What’s That Smell?

• January 5, 2001
• Goran Yordanoff

What a week. After a disappointingly weak morning, the day turned
increasingly
ugly with second tiers like
(
JNPR |
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(
SDLI |
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(
NEWP |
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(
CMVT |
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Biotech
sector getting dismantled. Fortunately, every single stock mentioned on
our short watch yesterday hit for gigantic profits. Not
much to say about this “watch and wait” game, other than buyers seemed to
take
the day off as more concerns about the condition of the US Economy surfaced
throughout the trading session.

Let’s keep our eyes on what the Nasdaq Composite is doing by looking at the
daily chart below:

Point (a) on the chart indicates the 50% mark of Wednesday’s huge green bar.
As I have pointed out before, bars like this one are very bullish
and the 50% marks of these bars should serve as support on
any subsequent declines. 

Even though the Composite closed
below this 50% line today, another area of support is
waving its arms from eight trading sessions prior. The gap up on 12/21-12/22
as indicated by point (b) is this next area of support. This gap
creates a “window” of support from the 2340 to 2298 zone. Support can occur anywhere within this zone. 

As seen by
the small tail on today’s bar, the Composite bounced up slightly when
it entered the top of this support zone. At this stage, I
am looking at initiating longs in the Nasdaq Composite with a
sell/stop at 2340 (on a closing basis).

Long Watch:
(
JNPR |
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(
SUNW |
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(
QQQ |
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CSCO |
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Short Watch: Drugs and Biotech still look awful. If you are still short
technology issues, tighten up your stops.

Have a great weekend.

Goran