Crossroads

April 17, 2001
Dave Landry

Each evening we focus
on the most interesting aspects for the upcoming trading
day. The comments are based on observations of the nightly
updates of the Stocks/Sectors and Market Bias pages. They
are provided for educational purposes only and are not
intended to be direct trading advice. Also, keep in mind
that these remarks are made up to 12 hours in advance of the
markets opening. Therefore, overnight events may alter the
outcome of these observations.

Heads up! After the close, Intel
(
INTC |
Quote |
Chart |
News |
PowerRating) announced
better-than-expected earnings. The stock is trading over 2-points higher in
early after hours trading. The rest of tech appears to be along for the ride. In
fact, Cisco is actually trading slightly above Monday’s close.

On
Tuesday, as expected, the Nasdaq gapped lower on the negative Cisco news. However, it
quickly found its low and began to rally–up over 3 1/2 percent from its low to
high. It
then gave up about half of those gains and chopped around for the rest of the
day.

Tuesday’s action
is interesting. The fact that the market survived Cisco’s bad news is a good
thing. A market that no longer goes down on bad news is sold out (see Dan
Delaney’s commentary for Tuesday). This sets up a trading range. A break above this range suggests the
potential for a rally with 2000 (b), and the 50-day moving average (which will
be near 2000 soon) are likely resistance levels. A break below this range suggests
the big blue arrow remains intact with a trip to the old lows being a likely
target (Note, the above paragraph was written before the Intel news was announced,
rather than “chase the news” and change my commentary, I decided to
let it stand as the market could easily pop up on the news and reverse.)

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As Cooper pointed out, the market is beginning to look cup
and handle-ish. I still believe the long term trend remains down, but you can’t
ignore what’s developing.

So what do we do? As mentioned above, a break below
this trading range
will suggest that the long-term downtrend remains intact a that a continued focus on
the short side would be in order. A break above the range, and above the 50-day moving
average, suggests either another bear market rally or the beginning of the first
bull market leg (no one will no for sure until after the fact). In this case, transition patterns, such as Bow Ties may be your
best play. No matter what, it’ll probably be a choppy ride for while so continue
to keep it light. Also, judging from the after-hours Q’s and index futures,
we’ll probably get a pop up on Wednesday’s open. Therefore, stay out of the fray
and wait to see if it sticks. In other words, second entries may be your best
entries.

Looking to potential setups, eFunds
(
EFDS |
Quote |
Chart |
News |
PowerRating) look
poised to resume its uptrend out of a pullback.

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Bausch & Lomb
(
BOL |
Quote |
Chart |
News |
PowerRating), mentioned recently, still
looks vulnerable.

National Instruments
(
NATI |
Quote |
Chart |
News |
PowerRating),
also mentioned recently, still looks vulnerable. Just wait for an entry in light
of the impact of the Intel news on tech.