Ughhh…
I don’t remember a group dropping as
much in a single day as the genomics (a
subgroup of the biotechs), freefalling as much as 23% on average at midday…
My screen of 18 genomics issues went
out with a median loss of 17%.
That compares with the Goldman Sachs
Internet Index unraveling 17% on April 19, 1999.
A rule of thumb I sometimes use when
riding an aggressive winner down from its high is to automatically sell one-half
or all of my position after it’s down 20% from its peak — this is in case I
haven’t already exited a big winner before this point.
When a group has had a huge runup like
the genomics have had, you should be extra alert to a number of distribution
days occurring in a stock that you’re holding…a distribution day occurs when
price falls amid volume that’s higher than the previous day…once you start
seeing this type of behavior, it’s time to exit — all the more so when you’re
dealing with the most speculative group in the universe: the genomics.
A look at Affymetrix
(
AFFX |
Quote |
Chart |
News |
PowerRating) (off
38% from peak) shows four distribution days in the last five…Curagen
(
CRGN |
Quote |
Chart |
News |
PowerRating)
(off 50% from peak) shows five distribution days in the last six…Gene Logic
(
GLGC |
Quote |
Chart |
News |
PowerRating)
(off 50% from peak) shows five in the last seven…So, given the number of
distribution days and the extent of decline from peak, there was no reason for
an intermediate-term trader to hold these issues entering Tuesday’s session.
As for the Comp, it was the second
distribution day in the last six:
Among the names, Allaire
(
ALLR |
Quote |
Chart |
News |
PowerRating)
came down 11%, though remained in position to build a handle and target the
180’s level…
CMGI’s
(
CMGI |
Quote |
Chart |
News |
PowerRating) handle is getting a
little heavy, but is still intact for a possible breakout above 151.50…
Commerce One
(
CMRC |
Quote |
Chart |
News |
PowerRating) fell on
lighter volume in its second day of handle construction…
Internets holding their own: eBay
(
EBAY |
Quote |
Chart |
News |
PowerRating),
up for the eighth day in 10…Inktomi
(
INKT |
Quote |
Chart |
News |
PowerRating), breaking out of a four-day
range into record ground on big volume…
Emcore
(
EMKR |
Quote |
Chart |
News |
PowerRating) refused to erode as
it puts in time forming a triangular base…
Plug Power
(
PLUG |
Quote |
Chart |
News |
PowerRating) began forming a
handle…
Software.com
(
SWCM |
Quote |
Chart |
News |
PowerRating) stayed
buoyant, nearing its record high of Thursday…
Sycamore
(
SCMR |
Quote |
Chart |
News |
PowerRating) faded out of
contention for any near-term break to new highs as it came under distribution
for the second day…
VerticalNet
(
VERT |
Quote |
Chart |
News |
PowerRating) was
distributed, leaving it handle-less and not close to a breakout from its
six-week cup…
Interestingly, numerous leaders,
though lower, came down on volume less than that of Monday.
As I’d mentioned Monday, there are
fewer and fewer growth stocks setting up for breakouts to higher ground — and
even fewer after Tuesday’s sorry showing.
In this type of environment, then, the
market’s message to the intermediate-term trader is this: Hold off on new
entries from the long side until more stocks begin to rebuild bases and repair
some of the technical damage inflicted.