Monday’s Intermediate-Term Report

• October 12, 2003
• Chris Tyler

For our ETF
friends and their cash equivalents the past week produced slight gains between
.75 % and 2% in measuring the S&P 500 and Nasdaq Composite.

After last week’s thrust and gap action higher, this may not be ‘just what the
doctor ordered’ if you were anticipating the more typical percentage pullback
that healthy markets normally produce. But, for the market bulls out there, the
fresh 52-week highs is probably a ‘moooving’ event nonetheless…now lets just
see if this bull has the legs to keep standing strong.

The move has produced a few
technical points worth addressing. First off, the bullish case for the markets.
The leading Naz’ (and most commonly associated w/ growth stocks) has once again
demonstrated leadership versus the broader market in terms of price and volume.
For the most recent 15 days of trade this index has notched 4 days of
accumulation on above-average volume, while only showing two days of evident
distribution. The S&P 500 has produced a 3:2 ratio during the same period. Price
leadership has also been evident in the leading Naz’ with gains of approximately
2% to the broader market’s .75%. This is confirmation that we, as growth stock
advocates, can appreciate…bottom line. Lastly, the action during the most
recent week suggests stronger signs of accumulation. Once again, this fact is
more evident in growth stocks and the associated Nasdaq index as two days of
above-average accumulation were witnessed, while only one day of above-average
selling was apparent. This day it should be noted too, did not qualify as a
session of distribution as volume was less than the prior day’s trade.

The flipside of all of this, is that
there is technical evidence that price action is in need of some corrective
action if the markets are to sustain the current ‘confirmed rally.’ The gains,
while not outsized during the past week have ultimately produced a
slightly-higher overbought condition. Furthermore, with seven of the last eight
sessions delivering rising prices, the market has quickly returned right back
into key daily and weekly chart technical resistance levels. Double top type
formations of varying shapes and sizes are evident in all of the major indices
as they press against Fibonacci and prior price resistance levels of the last
three years. The daily perspective is also showing rising angular, or wedging
action, that is usually prone to corrective activity. A much welcome pullback
from our established highs in retrospect, would have the ability to ‘shake out’
some of the anxious money caught buying, for fear of missing the next move, and
in the process rotate stock into stronger hands while setting up potential
handle formations.

As of Friday’s close, the market has
continued to deliver on its ‘confirmed rally’, regardless if you’ve been in it,
sidelined and waiting, or somewhere in between. I personally fall into the
latter as my comfort level dictates more of a swing approach to maintaining
positions. For me, pullbacks within a healthy market environment are a part of
the process where I add to my inventory by ‘picking up the pieces’ when the
technical conditions cooperate. Yes, I play the breakouts as well, but in
situations such as our current market where the consolidation work doesn’t
necessarily qualify as strong enough to carry overnighters I end up focusing on
making the most of breakouts on an intraday basis, and ‘see where the currents
carry the position.’ This approach has been effective the past week as many
stocks chopped around, some giving back a good deal, while others going
grudingly higher. Last week I said: ‘Ideally, a two to three session pullback will develop on lighter trade, but also
hold around either the 13 or 20-Day EMAs. Tests of these ‘awareness zones’
within the ‘confirmed rally’ also represent 2% to 3% pullbacks within an
existing overbought condition, which should result in  a much stronger
trade opportunity than  current levels, if the market gods are kind enough
to deliver ‘all the goods.’ Remember The Rolling Stones song, and stay prepared
to trade at current levels, if this is what the market decides to give us. A
lateral consolidation of one or two days might be enough ‘grazing’ for the bull
to charge ahead once more. I personally would like to see more, but constructive
activity along these lines might be all that we get, if institutional investors
are really serious about Friday’s FTD.’ Well, it turned out the Stones were
right. The game plan remains the same, but with the most recent trade, the
numbers have changed slightly. For the Q’s: 33.81 – 33.91 = 50% fib. retracement
from 9/30 low, the 20-Day EMA, and a retest of bullish gap supports. 33.43 –
33.55 = 62% fib. retracement and a gap fill. 32.98 – 33.09 = 78% fib.
retracement and the 50-Day EMA. For the Spyders: 102.56 – 102.95 = gap fill,
20-Day EMA test, and a 38% fib. pullback. 102.24 is the 50% fib. retracement
level from the 9/30 low. 101.50 – 101.60 = 62% fib. retracement and the 50-Day
EMA support level.

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.’

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
Hutchinson Technology	( HTCH | Quote | Chart | News | PowerRating)	56	32.91	37.29 – 37.55	13-week High level base w/pivot entries
E*trade	( ET | Quote | Chart | News | PowerRating)	83	10.44	10.74	13-week C & H
American Power Conversion	( APCC | Quote | Chart | News | PowerRating)	50	17.61	18.83 – 18.96	8 week high level angular base with triple pivots
Kyphon	( KYPH | Quote | Chart | News | PowerRating)	89	22.48	23.70	11-week Double bottom base w/ handle pivot entry
Websense	( WBSN | Quote | Chart | News | PowerRating)	60	22.18	24.32 or 25.46	7-week angular pivot b/o or 10-month C & H w/ weekly trigger
Alliance Data	( ADS | Quote | Chart | News | PowerRating)	66	28.77	29.84	13-Week lateral base
Hyperion Solutions	( HYSL | Quote | Chart | News | PowerRating)	38	32.57	36.67	4.5-Month ‘W’ pattern b/o
Imation	( IMN | Quote | Chart | News | PowerRating)	6	35.56	36.60	9-Week high level lateral consolidation base
Marvell Technology	( MRVL | Quote | Chart | News | PowerRating)	86	42.63	44.18	7-Week High level base
Veritas	( VRTS | Quote | Chart | News | PowerRating)	81	34.75	36.25 or 37.06	8-week angular channel

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)	38	25.53	18-Week High Level base	299	31.25
Axcan Pharma	( AXCA | Quote | Chart | News | PowerRating)	45	13.50	4-Month high level base	186	14.86
Guitar Center	( GTRC | Quote | Chart | News | PowerRating)	76	34.10	11-week high level base	369	36

*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)	40	25.27	11-Month Cup and Handle	410	29.10 or 29.80
Constellation Brands	( STZ | Quote | Chart | News | PowerRating)	36	30.11	Double Cup & Handle: Weekly one year and 3-Month version	672	31.90 to 32.10
Garmin	( GRMN | Quote | Chart | News | PowerRating)	68	43.72	19-Week High Level base w/ 6-week handle trigger	396	46.85

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	65.72	1,776	46.89 & 67.38	69.42
Career Education	( CECO | Quote | Chart | News | PowerRating)	83	47.80	1,067	27.20	50.46
Coach Inc.	( COH | Quote | Chart | News | PowerRating)	76	29.60	1,563	14.18	30.20
Boston Scientific	( BSX | Quote | Chart | News | PowerRating)	66	63.38	4,050	47.65	68.74
International Game Technology	( IGT | Quote | Chart | News | PowerRating)	62	28.09	2,300	18.71	29.50
UCBH Holdings	( UCBH | Quote | Chart | News | PowerRating)	64	33.46	251	22.60	33.98
Corinthian Colleges	( COCO | Quote | Chart | News | PowerRating)	64	57.28	673	43.09	60.70
Nextel	( NXTL | Quote | Chart | News | PowerRating)	78	21.48	18,025	15.85	21.78
Gtech Holdings	( GTK | Quote | Chart | News | PowerRating)	71	46.33	598	37.05 or 40.80	46.41
Centex	( CTX | Quote | Chart | News | PowerRating)	72	87.65	1,250	59.80 & 79.52	88.06
Endo Pharmaceuticals	( ENDP | Quote | Chart | News | PowerRating)	87	23.20	594	14.98	24
American Healthways	( AMHC | Quote | Chart | News | PowerRating)	85	43.59	270	40.95	45.25
Resmed	( RMD | Quote | Chart | News | PowerRating)	60	46.17	164	44.63	46.70
Countrywide Financial	( CFC | Quote | Chart | News | PowerRating)	78	94	2,200	78..84	95.78
Whole Foods Market	( WFMI | Quote | Chart | News | PowerRating)	46	59.71	611	56.34	61.46
Zebra Technologies	( ZBRA | Quote | Chart | News | PowerRating)	63	57.92	387	56.18	57.92
Marvel Enterprises	( MVL | Quote | Chart | News | PowerRating)	92	28.02	1,103	26.05	28.61
Aeropostale	( ARO | Quote | Chart | News | PowerRating)	90	32.09	934	30.52	32.74

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
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