This Sector Has Been Finding Support

  • January 6, 2004
  • Tim Truebenbach


HAPPY NEW YEAR! The market has been acting very well, but a
true test as to its endurance still remains. The major averages handed us
ample evidence that institutions are accumulating stock as they rallied on
heavy volume yesterday.


image src=”https://tradingmarkets.com/media/2004/Tim/tt010604-01.gif” width=”418″ height=”323″ />


image src=”https://tradingmarkets.com/media/2004/Tim/tt010604-02.gif” width=”418″ height=”323″ />

Heavy volume coupled with 1% to 2% moves in the indices is a strong gauge
that institutional dollars are moving into the market. We have also been
seeing strong action out of strong growth companies.

Yahoo!
(
YHOO |
Quote |
Chart |
News |
PowerRating) broke out of a base on Christmas Eve and has steadily moved higher.
This stock along with other Internets has been finding strong support over
recent weeks. The
(
HHH |
Quote |
Chart |
News |
PowerRating)‘s, for example, closed at a new high today.


image src=”https://tradingmarkets.com/media/2004/Tim/tt010604-03.gif” width=”418″ height=”323″ />

We have also seen strong breakouts in recent days from
World Acceptance
(
WRLD |
Quote |
Chart |
News |
PowerRating),
Omnicell

(
OMCL |
Quote |
Chart |
News |
PowerRating), Faro Technologies
(
FARO |
Quote |
Chart |
News |
PowerRating) and many others.


image src=”https://tradingmarkets.com/media/2004/Tim/tt010604-04.gif” width=”418″ height=”323″ />

Breakouts have not really been occurring en masse since the mid-July
correction, and they have not been making much progress. In mid-October, the
market seemed to enter a correction that affected growth stocks. Names would
break above resistance, but were unable to make any headway. I admit that
this rally feels different, but there are no guarantees.

One thing that will indicate a shift in potential is if some of these growth
stocks can break out and advance at least 20% in under 4 weeks. This would
indicate a true, potential leader that is capable of a continued advance
rather than the ‘rollovers’ we have seen. One failure that comes to mind is
Odyssey

(
ODSY |
Quote |
Chart |
News |
PowerRating) along with the whole Nursing Home group. This stock broke out
on 11/24 along with huge volume, but failed to achieve the 20% in 4 weeks
scenario. Looking at the chart below, you can see the rollover I am speaking
of.


image src=”https://tradingmarkets.com/media/2004/Tim/tt010604-05.gif” width=”418″ height=”323″ />

World Acceptance

(
WRLD |
Quote |
Chart |
News |
PowerRating) has already made a 13% move above its breakout point
of 20.47.


image src=”https://tradingmarkets.com/media/2004/Tim/tt010604-06.gif” width=”418″ height=”323″ />


Netflix

(
NFLX |
Quote |
Chart |
News |
PowerRating) came ripping out of the March, 2003 rally and posted huge
gains before setting up the base it is attempting to break out of right now.
Just out of curiosity, send me an email if you have any thoughts on this
company’s service. The stock had a pivot point at 59.33 and is looking solid
thus far.


image src=”https://tradingmarkets.com/media/2004/Tim/tt010604-07.gif” width=”418″ height=”323″ />

The breakouts that have been setting up for the past months of choppy action
are starting to make moves. There are plenty more names such as
Eresearch

(
ERES |
Quote |
Chart |
News |
PowerRating) as it sets up in a double-bottom base with a pivot point of 30.03. The
next several weeks of success (or failure) with these names will tell us what
we can expect over the next few months. One major sigh of relief is looking
at the indices’ year-to-date gains and not seeing them up 25%-50% anymore!

Tim Truebenbach

timt@tradingmarkets.com