Multiple Patterns Hitting Sun Microsystems
The Nasdaq pulled back off the highs, as was suggested by the chart
of the Nasdaq Composite I showed you Monday.
We saw a triple layer of resistance put up by the top of a channel, a 50%
retracement, and a broken support level. As I mentioned, it’s impossible to
predict what kind of follow-through we might see from this pullback.
We can get a feel for this, however, by taking a look at the charts of Nasdaq
bellwethers, Intel
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PowerRating), Cisco
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Microsystems
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PowerRating).
To shed some light on the matter, let’s zero in on SUNW.
Multiple patterns are coming into play in SUNW. This is a
favorite setup of mine, particularly when it shows up in a long-term chart. In
this instance, we have SUNW plunging down to its one-year lows, its 50%
retracement (Oct. 1998 lows – Aug. 2000 highs), and a two-year trend trendline.
I have observed many times on hundreds of charts not unlike this one that long-term support
like this is usually pretty potent. The standard expectation here would be to
see a sizeable bounce. This, of course, would help to support the Nasdaq.
The caveat is that the heavy volume coming into SUNW during its
recent plunge suggests that the bears still have the upper hand until proven
otherwise.
Until Wednesday,
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