Institution Is The Name, Stock Is The Game

The institutions came for their favorites again yesterday, with many of these stocks rallying three to five points. Techs obviously continued to lead the end-of-quarter rally. We have now retraced almost all of the recent 4.7% down move in the S&P 500. This week wraps up the quarter and also contains the first two days of reinvestment.

After yesterday’s big up, the futures are down slightly this morning; I would expect the market to be quiet-to-down and to digest some of yesterday’s gains. The strategy remains the same: Trade the big-cap stocks that have outperformed the S&P 500. These are the names the institutions must own to keep up with, or hopefully beat, the S&P. We want buyers, programs, and market dynamics on our side before taking action.

Target Stocks Of The Day  Some of the stocks I’m looking at today could follow through with any continuation moves over yesterday’s high. Momentum stocks with patterns near their highs include Qwest Communications [QWST>QWST], Level One Communications [LEVL>LEVL], Best Buy [BBY>BBY], Solectron [SLR>SLR], Gap [GPS>GPS], American Express [AXP>AXP], Northern Telecom [NT>NT], and Amgen [AMGN>AMGN], which made a nice move yesterday and could move again today.

Patterns on stocks that have pulled back or re-crossed their 50-day exponential moving averages (EMA) are Applied Materials [AMAT>AMAT], Chase Manhattan Bank [CMB>CMB], and Guidant [GDT>GDT]. Two stocks with narrow-range patterns that can be played in the direction of the trend are Dayton Hudson [DH>DH] and USWEB [USWB>USWB].

The semiconductor index (SOX) closed at the top of its range yesterday and just above its 50-day EMA. Intel [INTC>INTC] and Texas Instruments [TXN>TXN], which are part of that index, did the same. May be we’ll get a little run in the chips today.

After the big day last Thursday, Friday was an inside day–kind of dull. It’s hard to tell if we’ll get carry through from yesterday or just a holding pattern. Keep your stops tight, and if you get entry the first time and get stopped out, look for another opportunity on a re-cross of your entry level.

Editor’s note: If you want to learn more about Kevin Haggerty’s trading strategies, click on the link below to go to his new series of tutorial articles.