Critical Resistance

• February 12, 2002
• Dave Floyd

The slow
grind continues. Yesterday’s move, a slow steady grind higher,
offered very little on the HVT front. Position trades fared better, but
overall there were very few trade setups. The smart trading was accomplished by
not trading.

To me the market did not feel all that
convincing, yet the box scores tell a different story. Sitting in front of your
screens watching the action offers far more insight, and I am not real
“sold” on this recent rally. However, the next few days will hold the
key with the release of some economic reports beginning on Wednesday and some
very critical resistance numbers coming up in the major indices. Keep an eye on
these levels over the next few sessions, not only will they offer some clue as
to future direction, but also some excellent entry points for intraday trades:

* The Dow is the
strongest index currently, it is already trading above its 20 and 50-day moving
averages.

As most of us know the SOX does seem
to be the tail that wags the dog. Much has been written about this index,
specifically about the components of it. You have heard it all, the valuations,
the this the that. But one thing holds true until the market decides
otherwise, if the SOX leads the market will follow. After doing my scans last
night for longer-term picks, it became evident that the stocks setting up from a
leadership standpoint were, you guessed it, SOX components. Specifically Applied
Materials
(
AMAT |
Quote |
Chart |
News |
PowerRating) and KLA Tencor
(
KLAC |
Quote |
Chart |
News |
PowerRating) Both
are excellent intraday traders, but their daily charts are certainly compelling.

As Larry Connors and Kevin Haggerty
routinely point out, let the Semiconductor Sector
(
$SOX.X |
Quote |
Chart |
News |
PowerRating) talk to you in terms of what the market may do.
To me, these charts say quite a bit. If Jim Morgan from
(
AMAT |
Quote |
Chart |
News |
PowerRating) can say
something positive with the earnings release tonight THAT
DOES NOT have a bunch of spin associated with it, it may just be the
catalyst that the market needs to seek out higher ground and test the resistance
levels noted earlier.

Key
Technical Numbers

As always, feel free to send me your comments and questions. See you in TradersWire.

Dave