Whipsaw Wednesday
Thanks to
defensive buying of the healthcares, utilities, and oils, the list
was positive Wednesday, as was the Dow.
But that didn’t help tech. Except for a
few hardwares, broadband plays, and e-commerce names, the computer complex
landed in a pool of red.
Bonds were sacked on renewed fears of
more Fed tightenings…Judging by the action of interest rate futures, the
market is discounting a 100 percent chance of a 25-basis-point Fed tightening at
the Feb. 1-2 confab and a 25 percent chance of a 50-basis-point
hoist.
On the bond market’s radar screen:
Friday’s December employment report.
In cyberspace,
Amazon [AMZN>AMZN] broke down horribly, off 15% on triple average
volume, and the fifth day of distribution in the past nine
sessions…DoubleClick [DCLK>DCLK] and CMGI [CMGI>CMGI], two Net leaders,
each experienced their first day of distribution in a few weeks…Network
Solutions [NSOL>NSOL] came under institutional selling for the fourth time in
the last three weeks…Turnaround-of-the-day award: Brocade [BRCD>BRCD], which gapped down to 150 at the open from Tuesday’s close of 153 1/2, then dropped to 132 1/2 before jetting up to close at 170, a point south of its session best…volume was 50% above average.
Elsewhere, Compaq [CPQ>CPQ] and IBM [IBM>IBM]
continued to showed the best tone among tech
benchmarks.
The toughest part of the
intermediate-term trading game is knowing when to nail down a profit. This is
many times more difficult than either the buy decision or the sell-to-cut-a-loss
decision.
Since no one does it perfectly, you
shouldn’t have felt bad getting shaken out on this a.m.’s opening downdraft. One
research director checked in to tell me that his whole a.m. was spent dealing
with money managers freaking out as they dealt with the
“should-I-or-shouldn’t-I-pull-the-trigger?” problem.
But what I’d said in Tuesday’s Brief
applies: If you exit a winner and then see it turn around and go back up in your
face, it should be treated as a new position. That means that if the stock is
materially extended from its most recent base, the potential entry represents a
high-risk, unattractive play.
Quipped a West Coast money manager: “When you have the guy that runs (a big
contrarian fund) crowing on television about how much money he’s making, you
know you’ve got a bottom.”