Don’t Fight The Trend — Part II

August 23, 2001
Eddie Kwong

As I wrote in yesterday’s column, we
should not fight the trend of the market. Picking the top and the bottom in
markets is not really a daytraders’ primary target. Traders must learn to follow
and adjust to the market as quickly as possible. After all, most daytraders do
not have the unlimited resources necessary to move and shake the market. We are
not the Fidelity Magellan funds.

The chart below is a daily chart of Openwave Systems (OPWV)
as of the close of 8/22/01. As you can see, the stock is in a clear downtrend as
indicated by the declining trendline and the moving average. The chart tells us
there is only one possible support level still left — the April 3 low. If the
stock can’t hold that level, even the bottom fishers would be dumping their
shares.

Now let’s see the five-minute chart from today’s session. (The
upper red line indicates yesterday’s low. The lower line is the level of the
April 3 low.) OPWV made a false breakdown below yesterday’s low at the open and
began to trade sideways for about one hour. The short-sellers had an entry
opportunity at 10:35 a.m., and the stock sold off. After hovering around the
April 3 low, OPWV started to form a bearish flag. It then gave us another
selling opportunity at 12:50 p.m. Although the stock broke below the April 3 low
at 2:10 p.m., it quickly formed a double bottom and began to rise.