Tech? Been There, Done That

• August 4, 2000
• Dave Baker

It’s time for my weekly
look at the Nasdaq Composite. Let’s see where we stand.

Intraday Setup:
(
SCMR |
Quote |
Chart |
News |
PowerRating)

Sycamore
(
SCMR |
Quote |
Chart |
News |
PowerRating) is testing its intraday high. Watch for a new-high
breakout.

Today’s Insight

Because tech has been so crazy lately,
I thought that it would be good to look at some good setups in the other
sectors. It’s important not to trap yourself in one sector. As you’ve probably
noticed from my Watchlist, I love to trade breakouts and breakdowns. When there
are few breakouts in the tech sector, I like to switch modes. If drugs and
financials are breaking out on volume, that’s where I’m headed. If I have to
dabble in the oil group, that’s where I’ll be.

As traders, we need to move where the
money is, where the action is, and most importantly, where the quality setups
can be found. Thus, today, think of the column not as Trading the Techs, but
Trading Just the Best Setups.

Today’s Non-Tech
Watchlist
(
VIA |
Quote |
Chart |
News |
PowerRating),
(
MER |
Quote |
Chart |
News |
PowerRating),
(
AIG |
Quote |
Chart |
News |
PowerRating),
(
LEH |
Quote |
Chart |
News |
PowerRating),
(
AXP |
Quote |
Chart |
News |
PowerRating),
(
MWD |
Quote |
Chart |
News |
PowerRating),
(
AFL |
Quote |
Chart |
News |
PowerRating)

Viacom
(
VIA |
Quote |
Chart |
News |
PowerRating) is breaking out on Friday. It gapped open this morning and
has headed higher for most of the day. Currently trading at its day high, Viacom
looks strong. The volume pickup on Thursday and Friday is quite a positive sign.
Unless it makes a serious turnaround, it looks to close strong. On Monday, watch
for a continuation move to create a buying opportunity.

The big brokers have been quite strong lately. Mother Merill
(
MER |
Quote |
Chart |
News |
PowerRating)
took out its previous high intraday on Friday, but has pulled back a bit. Watch
for it to continue to rally out of this high-level cup formation and to close at
a new high. When it closes at a new high, swing traders will want to watch for a
continuation move.

.

American International Group
(
AIG |
Quote |
Chart |
News |
PowerRating), in the insurance group,
is breaking out to a new high on Friday. Financials are strong today, so watch
for follow through on Monday. AIG has set a new intraday high. If it’s able to
close near the top of its range, ideally at a new high, look for a move on
Monday to take out the intraday high from Friday. Remember to use volume as a
confirming indicator.

Back to the brokers, Lehman Brothers
(
LEH |
Quote |
Chart |
News |
PowerRating) is setting a new
high on Friday. Like many of the financials, it had been trading in a range for
several months. Finally, it broke out of that range and traded higher for a
short while. What I’m seeing on the near-term charts is a high-level cup pattern
and a new-high breakout. Stick with the plan. Watch for the price action on
Monday to take out Friday’s intraday high.

American Express
(
AXP |
Quote |
Chart |
News |
PowerRating) also traced out a high-level cup
pattern. Again, watch for a new closing high. There is resistance near 60, so
consider waiting for a breakout move above this level.

Let’s add one more broker to the Watchlist. Morgan Stanley Dean
Witter. Rather than just the simple high-level cup that I’ve seen in other
financials, here, I’m seeing a high-level W pattern. Watch for a breakout to new
highs here as well. There may be psychological resistance at 100, so be prepared
for a pause should it head higher.

Aflac
(
AFL |
Quote |
Chart |
News |
PowerRating) broke out to a new high several days ago, but
the continuation move that we saw on Friday was weak and failed. The stock
retraced but found support at a near-term uptrend. Perhaps this bounce will be
able to take it back to its highs and offer us a trading opportunity.

 

Have a great weekend, 

Dave Baker

 

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