With All The Mixed Signals, This One Thing Is Certain…

  • September 9, 2003
  • Tim Truebenbach


The
market has been throwing out mixed signals since last Friday. The
Nasdaq showed some evidence that institutional dollars were heading for the
exit as volume came in heavier on 9/5. On Monday, we saw exactly the opposite:
The index rallied on heavier volume than Friday. It’s almost like someone out
there sold, then said: “Oops, I do want to own that stock,” and bought
it back. Finally, after today’s trading, they decided to sell it once again as
volume came in heavier with the index down just less than a percent.

 

 image src=”https://tradingmarkets.com/media/2003/Tim/tt090903-01.gif” width=”380″ height=”327″ />

 

This action not only
describes the overall market, but also some of the stocks that have been
setting up.  Yahoo, United Online
(
UNTD |
Quote |
Chart |
News |
PowerRating)
and Genentech
(
DNA |
Quote |
Chart |
News |
PowerRating) all come to mind. 
Depending on what base you were looking at with
(
YHOO |
Quote |
Chart |
News |
PowerRating), it could have
broken out through 33.35, 33.87 or 35.79.  In any case, volume did not show up
on the move until today, and by looking at the trading, it is not a good sign.

 


image src=”https://tradingmarkets.com/media/2003/Tim/tt090903-02.gif” width=”382″ height=”328″ />

 


United Online
(
UNTD |
Quote |
Chart |
News |
PowerRating) attempted a
recent push through a short handle at 38.25 (look on a four-year chart) but
came on short on volume. The company has been a great performer since a
low-stage breakout around 16 in late-March, but seems to be running out of gas
for the time being.

 


image src=”https://tradingmarkets.com/media/2003/Tim/tt090903-03.gif” width=”400″ height=”328″ />


image src=”https://tradingmarkets.com/media/2003/Tim/tt090903-06.gif”

 


Genentech
(
DNA |
Quote |
Chart |
News |
PowerRating) broke out yesterday.  The
company has posted a strong couple of quarters and established a flat base
with a pivot point of 82.38.  Price has been successful so far, but volume
keeps getting lighter.  It is above-average, but not by at least 40% like a
successful breakout should produce to succeed.

 

src=”https://tradingmarkets.com/media/2003/Tim/tt090903-06.gif” face=”Arial, helvetica”>
image src=”https://tradingmarkets.com/media/2003/Tim/tt090903-04.gif” width=”381″ height=”326″ />

 

With all of these mixed
signals, there is one thing for certain: The market has already given us a
confirmed rally to buy stocks into and some of these stocks have been
working. Kos Pharma
(
KOSP |
Quote |
Chart |
News |
PowerRating) is an example as it pushed through resistance at
40.30 on volume that was almost 50% above average. The company has produced
three straight quarters of triple-digit earnings growth and stands about 2%
above new support at 40.30.  It would be a healthy sign for this stock to
follow-through and move higher tomorrow.

 


image src=”https://tradingmarkets.com/media/2003/Tim/tt090903-05.gif” width=”381″ height=”325″ />

 

Despite the recent mixed
signals, it is still important to follow the overwhelming evidence. Growth
stocks have been leading the market higher as the economy shows signs of
strength. The major averages never run straight up and always like to keep
investors off-balance. It is important to move forward with a watch list of
potential purchases alongside proven money management to reduce risk. We are
not in the latter market of the 1990s, but we do not appear to be in a Bear
Market either. Stocks in the Medical, Internet and select semiconductor
groups have been leading the way and are worth checking out.

 

Until Thursday,

 


Tim Truebenbach

 

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