Playing The Support Levels

Dell Computer’s sell-off early yesterday pulled
the plug on the rest of the market.
But true to form, Dell managed to rally back to 84 before drifting between 82 and 80. Volume was
big at 56 million (that’s real volume, not double-counted). The drop put Dell down 32 percent in
11 days from the 110 double top, and it of course has company in many of its tech relatives.

The Dow may have finished down 101 points, but the rally that lasted until mid-day was enough
to ring the bell on some trades. Look at your daily charts on AIT, GPS, SCH, UTX, CC, and SEPR;
these stocks all show similar patterns. They all gave clean entry on the buy side and
multi-point moves before fading–the average move (entry to high) was 2.10 points.
(This is not to imply it’s possible
to catch all of such moves, just to highlight the explosiveness of the pattern when market
dynamics are on your side.)

Both the S&P 500 and the Dow are near the low ends of their trading ranges. Look for
if the S&P trades below 1211.86 (the last reaction low), then 1206.57 (the low of its trading
range). The bulls will talk up support at the 50-day exponential moving averages of the Dow
(9183) and the S&P (1220). Regardless of
what happens, volatility will continue and there will be good pattern setups in many
of the
big-cap stocks.
Play clearly defined trading range or consolidation patterns, risking no more than 1/4 to
3/8 on intraday trades.

Target Stocks Of The Day  Stocks with tight patterns near highs include
Clorox [CLX>CLX], Aflac [AFL>AFL], CBS [CBS>CBS], Allergan [AGN>AGN], Tandy [TAN>TAN], and
Home Depot [HD>HD].

If Best Buy [BBY>BBY] sets up below 86 5/8, it could make a run to break the 90 box
United Technologies [UTX>UTX] closed at 121 3/4, a quarter-point above yesterday’s
entry level and down from the high of 123 15/16. This stock will run early if the futures
are up.

Finally, Circus Circus [CIR>CIR], which is breaking out of a consolidation just
above its 200-day moving average and has rising 10- and 50-day moving averages, is a
possible position trade.