Monday’s Intermediate-Term Report

• September 28, 2003
• Chris Tyler

Unfortunately for
our high flying ETF friends, this past week was ‘no walk in the park.’
Actually, to keep with the Top Gun theme, the
appropriate words might be a take on the ‘crash and burn Maverick’ line from the
movie…’cash or burn.’ It was definitely not a walk in the park for growth
stock investors as the market started off on the wrong foot by gapping down in
Monday’s trade. That day’s ‘profit-taking’ took place on lighter volume (which
we like to see), and with a nice reversal day to the upside on heavier, and
above-average volume on Tuesday (especially in the leading Nasdaq), it looked as
though the ‘shake and headfake’ were over. But, that my friend was as good as it
got for our market proxies and favored growth stocks. The final three days of
the trading week left claw marks all over our bovine friend, with some of the
scars looking quite ugly indeed. For the week, the Spyders were off by 3% and
the Q’s, a very oversold 6%, and the worst one week performance in over 17
months.

OK, now it’s time to take a deep
breathe and, as Charles Schwab said, ‘relax.’ The quick and brutal nature of
this move has left our ‘confirmed rally’, deep in oversold territory. That
doesn’t mean that we’ve seen the last of a move down, but you should stay
prepared to take advantage of a potential ‘follow-thru’ day in the coming
sessions. With the Spyders down 5% and the Q’s off by roughly 7% from their very
recent highs, it’s imperative that you stayed focused for opportunities should
they present themselves. No doubt, the markets broke some significant price
supports during the past week, and the accumulation/distribution statistics for
the past three weeks don’t look nearly as compelling as they did one week ago.
Both indices have 3 days of classic institutional distribution, as well as the
latest two sessions not qualifying as textbook days, but nonetheless worrisome.
Bottom-line though, with distribution not yet telling us to ‘keep it in cash’,
and our index friends still well above the 10% retracement benchmark, as growth
stock investors we are still looking for fresh purchases of quality stocks that
make sense technically and fundamentally. Should our stocks, and the broader
market give signs that the worst is behind us within our ‘confirmed rally’, it’s
up to us to take full advantage of a trend resumption up, should it present
itself in the coming days.

Hopefully, with proper money
management your portfolio has not been as mistreated as some of the ‘hard
percentage’ losses experienced in most growth stocks. Yes, some have survived
the pivot test thus far (and that is normally a sign of a great stock), but as a
more active trader influenced by a swing trading approach, my portfolio is more
concerned with the proverbial ‘leaving it on the table’ philosophy. Many issues
have ‘pulled back’ 15% to 30% from their recent highs, so in my humble opinion,
pivots are secondary to my approach of ‘keeping it real.’ As growth stock
traders all we can do is prepare as best as possible for the next high
percentage play. Within the In an oversold condition as of Friday’s close, the
indices are still hanging in there, and so should you.

With ‘the fall’ upon us we didn’t
get to test the weekly resistance zone mentioned here in last weeks column, so
our concern at this point, or should I say opportunity, are possible zones of
support that still exist within the ‘confirmed rally’, for an upside resumption
to trigger from. With the Spyders closing at 99.95 we have: 98.83 – 99.55 for
the first zone, which is comprised of the 8/26 pivot low and a 62% August
Fibonacci retracement. From approximately 97.50 – 97.90 the index proxy has
angular trendline support and prior support pivots from June and July. The last
zone, and approx. 8% from highs is 96.34 – 96.61. This support area is comprised
of July and August pivots and the 50-Week EMA. For the Q’s, which closed at
32.58, our levels look like this: The 50/50 zone (50-Day EMA and 50% Aug.
retracement) is slightly below between 32.40 – 32.64, and represents a 7%
pullback from recent highs. The second, and final zone of support for the
‘confirmed rally’ falls between 31.50 – 31.75. This zone represents a 9% to 10%
pullback, as well as angular channel support on the daily chart.

As you should know by now (if you
read this column, but more importantly accept responsibility for your trading
successes and losses), 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.’ With the most recent action some might
consider the sailing less than ideal, but sometimes it’s a ‘perfect storm’ that
clears the air, as we look forward to the next leg of our journey.

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
Citrix	( CTXS | Quote | Chart | News | PowerRating)	86	21.26	24.08 or 24.87	12-week C & H
Hutchinson Technology	( HTCH | Quote | Chart | News | PowerRating)	76	32.78	37.29 – 37.55	12-week High level base w/pivot entries
Documentum	( DCTM | Quote | Chart | News | PowerRating)	67	20.78	23.50	16-Week High-Level C&H w/ Cup trigger
New Century	( NCEN | Quote | Chart | News | PowerRating)	61	27.14	29.20	3.5 month 37% deep High level base w/ 3 week mid level consolidation for triggers
E*trade	( ET | Quote | Chart | News | PowerRating)	85	9.40	10.74	20-Month Cup w/ weekly handle trigger
Quest Software	( QSFT | Quote | Chart | News | PowerRating)	43	12.44	13.66 – 13.75	14-month Slim Jim
Altiris	( ATRS | Quote | Chart | News | PowerRating)	85	25.02	27.90	3.5 week high level double bottom
American Power Conversion	( APCC | Quote | Chart | News | PowerRating)	59	17.30	18.83 – 18.96	6 week high level base with triple pivots
Lowes	( LOW | Quote | Chart | News | PowerRating)	61	52.64	56	6 week High level double bottom consolidation
eBay	( EBAY | Quote | Chart | News | PowerRating)	72	54.22	59.03	3-month High level base

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
Zebra Technology	( ZBRA | Quote | Chart | News | PowerRating)	48	50.48	12-week High Level base	412	56.18
Centex	( CTX | Quote | Chart | News | PowerRating)	64	75.20	10-Week High Level base Slim Jim pattern	1,305	79.52
Sharper Image	( SHRP | Quote | Chart | News | PowerRating)	47	24.57	16-Week High Level base	255	31.25
Marvel Entertainment	( MVL | Quote | Chart | News | PowerRating)	89	22.29	17-Week Cup&Handle base w/ handle and cup pivots	1,200	25 or 25.35
Aeropostale	( ARO | Quote | Chart | News | PowerRating)	92	26.80	9-Week High Level Double bottom base w/ handle	960	30.52
Rent-a-Center	( RCII | Quote | Chart | News | PowerRating)	67	32.13	10-week base	631	33.20
Resmed	( RMD | Quote | Chart | News | PowerRating)	61	43	7-Week high level double bottom base	151	44.63
*Axcan Pharmaceutical	( AXCA | Quote | Chart | News | PowerRating)	54	13.60	4-Month high level base	142	14.86
New York Community Bank	( NYB | Quote | Chart | News | PowerRating)	64	31.83	11-Week high level base	791	33.28

*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)	48	24.95	10-Month Cup and Handle	368	29.10 or 29.80
Constellation Brands	( STZ | Quote | Chart | News | PowerRating)	48	30.72	Double Cup & Handle: Weekly one year and 3-Month version	863	31.90 to 32.10
Countrywide Financial	( CFC | Quote | Chart | News | PowerRating)	65	76.70	4-month Cup and Handle w/cup triggers	2,200	78.84
Whole Foods Market	( WFMI | Quote | Chart | News | PowerRating)	32	53.41	21-Week Cup w/ Mid-Level Handle pivot entry	685	56.34

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)	61	65.90	1,776	46.89	69.32
Career Education	( CECO | Quote | Chart | News | PowerRating)	85	46.06	1,500	27.20	50.46
Coach Inc.	( COH | Quote | Chart | News | PowerRating)	76	54.29	789	28.35	59.65
Boston Scientific	( BSX | Quote | Chart | News | PowerRating)	74	63.75	4,050	47.65	68.74
International Game Technology	( IGT | Quote | Chart | News | PowerRating)	69	28.56	2,300	18.71	29.40
UCBH Holdings	( UCBH | Quote | Chart | News | PowerRating)	59	29.82	300	22.60	33.55
Corinthian Colleges	( COCO | Quote | Chart | News | PowerRating)	70	57.49	705	43.09	60.70
Nextel	( NXTL | Quote | Chart | News | PowerRating)	78	19.32	17,800	15.85	20.83
Gtech Holdings	( GTK | Quote | Chart | News | PowerRating)	67	42.11	586	37.05 or 40.80	44.12
Centex	( CTX | Quote | Chart | News | PowerRating)	64	75.20	1,395	59.80	87.50
Endo Pharmaceuticals	( ENDP | Quote | Chart | News | PowerRating)	88	20.80	640	14.98	22.26
American Healthways	( AMHC | Quote | Chart | News | PowerRating)	85	41.98	300	40.95 or 42.10	45

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
USANA Health Sciences	( USNA | Quote | Chart | News | PowerRating)	97	50.41	149	51.49	56.43
Nextel	( NXTL | Quote | Chart | News | PowerRating)	78	19.32	17,800	20.63	20.83
Apollo	( APOL | Quote | Chart | News | PowerRating)	61	65.90	1,775	67.38	69.42