10 or 29.80
Constellation Brands	( STZ | Quote | Chart | News | PowerRating)	41	30.645	Double Cup & Handle: Weekly one year and 4-Month version	597	31.90 to 32.10
Garmin	( GRMN | Quote | Chart | News | PowerRating)	63	42.05	21-Week High Level base w/8-week consolidation pivot trigger	365	46.85
Dollar General	( DG | Quote | Chart | News | PowerRating)	0	21.64	9-Week Cup w/ mid-level handle entry	0	21.87

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)	55	63.63	1,953	46.89	69.42
Career Education	( CECO | Quote | Chart | News | PowerRating)	87	52.35	1,335	27.20	52.43
Coach Inc.	( COH | Quote | Chart | News | PowerRating)	83	33.65	1,596	14.18	33.67
Boston Scientific	( BSX | Quote | Chart | News | PowerRating)	68	64.57	3,946	47.65	68.74
International Game Technology	( IGT | Quote | Chart | News | PowerRating)	72	31.12	2,468	18.71	31.64
UCBH Holdings	( UCBH | Quote | Chart | News | PowerRating)	66	33.94	253	22.60	34.90
Corinthian Colleges	( COCO | Quote | Chart | News | PowerRating)	67	56.79	792	43.09	60.70
Nextel	( NXTL | Quote | Chart | News | PowerRating)	79	22.09	18,187	15.85	23.07
Gtech Holdings	( GTK | Quote | Chart | News | PowerRating)	69	43.73	580	37.05 or 40.80	46.50
Centex	( CTX | Quote | Chart | News | PowerRating)	79	93.65	1,187	59.80 & 79.52	94.93
American Healthways	( AMHC | Quote | Chart | News | PowerRating)	85	42.99	293	40.95	46.61
Countrywide Financial	( CFC | Quote | Chart | News | PowerRating)	84	104.94	2,500	78..84	108
Whole Foods Market	( WFMI | Quote | Chart | News | PowerRating)	41	58.98	560	56.34	61.46
Marvel Enterprises	( MVL | Quote | Chart | News | PowerRating)	92	27.32	946	26.05	28.65

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
Aeropostale	( ARO | Quote | Chart | News | PowerRating)	88	30.55	895	30.52	34.70
Zebra Technologies	( ZBRA | Quote | Chart | News | PowerRating)	59	56.65	403	56.18	58.94
Resmed	( RMD | Quote | Chart | News | PowerRating)	55	45.05	144	44.63	46.70