Stock Attack II - A Complete Analysis Message Board

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Strategies & Market Trends : Stock Attack II - A Complete Analysis

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To: StockOperator who wrote (5622)	4/15/2001 10:28:02 PM
From: StockOperator	Read Replies (1) of 52237

Happy holidays all. I wanted to make some quick observations regarding where I believe we are with the avgs. Let me say first of all that the rally of last week caught me a little off guard. The formation developed on the daily charts just prior to the rally was in many instances a classic replay of the "setup" seen in previous market selloffs. Looking through the rear-view mirror today I can easily see the subtle clues that led to the market rally. First of all the downturn during the first couple of days of the month was the headfake by the market drawing traders into the bear trap. As I mentioned in a previous post you would expect with the start of a new quarter to see price back and fill especially because of the drubbing stocks took in the first quarter. This of course is not always the case. Stocks like LU did very little backing and filling on their way to single digits. Nothing is ever cut in stone. But that downdraft in the beginning of the qtr. was the trap. Which in my case is one of the things that keeps my interest peaked in TA. Over the years I have developed a strong belief that a trader can trade any market...any commodity...any currency... anywhere in the world as long as he/she has a solid understanding of the technical side of trading. Almost to the point of absolute neglect of the fundamental picture. So to miss what looks today like a call that was a slam dunk is frustrating but is also part of the never ending lessons of TA. Now that we have the market rallying, where do we go from here? Some observations: The picture for the COMPX is a little murky only because you can come up with two possible scenarios when looking at it on two different time frames. On a quarterly basis I have prices running into very heavy resistance as we speak (give or take another 50-100 pts). On a monthly basis if prices exceed this 100 pt limit they have the ability to run to 2400 roughly before the next serious resistance on my charts. Let me add that I am leaning towards my first scenario simply because of my read of the rest of the market which I will continue to point out. With the close on Friday the DOW is running right into that serious resistance that I pointed out in last week's posts. We are there right now. This is a trend started from the very top which led to our 1,000 pt drop in the average. Watch this avg closely this week. There is going to be significant pressure on prices to break one way or the other. When looking at some stocks in this index I continue to find stocks in the same predicament. GE, IBM, GM, HD and MSFT have prices "boxed in" with nowhere to go. The time period in closing in fast when either the bulls or bears will win out. The VIX is sitting on very key support. The whole pattern of volatility has been rising during the last couple of months with a pattern overall that may blowoff to the upside if this support can hold. Of course that means that the 10150 area on the DOW must not be breached in any kind of meaningful (lasting) way. BTW if prices do take out that level the DOW could run as high as 10900 before the next key area. So this is a very big week. Stocks like CIEN ($55.98) could still run up to $60 roughly before running into resistance that almost without question should halt the advance into the third quarter. This fact also weighs heavily into my COMPX outlook. SUNW ($17) is within a dollar or two of its third quarter resistance. CMVT is running into monthly resistance. While almost all the chips that I follow are a point or two away from res. that should keep prices from moving higher into the second half of the year. YHOO should be watched here because any significant move beyond this level would imply a breakout of some sort. Prices will also be under great pressure this week. I could go on and on but it's important to remember that stocks could push through this resistance and traders should always prepare for any scenario. Especially because of last week's price advance. Stocks like MNMD and CHKP, if they move higher, may be filling out the right shoulder of major h&s pattern. These are all things to watch. Hopefully some of them will be clues for market direction overall. Good luck trading. SO p.s. Remember this long term resistance that I am pointing out will do one other thing besides keeping prices in check over the next couple of months. More importantly it will also place significant pressure on prices to CONTINUE their downward trek. As of right now we are still knee deep in a bear market. Our challenge over the next eight weeks will be to watch how the patterns unfold to see which way prices ultimately break.

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