No Silver Lining Here
It was tough to
find anything constructive about Thursday’s trade.
The Naz underwent distribution as
price dropped 3% while volume expanded 6%.
Within the glamour complex, more than
four stocks fell for each that rose.
In the bells, every important issue
retreated.
Nokia
(
NOK |
Quote |
Chart |
News |
PowerRating) fell loudly on 2.5
times average daily volume…to make matters worse, the stock not only failed on
Monday’s breakout, but also took out its prior two-week handle.
Texas Instruments
(
TXN |
Quote |
Chart |
News |
PowerRating) also came
down on sheets of volume.
EMC
(
EMC |
Quote |
Chart |
News |
PowerRating) held up fairly well, off
3% on lighter volume.
In our Group
of Seven, SDL
(
SDLI |
Quote |
Chart |
News |
PowerRating) fell 9% on elevated trade, Linear Tech
(
LLTC |
Quote |
Chart |
News |
PowerRating)
lost 10% on a 31% pick-up in volume, while four others forfeited from 2%-5%…Sanmina
(
SANM |
Quote |
Chart |
News |
PowerRating) was the sole winner, up 2%.
Every genomic I track fell, with all
but three off at least 4%.
Among the names, Aurora Biosciences
(
ABSC |
Quote |
Chart |
News |
PowerRating)
finally cleared its three-week zone, then reversed on heavy trade, going out
near its low.
GSI Lumonics
(
GSLI |
Quote |
Chart |
News |
PowerRating) kissed its
old high on double average trade, but couldn’t break out of its four-month
O’Neil cup-with-handle.
Mercury
(
MERQ |
Quote |
Chart |
News |
PowerRating) also broke out of
a small consolidation pattern, then tailed off by day’s end.
Semtech
(
SMTC |
Quote |
Chart |
News |
PowerRating) broke out of
a handle on volume triple its average, then tailed off into the close, finishing
right at the top of its base.
Checkpoint
(
CHKP |
Quote |
Chart |
News |
PowerRating) hurdled a
three-week handle on elevated trade, then failed.
Maxim Integrated
(
MXIM |
Quote |
Chart |
News |
PowerRating) failed,
diving back into its prior base on big volume.
Medimmune
(
MEDI |
Quote |
Chart |
News |
PowerRating) also failed on
its recent breakout, though volume faded.
Siebel
(
SEBL |
Quote |
Chart |
News |
PowerRating) is in the second
day of handle construction.
Nortel
(
NT |
Quote |
Chart |
News |
PowerRating) was in the second day
of a handle to accompany its 12-week base.
Elantec
(
ELNT |
Quote |
Chart |
News |
PowerRating) broke out of a
seven-day shelf on volume 165% above its usual.
In the Intermediate-Term
Trading Course that I wrote with Greg Kuhn, I speak of having bought Juniper
Networks
(
JNPR |
Quote |
Chart |
News |
PowerRating) in early February at the second entry point in the chart
below.
This is what I wrote: "Elsewhere
in this course, I’ve stressed the need for beginners to this strategy to focus
on stocks with bases of at least five to six weeks in length. Often, a big
winner will break out from a so-called first-stage base, run up, and then pause
for a week or two. If volume dries up significantly during this abbreviated
one-to-two-week period, I’ll buy the stock as it clears this brief range."
Elantec is an example of the above
situation.
It was one of the first stocks to
return to its old high, doing so on June 6.
Because it did this as one of the
leaders in a fresh intermediate-term advance, the odds of it failing on the
breakout are less than if it had tripled over a six-month period and then broke
out.
If you either 1) missed ELNT’s June 6
breakout, 2) bought the June 6 breakout and was shaken out during the June 12-15
pullback of 20% (on an intraday basis), or 3) bought the June 6 breakout and
wanted to add to your position, today’s breakout gave you an opportunity.
The husky volume improved the odds
that ELNT would follow through.
Nevertheless, this is a higher-risk
play than buying a stock coming out of a six-week base on big volume. As such,
it should only be attempted by traders that have a successful track record with
this strategy.
Higher-risk plays involve tighter
stops, smaller position sizes, or both.
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