Where To Get Good Ideas

Shortly after the open
in our chat room at TradersWire Interactive, one of the participants, mentioned the
potential of a reversal of KLA-Tencor (KLAC)
to the upside. This member pointed out that the Semiconductor Index
(
SOX |
Quote |
Chart |
News |
PowerRating)

was quickly recovering from the opening losses and beginning to gain the upward
momentum. I decided to follow the stock.

KLA-Tencor gapped down on the open as you can see on its five-minute chart
below. (The red horizontal line is the level of yesterday’s low.) The stock
traded sideways for 45 minutes, and at 10:15 a.m., it made a breakout. Needless
to say, it was a good buy entry point. KLAC made a quick one-point gain in less
than 10 minutes. Also, look at the five-minute chart of the Semiconductor Index.
It broke out at 10:15 a.m., too.

Don’t forget to check other stocks
in the same group when you smell a breakout. When I heard KLAC, I was
automatically thinking about Novellus Systems Inc. (NVLS)
because those two stocks tend to move in similar ways. At 10:15 a.m., NVLS also
broke out and gained 1.25 points in less than half an hour. Of course, in this
case, you would not need to wait until the breakout to buy the stock. I
personally believe that one excellent buy point came earlier when the NVLS moved
back inside of the lower Bollinger Band.

Today’s lesson: Sometimes pays to listen to your fellow traders.
You have to do your do your own research, of course. Never, ever act
blindly on the basis of what someone else says. There are many ideas floating all
around. Filter through them and find the best.

Eddie