Exercise Patience

• January 7, 2002
• Dave Floyd

The market is
starting once again to play the sector-rotation game intraday. You
will recall on Thursday that the
(
$SOX.X |
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PowerRating) rocketed above its 200-day
moving average with the underlying components making similar gains on big
volume. Friday saw the SOX take a breather but the beaten down Biotech Index
(
$BTK.X |
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PowerRating)) went on a tear.

We were fortunate to have seen the move and
were able to capitalize on stocks like Genentech
(
DNA |
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PowerRating) and IDEC
Pharmaceuticals
(
IDPH |
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PowerRating). Take a look at the one- and five-minute charts
of these stocks on Friday to see the moves. Will there be continuation today?
Keep an eye out. If they are in play, look for $52.80 for support off the
opening on DNA, and 65.55 off the opening as resistance for IDPH.

While most of the biotech stocks still
look pretty weak on their daily charts, two stocks stand out, and seem like
decent setups to the long side regardless of whether or not the index continues
higher. Take a look at these two stocks as potential long-term set-ups, Napro
Biotherapeutics
(
NPRO |
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PowerRating) and Cephalon
(
CEPH |
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PowerRating).

Getting real far away from Biotech to
real low tech, Wendy’s International
(
WEN |
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News |
PowerRating) looks pretty
“tasty” as a longer-term buy.

I have received several emails over
the last couple of days which indicate some degree of frustration with the lack
of follow-through on the one- and five-minute charts. As a result, many are
getting “chopped up” trying buy pullbacks and short rallies. While
there is no encompassing answer to avoid these pitfalls 100%, you will do
yourself a big favor by simply exercising patience. Trying to play for the
breakout in those situations is real tough. The best thing to do is to
wait for the breakout and then play the continuations.

Key
Technical Numbers

As always, feel free to send me your
comments and questions. Also, don’t forget to check into TradersWire
throughout the day, given the fickle nature of the market I will often point out
some additional key support and resistance areas as well as sectors which are
coming into play. You will get some great insights from some excellent
traders who also participate.

Dave