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All,
This week sure helped to clarify the confused picture the indices I
follow had been giving as they changed to a clearly bullish posture. The
DJI broke out to all time highs and I constructed a new Intermediate Term Up
Trend Channel (ITUTC) from the 10/08/98 low using the Trader Vic trend line
methodology. The NYSE, OEX, and SPX indices also have similar patterns.
The NASD and the RUT are also rising with the NASD in the middle of its
Horizontal Channel (HC) and the RUT just coming off the bottom. Other
positive indications are that Guy covered his short position and my
portfolio was up for the week <G>. Even with this, I still don't like the
feel of this market. I keep thinking we are being set up for a large
correction, but maybe that's part of the wall of worry that a good bull
market needs. The bottom line is that I'm going to follow my system which
calls for me being 100% long under these conditions.
Even with the good week FDX closed below my stop Friday. I'll close
that position Monday. Also, WMT is getting close to the top of my Trader
Vic type ITUTC and my 99 target. I've already put in a good until canceled
limit sell order at 99 on it. Since we have all these clearly bullish
indications and the internet stocks look like they are in the process of
turning back up, I decide to replace FDX with an internet stock. My choice
for this is Amazon.com (AMZN). I also looked at my existing positions and
decided that DELL which had pulled back all week and is only a little over 3
points above its stop is at a good entry point. I'm going to leverage my
DELL position by picking up some Jan 2000 50 LEAP call options (LDEAJ).
However, I will wait until it falls a couple of more points or turns up,
whichever happens first. I won't go over my rationale for DELL since it was
my weekly pick just three weeks ago and the rationale is the same, but I
will send a chart to everyone on the email list.
AMZN at 133.3 is in a long, intermediate, and short term up trend
channel. It bounced off the bottom of its ITUTC about three weeks ago and
broke out of its Short Term Down Trend Channel (STDTC). I constructed a new
standard deviation STUTC from the 2/18/99 low to the 3/11/99 high and
extended it to the right. The top with the deviation at 2 is at 168 and the
bottom with the deviation at 1 is at 128. AMZN set an all time high of
199.1 on 1/8/99 to establish the point for placing the top of the ITUTC. It
then fell to bounce off the bottom of the ITUTC and then rose to its current
price. There has been a MetaStock Tema PDI-MDI buy signal in effect since
last October. If the buy signal wasn't in effect, we would have gotten
another one last week. The fundamentals are typical of an internet stock
with huge revenue growth and no earnings. Since this is a very volatile
stock, there is a good chance it will break through the new STUTC and test
the bottom of the ITUTC again. Therefore, I'll only enter a position if the
stock is rising and is still above the bottom of the STUTC. If it breaks
through, I'll wait for another bounce off the bottom of the ITUTC. If I do
get the position, I'll set my initial target just under the Jan high at 198.
I'll set my stop just under the bottom of the STUTC at 127 3/4.
I'll send 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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