This Week’s Intermediate Term Traders Report

August 1, 2003
Chris Tyler

Is it really a
‘best buy?’ Well investors that don’t mind buying in an
‘IBD’ environment seem to think it was just fine to pay more than retail for the
consumer electronics giant Best Buy
(
BBY |
Quote |
Chart |
News |
PowerRating). Sure, there might be worse-looking charts out there when viewing the weekly time frame, but considering the
fact that it has been an ‘Investors Buying & Dumping’ market for the past
couple of weeks, I’d personally be checking with the clerk over at the
specialist counter before I made any more expensive retail decisions.

Since our
last report
the ETFs and
their compadres the cash indices have established lower prices within our
two-month old trading range. The SPDRs have actually tested range lows from
July 1, before reversing two sessions ago, on better-than-average volume, but
nothing to write home about, especially when one considers the weak close off of
the price supports. Further evidence that we might have a bit more
‘consolidating’ to go thru is the lower volume that was notched in today’s
follow-thru session. And with the aforementioned deteriorating prices during the
past week, we now have overhead resistance within our range, in the form of key
moving averages.

As I always say, look at clues from
both price and volume. Volume up to this past week has led price to the
downside, but has now been mixed depending on your index of choice. Since most
of our stocks happen to fall under the Nasdaq grouping, it should be pointed out
that while the S&P 500 distribution signs have been less consequential the past
week, the Nasdaq Composite has picked up two days of Institutional
distribution. This is a concern, but more alarming during the ‘consolidation
phase’ is the amount of growth stocks ‘getting whacked.’ There are still some subsectors and individual names that are basing in an orderly manner, and even a
few that have broken out and managed to retain their gains above pivot
levels…but this has fast become the exception, rather than the rule during the
past two weeks or so.

If you happen to have some outsized
profits, great. This is not a proclamation to ‘drop everything.’ I’m only here
to reawaken any due diligence that may have slipped out of the ol’ trading
arsenal as we experienced an exceptional growth stock environment for the past
few months off of the March lows. Remember as the signs appear, we take heed, as
well as our profits when they’re presented to us. There’s no need to fight the
tide. Besides the fact that it’s a losing battle that depletes our resources for
that time when high quality growth stocks will once more breakout consistently,
and hold on to their outsized gains, rather than force us to take refuge with
our protective stops so quickly.

Mark Boucher’s Top
RS and ER List and Bottom
RS and ER lists have narrowed the bullish spread between the two groupings
and sector strength in general has continued to put us on guard. Two other
events worth mentioning. This is the first week since I have taken over the IT
Report that two growth stocks were removed from our lists. Both Garmin
(
GRMN |
Quote |
Chart |
News |
PowerRating)
and Hovnanian
(
HOV |
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News |
PowerRating) have etched lows greater than 30% from their 52-Week
Highs. Both were on the ‘due diligence’ list that yours truly implemented, in
order to keep our lists relevant by weeding out ‘what was’, from the ‘what is’
growth categories. Furthermore, this was the first weekly period where none of
our issues established fresh highs…Wake UP!!! This means exercising
caution with existing positions, and being on the lookout for worthy
opportunities for the day when the market decides to ‘show us the money’ once
more. When the time is right, meaning a follow thru day with Institutional style
support backing it up, we’ll be ready once again to participate in a healthy
market climate with our stocks selected for their outstanding growth
characteristics, and their ability to weather any storms that the market has
thrown their way by demonstrating quality weekly patterns within a market that
is ‘still consolidating’ in its ‘confirmed uptrend.’

The technical levels are still in
place. For many, the July 1 lows will be the definitive ‘line drawn in the
sand’ for the bullish case. Personally, with my emphasis on taking profits as
the market provides them to us, and through the use of trailing stops, I tend to
gravitate towards a bit of a more creative approach. I emphasize a blend of
trendline analysis, percentage pullback/fibonacci retracements, as well as what
the current environment is for our leading growth stocks. In my humble analysis,
I’m looking towards the May 20th/21 pivot lows as the technical uptrend
supports for both the Diamonds and Spyders. This is roughly a 10% pullback for
both these market proxies, and between the 38 to 50% Fibonacci supports from the
March lows. For the stronger Q’s, I’m looking towards the July 1 lows as the
technical case for the uptrend to remain intact. This level also approximates a
10% pullback from its highs, and is confirmed by the 38% Fibonacci support.

As we begin trade on Friday, the
emphasis is on ‘maintaining’. Who knows what tomorrow will ultimately bring. We
have some clues, and that has reduced our lists as we go forward one day at a
time. What happens after that, we also don’t know for sure, but the one thing
that we can count on is always being prepared to trade those stocks
demonstrating superior growth and technical characteristics as they appear on
our trading screens once again, in a healthy market environment.

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
Boston Scientific	( BSX \| Quote \| Chart \| News \| PowerRating)	86	63.03	64.81 or 65.83	7-week cup & handle pattern with pivot entries from handle or cup highs
F5 Networks	( FFIV \| Quote \| Chart \| News \| PowerRating)	63	17.03	18.96 or 19.34	triggered 7/31 out of seven week base, at 52-week highs
Talk America	( TALK \| Quote \| Chart \| News \| PowerRating)	86	10.82	12.55 or 13.53	two pivots based on 7 and 9 week handle consolidation
Gtech Holdings	( GTK \| Quote \| Chart \| News \| PowerRating)	77	38.56	40.80	7-Week high level base
BEA Systems	( BEAS \| Quote \| Chart \| News \| PowerRating)	84	12.76	13.88 – 14.08	7-Month Saucer pattern
Scientific Games	( SGMS \| Quote \| Chart \| News \| PowerRating)	67	8.97	10.07 – 10.31	17-Month Cup and Handle
Kronos	( KRON \| Quote \| Chart \| News \| PowerRating)	76	53.50	59.60 or 60.50	18-Month Cup and Handle

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	Pivot

Stocks Forming A Handle

Company Name	Symbol	12 Month RS	Price	Technical condition	Average Volume	Pivot

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	Pivot	52-Week High
Apollo Group	( APOL \| Quote \| Chart \| News \| PowerRating)	68	62.35	2,299m	46.89	67.30
Career Education	( CECO \| Quote \| Chart \| News \| PowerRating)	83	83.54	984k	54.40	86.87
Coach Inc.	( COH \| Quote \| Chart \| News \| PowerRating)	82	51.92	924k	28.35	57
Boston Scientific	( BSX \| Quote \| Chart \| News \| PowerRating)	86	63.03	4,028m	47.65	65.73
International Game Technology	( IGT \| Quote \| Chart \| News \| PowerRating)	71	24.57	4,060m	18.71	27.11
UCBH Holdings	( UCBH \| Quote \| Chart \| News \| PowerRating)	65	29.84	395k	22.60	31.50
Corinthian Colleges	( COCO \| Quote \| Chart \| News \| PowerRating)	72	53.79	775k	43.09	56.10
Nextel	( NXTL \| Quote \| Chart \| News \| PowerRating)	93	17.55	22,151m	15.85	20.53

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 pullbacks 30% 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-65 Day	Pivot	52-Week High
Gtech Holdings	( GTK \| Quote \| Chart \| News \| PowerRating)	77	38.56	656k	37.05	40.70
Endo Pharmaceutical	( ENDP \| Quote \| Chart \| News \| PowerRating)	76	15.23	1,025m	14.98	19.45
Centex	( CTX \| Quote \| Chart \| News \| PowerRating)	69	74.59	1,639m	59.80	87.50

This Week’s Intermediate Term Traders Report

BUY THE FEAR, SELL THE GREED

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