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All,
A choppy week in which my portfolio was actually up a little. That
makes me feel a little better about my decision to go to mostly cash, cash
equivalents, and financial stocks a couple of weeks ago. The question now
is, what next? Looking at the indices it looks like the large cap stocks
are in a sideways or Horizontal Channel (HC) as shown by the DJI, OEX, and
SPX indices while the overall market, small cap, and high tech stocks are
still in a Short Term Down Trend Channel (STDTC) as reflected by the NYSE,
NASD OTC, and Russell 2000 indices. If this is just a normal correction,
the big high tech market leaders should be getting close to their bottoms
having corrected 10 to 20%.
Therefore, I'm going to start nibbling at the high tech market leaders
such as AOL, CSCO, DELL, INTC and MSFT. I'm also going to do the same for
the market leading retailers such as BBY, HD and WMT. However, I'm not in a
hurry and I do mean nibble, just in case I'm wrong and we are turning to a
Bear market. What I'm going to do is watch the above stocks closely and
enter 1/2 size positions when they look like they have bounced off the
bottom of longer term channels which I think may hold are within 3 points of
the bottom of that channel. Then, if they do reverse and head up, I'll
double my position to a normal size position when they break out of the
Short term Down Trend Channels (STDTCs). If I can't find a good entry near
the bottom of a longer term up trend channel, I'll take a 1/2 size position
when/if they break out of their horizontal or down trend channels. I'll
then double up to a normal size position on the first pull back to the
bottom of its new STUTC. None of the above stocks are currently close to
the bottom of longer term channels except for DELL. However, HD is close to
the top of a HC and CSCO is close to the top of a STDTC. Either could break
out at any time.
I started the process with DELL yesterday. I had a buy stop in at 80
which was under 3 points away from the Wednesday low and right on the short
term up trend line. I got the position about 30 minutes before the market
close. My rationale was as above, plus the fact that Wednesday's high
volume low, with a close well above the low, looked like a possible blow-off
bottom to me. I wanted to test that theory by taking a 1/2 size position
with the stop set just under the Wednesday low.
DELL at 80.06 is right at the bottom of a STUTC with the top at 118 1/2
and the bottom at 80. It is also in a shorter term STDTC with the top at 95
and the bottom at 74. It hit an all time high of 110 on 2/2/99. From there
it pulled back to a low of 77.38 on high volume Wednesday. It went on to
close well above the bottom at 81.56 Wednesday. Then, it jumped up Thursday
and came about 1/2 way back Friday. To me, that sure looked like a blow-off
bottom and I proceeded on the assumption that it was <G>. The Tema PV
Binary wave has been falling, but it is still positive and has slowed the
rate of its fall. The Tema StochRSI looks like it has reached a negative
peak which is typically a turning point. The fundamentals are good except
for the price/sales which is a little high at 6.65. However, this is offset
by the rest of the fundamentals which are excellent. I set my target just
under the top of the STUTC at 118 and my stop under the Wednesday low at 76
3/4 to leave plenty of wiggle room. I'll leave the stop there until it's
hit or the STDTC reverses, preferably the latter <G>.
I'm not going to spend a lot of time on CSCO and HD. I just wanted to
say that CSCO closed at 97 and the top of the STDC is at 99 1/4. HD closed
at 60 1/2 and the top of the HC is at 62. I'll open a 1/2 size position in
them, if and only if, they break out of their respective channels.
I'll send DELL.GIF, CSCO.GIF, and HD.GIF charts to everyone on my chart
email list. If you aren't on the list, and want on, just yell.
JimG
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