It Only Counts After The Bell Rings

“Relentless” is the word you’d have to use. With the overblown media hype on Compaq, the S&P futures were down 20 points before the opening yesterday, and the NYSE followed up with big down gap opening. After the seller’s trap door closed, the S&P 500 turned on a dime and staged a relentless uptrend with hardly any retracement on the way to another new high.

The lesson yesterday was that no matter what you read or hear, it’s what happens after the opening bell rings that counts.

Dell, Microsoft, Cisco, and Intel all finished down on the day but gave excellent snap-back moves off their lows. The par (100) club rolled on, with Abercrombie & Fitch (ANF) closing at 100 1/4, Wal Mart (WMT) closing at 104 3/4, and Merrill Lynch (MER) closing at 99 15/16 after trading up to 101 7/16. Merrill is releasing earnings today; if the numbers are good, that stock will obviously go though par.

One thing to keep in mind: The Compaq specialist did a great job yesterday. They opened the stock at 23 1/8 on just over 10 million shares and took out the panic sellers at levels seen only twice in the last year (including the October 98 panic). The level was right and brought in buyers; Compaq traded to 24 1/2 by 11:15 a.m., and it was a push between buyers and sellers for the rest of day. But the key point here is that by taking out the panic immediately, the stock stabilized and went a long way toward calming the market.

In case you don’t follow Compaq, it traded down from 51 1/4 in January to 29 in March–a 40% drop on a well-advertised slow-down. Why should the Compaq news be such a surprise? Where’s an analyst when you need one? If the companies they cover control them, why do we call them analysts?

Target Stocks Of The Day  Stay focused on the high relative strength momentum stocks for intraday and short-term (two- to five-day) trades. There are always good patterns developing as these stocks move up an then pull back or consolidate before exploding. An excellent example is Safeguard Scientifics [SFE>SFE], which has gone from 72 to 99 3/4 in five days.

There are some interesting patterns in Internet stocks (and you don’t hear that from me often). If you get a trade through your entry level in the direction of the trend and have the appropriate communications/execution set-up, take a look at America Online [AOL>AOL], Yahoo [YHOO>YHOO], Amazon [AMZN>AMZN] and Lycos [LCOS>LCOS].

Chase Manhattan [CMB>CMB] and BankAmerica [BAC>BAC] set up yesterday. BAC closed at the top of its range; with any follow-through today, it should take off.

Narrow-range patterns that look interesting are Amgen [AMGN>AMGN], Intuit [INTU>INTU], and Tarrant Apparel [TAGS>TAGS]. Two other powerful momentum stocks in position to extend or make new highs are Metromedia Fiber Network [MFNX>MFNX], RF Micro Devices [RFMD>RFMD], and MCI Worldcom [WCOM>WCOM], which is closing in on par after an overblown nine-point downside reaction to the NXTL talks several days ago.

A reminder for index traders: The Russell 2000 closed above its 200-day moving average for the second day and broke out of an eight-week base pattern. I hope this means the rest of the market will catch up with the extended, momentum blue-chip issues.

Today’s program trading numbers: The buy programs come in at 11.42 (the spread between the S&P cash and the S&P futures); sell programs come in around the 7.12, and fair value is 8.92.

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.