Bringing Up The Rear

  • May 22, 2001
  • Tim Truebenbach


The Naz finally did it! 
It was able to follow the
DJIA’s and S&P 500’s lead and break out of its cup-and-handle base on good
volume. What does it all mean now that the Nasdaq has managed to move out of
this bullish formation? Just another sign that we’re in a bull market. What will
happen next? Who knows other than the averages may pull back or consolidate for
a few days on lighter trade. After watching the action, there is one thing to
check off the list: The “M” for Market has been taken care of until we
see otherwise.

Stocks continue to break out with a passion, and
I have only seen one minor negative that I will mention shortly. The following
insert was taken from today’s TradingMarkets.com’s Trading Insights From The
War Room and is pretty indicative of the current action:




10:33:23

Breakouts During The Last Hour

FDO hits 52 week high at 29.10

BBBY hits 52 week high at 31.90

MAR hits 52 week high at 49.54

FAST hits 52 week high at 72.26

ACI hits 52 week high at 38.20

PPL hits 52 week high at 61.13

IGT hits 52 week high at 53.50

GT hits 52 week high at 28.81

GD hits 52 week high at 83.50

TXU hits 52 week high at 46.65

LMT hits 52 week high at 39.75

FLS hits 52 week high at 32.74

VFC hits 52 week high at 41.80

ERTS hits 52 week high at 63.07

UPC hits 52 week high at 40.38

FTN hits 52 week high at 35.20

PEG hits 52 week high at 50.25

SOTR hits 52 week high at 24.95

Breakdowns During The Last Hour

None

Please do not rush out and buy any of the
above-mentioned stocks. There will many more popping up now that the Naz has
moved through resistance. In the last few days, I have been finding some
stocks in the Semi-Equipment group that further back the cup-and-handle
breakout. Novellus
(
NVLS |
Quote |
Chart |
News |
PowerRating) has been looking to move higher from 14.5-month
base. It attempted to pass through a potential pivot point of 57.50 yesterday,
but did not have much volume to back the move. Coincidentally, this stock is a
technology stock within 15% of its high and posted a 265% EPS growth
rate in the most recent quarter. The slowdown missed this company!

FEI Company
(
FEIC |
Quote |
Chart |
News |
PowerRating) is another stock in
this group that was able to break out on May 10 and move higher. It also
posted an EPS growth rate of 260% in the recent quarter. Other stocks in the
group include ASM International
(
ASMI |
Quote |
Chart |
News |
PowerRating) which is working on the right side
of a 13.5-month base; Rudolph Technologies
(
RTEC |
Quote |
Chart |
News |
PowerRating) which is setting up in
a very wide and loose 15.5-month base and Entegris
(
ENTG |
Quote |
Chart |
News |
PowerRating), a newer member
to the group, who is working on the right side of an 11-month base.

Oils and retailers continue to hang in there
and provide leadership. Columbia Sportswear
(
COLM |
Quote |
Chart |
News |
PowerRating) posted a new high
after its gap breakout and ensuing consolidation. One quick rule I will break
on gap-breakouts: If a stock has gapped up and has opened up more than 5%
above its pivot point; buy it. These stocks have an enormous success rate and
are a worthy exception to the rule. Past winners that I have done this with
and had success include such names as Microsoft
(
MSFT |
Quote |
Chart |
News |
PowerRating) and Dell Computer

(
DELL |
Quote |
Chart |
News |
PowerRating).

Now for the minor negative. Building stocks
have shown signs of distribution and have succumbed to selling. This simply
warrants a close eye on current leaders and signs of something other than mild
profit-taking. As I write this, I am noticing Charlotte Russe
(
CHIC |
Quote |
Chart |
News |
PowerRating) down
on above-average trade. This coupled with American Eagle’s
(
AEOS |
Quote |
Chart |
News |
PowerRating) failure
to break out on volume may be leading to some mild profit-taking in the retail
group. Nonetheless, they have posted nice gains thus far and some continue to
do so, such as in Christopher & Banks
(
CHBS |
Quote |
Chart |
News |
PowerRating).

One failed breakout I will mention before going
into the good ones, is Apollo Group
(
APOL |
Quote |
Chart |
News |
PowerRating). This attempted breakout
through its pivot of 38.56 is why you need volume and why stops are important.

BEI Technologies
(
BEIQ |
Quote |
Chart |
News |
PowerRating) moved through its
pivot yesterday on nice volume and did so with gusto. If you tried to buy this
one and did not get the greatest fill, you’re not alone. There appears to be a
lot of demand. Mitchell Energy
(
MND |
Quote |
Chart |
News |
PowerRating) continues to set up in a 21-week
base. Quest Diagnostics
(
DGX |
Quote |
Chart |
News |
PowerRating) is pulling back on lighter trade after a
move out of consolidation.

Many stocks are building the right sides of
their bases as some of the initial supply of breakouts has been exhausted. As
the bull market develops, so will set-ups. In the meanwhile, it is always
important to watch the daily market action and to watch and see how recent
breakouts react to their run-up or consolidate.

Don’t forget that I will be on the
intermediate-term message board this Thursday at 8 p.m. ET.

Good trading!

Tim