MANU BLOW’D UP
Yesterday we pointed out a confluence of four
technical factors that were all converging on Manugistics at the same
time.Â
They were:Â
-
its 20-day moving average
-
a five-week trendline
-
the lows of its seven-day range
-
its 50% retracement level (off its big range day on 9/22)
We stated the following:Â
It is best not to have preconceived ideas of what may happen here. When
I say “hefty support” think as much about what will happen if it is
broken as what will happen if it is not. Our job as traders is not to predict,
but to watch and react…and react fast. Think of an inflection point such
as this as an area that will tend to repel price action in one direction or
another. We could get a bounce. Or we could see MANU breakdown, which would
potentially trigger an accelerated decline in MANU. If this occurs, you’ll
want to look for a surge in volume that would confirm downside momentum.
Tuesday, the downside scenario got the upper hand as we saw a clean decisive
break below the support level.
Today’s action illustrates that an understanding of support and
resistance is useful, as long as you do not assume too much how a stock will
react upon reaching these levels. Similar breakdowns occurred in the Nasdaq
bellwethers Sun Microsystems
(
SUNW |
Quote |
Chart |
News |
PowerRating) and Oracle
(
ORCL |
Quote |
Chart |
News |
PowerRating), contributing to
a deep plunge in the Nasdaq. Many traders are no doubt surprised and shell-shocked by the magnitude of these plunges. But one of your goals is to come to
grips with the idea that the market leads–and you follow. Not the other way
around. If you adopt this attitude, you will not be surprised.
Till tomorrow,