<<< MAVERICK UPDATE FOR SELECT STOCKS 3-14-97 >>>
NOTE: ALL ANALYSIS AND COMMENTS ARE BASED ON CLOSING PRICES AS OF
3-13-97. ALL ANALYSIS IS GEARED TOWARD SHORT-TERM ENTRY AND EXIT,
EXCEPT WHERE NOTED.
CONCEPT TO UNDERSTAND: I WILL REFER TO TWO TYPES OF SUPPORT,
STATIC AND DYNAMIC. STATIC SUPPORT, AS ITS NAME SUGGESTS, IS
THAT WHICH DOES NOT MOVE...IT IS SUPPORT WHICH HAS BEEN CREATED,
IF YOU WILL, BY A PAST OCCURRENCE IN THE PRICE PATTERN. DYNAMIC
SUPPORT IS THAT WHICH IS EVER CHANGING WITH EACH NEW ITERATION
OF PRICE WITHIN THE GIVEN TIME FRAME. FOR EXAMPLE, A 20 DAY
SIMPLE MOVING AVERAGE IS A TYPE OF DYNAMIC SUPPORT (OR RESISTANCE)
BECAUSE ITS VALUE CHANGES AS EACH DAY PASSES. TO SAVE SPACE,
I WILL JUST SAY STATIC OR DYNAMIC...AND YOU CAN FIGURE OUT
WHAT TYPE OF TECHNICAL SUPPORT/RESISTANCE I AM TALKING ABOUT.
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BEFORE I BEGIN MY COMMENTARY AND RECOMMENDATIONS ON SELECT STOCKS,
I WOULD LIKE TO MAKE A QUICK NOTE ABOUT THE IMPORTANCE OF INTEREST
RATES, AND ESPECIALLY THE MOVEMENT OF THE LONG BOND...AND ITS BASIS
FOR DAY-TRADING. TODAY, THE LONG BOND DID THE NASTY FROM THE START,
WITH THE CULPRIT BEING STRONG ECONOMIC DATA (AS PER USUAL). THERE
WAS SOME SHORT-COVERING AROUND 9:45AMEST WHICH ALLOWED THE TECH
SECTOR TO EXTEND ITS STRONG START OUT OF THE GATES. HEAVY SELLING
STARTED 1/2 HOUR LATER AT 10:15AMEST IN THE JUNE CONTRACTS, AND
THE TECH MARKET STARTED ITS RAPID DECLINE. NOW...TO NOTE THE
TECHNICALS. THE INITIAL AM DROP IN THE NDX STOPPED AND REVERSED
AT STATIC INTRADAY FIBONACCI SUPPORT AROUND 835.75. THE NDX THEN
RALLIED TO UPSIDE FIBONACCI RESISTANCE ~847. THE SELL-OFF WHICH
STARTED AROUND 10:15AMEST DUE TO THE SELLING IN BONDS STOPPED,
AGAIN AT DOWNSIDE FIBONACCI SUPPORT ~835.75. THE ONLY KEY OPPOR-
TUNITY TO GO LONG FOR A SECURE DAY-TRADE WAS ON THE SECOND TEST
AROUND 1;30PMEST OF DOWNSIDE FIB-SUPP JUST MENTIONED. THE NDX
RALLIED STRONGLY OFF THIS SUPPORT, AND REVERSED DUE TO THE
LONG BOND YIELD INCHING UPWARDS TOWARD THE PSYCHOLOGICAL 7.00%
MARK. IN FACT, WE TESTED UPSIDE RESISTANCE ON THE YIELD AT
~6.965% A COUPLE OF TIMES, AND FINALLY BROKE IT OUT ON THE UPSIDE
(WHICH IS BAD FOR STOCKS, GENERALLY). AND THIS BRINGS ME TO MY
FINAL POINT...FOR A WHILE BETWEEN 2:15PM AND CLOSE OF THE FIRST
LONG BOND SESSION AT 3:00PM, AND THEN FOR A FEW MINUTES
AFTERWARDS...THE STOCK MARKET SEEMED TO IGNORE THAT THE YIELD AS
SO (DAMN) HIGH...TECH STOCKS KEPT RISING WHILE THE BOND YIELD
WAS RISING. I DIDN'T GO NEAR THE END OF THE DAY WHILE STOCKS
WERE GOING UP BECAUSE OF WHAT I SAW IN THE BOND MARKET...AND A
FEW MINUTES LATER, THE STOCK MARKET NOTICED TOO. SO PLEASE WATCH
THE LONG BOND IF YOU WANT TO DAY TRADE...IT WILL HELP YOU BETTER
POSITION YOURSELF, EITHER LONG OR SHORT. OK...NOW ON THE THE
STOCKS.
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3COM (COMS): I RATE 3COM A BUY. UPSIDE RESISTANCE AT 36 3/4.
TWO CONSECUTIVE BULLISH DIVERGEANCES, OVERSOLD CONDITION ON
BOTH SHORT- AND LONG-TERM INDICATORS, VERY STRONG SUPPORT AT
32 1/2-33. BREAKING AND CLOSING ABOVE 37 SHOULD LEAD TO A
RALLY UP TO 45. NOTE, HOWEVER, THAT 36 3/4 RESISTANCE SHOULD
BE FAIRLY STRONG. TARGET OF 50 BASED ON PREVIOUS PRICE PATTERN.
AMERICA ONLINE (AOL): AOL HAS STRONG UPSIDE MOMENTUM AT PRESENT,
AND IS WIDELY HELD FUND STOCK. AOL IS CURRENTLY OVERBOUGHT AND
SHOULD SEE A PULLBACK TO ~40 BEFORE CONTINUING UPWARDS. I DO
NOT "PLAY" AOL AT ALL, BUT WOULD CONSIDER IT A BUY AT ~40. THE
RECENT RUN-UP NEEDS A BIT OF TEMPERING. SORRY I CAN'T REALLY
COMMENT MORE...EXCEPT WITH SUPPORT AT 40 ON THE 20SMA.
CASCADE COMMUNICATIONS (CSCC): I AM VERY BULLISH ON CASCADE.
THERE HAVE BEEN TWO CONSECUTIVE BULLISH DIVERGENCES BETWEEN THE
PRICE AND INDICATOR PATTERNS. CASCADE IS VERY OVERSOLD ON BOTH
SHORT- AND LONG-TERM BASIS. UPSIDE RESISTANCE AT 29 5/8, WHICH
WAS ALSO UPSIDE ITD FIB-RE FOR TODAY. POSTING A CLOSE ABOVE
30 IS EXTREMELY BULLISH, WITH FIRST MAJOR RESISTANCE AT 40.
CASCADE, ALONG WITH SEVERAL OTHER NETWORKING STOCKS, HAVE BEEN
VERY RESILIENT DURING THE RECENT DOW/MARKET DOWNDRAFT, MAINLY
BECAUSE THEY ARE ALREADY (OVER-)CORRECTED. I RATE CASCADE A
BUY, WITH A 6-9 MOS. TARGET OF 55-60 BASED ON BASIC TRENDLINE
ANALYSIS AND PRICE PROJECTION.
CISCO SYSTEMS (CSCO): CISCO HAS SUPPORT AT 48, WHICH IS ~ THE
RECENT LOW PUT IN, AND CORRESPONDS TO THE CONGESTION REGION
FROM Q1-CALENDAR96. SHORT- AND LONG-TERM INDICATORS ARE OVERSOLD
AT THIS POINT, WITH HEAVY ACCUMULATION. IN MORE PRECISE TERMS,
THERE IS STRONG SUPPORT AT 46 3/4, WHICH IS THE 100SMA ON A
WEEKLY CHART. CISCO HAS NEVER TESTED/VIOLATED THIS DYNAMIC
SUPPORT SINCE Q1-CALENDAR94. I RATE CISCO A BUY, WITH UPSIDE
RESISTANCE AT 55-56, AND AN INTERMEDIATE TERM TARGET OF 59 1/2.
CISCO NEEDS TO TEST AND BREAK UPSIDE DYANMIC 20SMA RESISTANCE,
WHICH HAS A CURRENT VALUE OF ~57; NOTE THAT THIS VALUE CHANGES,
AND BEFORE CISCO BREAKS OUT ON THE UPSIDE, PRICE WILL HAVE TO
CONVERGE CLOSER TO THE 20SMA. ALSO...BULLISH DIVERGEANCE AS
WITH A COUPLE OF THE OTHER STOCKS ANALYZED HERE.
DELL COMPUTER (DELL): DELL IS PLAYING I-DARE-YOU WITH ITS 20SMA
ON A DAILY CHART. WHILE CLOSING BEFORE THE 20SMA FOR THE THIRD
CONSECUTIVE DAY, IT HAS ALSO TESTED IT ON AN ITD BASIS IN THE PAST
TWO DAYS. THE ANALYSIS HERE IS SIMILAR TO THAT FOR GATEWAY,
COVERED BELOW. THE EXCEPTION HERE IS THAT A TRUE INTERMEDIATE-
TERM OVERSOLD CONDITION HAS NOT BEEN REACHED YET. THE STOCK IS
BEING ACCUMULATED, BUT NOT AS RAPIDLY AS GATEWAY. FURTHER, I
FIND GATEWAY TO HAVE MORE UPSIDE POTENTIAL ON A PERCENTAGE GAIN
BASIS. WHILE I RATE DELL A BUY, I RECOMMEND GATEWAY INSTEAD.
(ALSO, THERE ARE QUITE A FEW GROUPS OUT THERE WHO WOULD LOVE
TO SHORT DELL AND WATCH IT FALL...SO THERE IS CONSIDERABLY MORE
DOWNSIDE RISK HERE.)
FORE SYSTEMS (FORE): THE SELLING THE FORE WAS OVERDONE, NO
QUESTION. HOWEVER, I AM NOT THAT BULLISH ON FORE, AS I AM ON
OTHER NETWORKING STOCKS, SUCH AS CASCADE AND CISCO. THE RECENT
LOW PUT IN BY FORE CORRESPONDS TO STATIC SUPPORT ALONG THE TOP OF
THE Q1-CALENDAR95 CONGESTION REGION. FORE IS A GOOD PLAY FOR
~4 POINTS FROM THURSDAY'S CLOSE, WITH THE UPSIDE TARGET OF ~28 3/4.
I DO NOT THINK FORE WILL BOUNCE BACK TO 32 1/2-35 AS QUICKLY AS
THE OTHER NETWORKING STOCKS WILL RISE...BASED ON TECHNICAL ANALYSIS.
HOWEVER, THERE MAY VERY WELL BE A MOMENTUM PLAY ON FORE. I WILL
RATE FORE A BUY, SHORT-TERM, WITH A TARGET OF 28 3/4. MY VIEW
ON FORE WILL BE UPDATED IF I FEEL A FURTHER UPSIDE RALLY IS
POSSIBLE.
GATEWAY 2000 (GATE): GATEWAY IS RESTING AROUND STATIC SUPPORT
DATING BACK TO THE INTRADAY LOW OF 54 7/8 SET ON 2-5-97. IN
STRICT TERMS, GATEWAY HAS VIOLATED THIS SUPPORT TWICE: ONCE ON
3-12-97 WITH AN ITD LOW OF 54 3/4, AND TODAY, WITH AN ITD LOW OF
54 1/4. DYNAMIC SUPPORT BASED ON A 100SMA WAS VIOLATED ON
3-11-97. THE 100SMA NOW SERVES AS UPSIDE RESISTANCE, WITH A
CURRENT VALUE OF ~56 1/4. IT SHOULD BE NOTED THAT GATEWAY WAS
ABLE TO PIERCE/TEST THIS UPSIDE RESISTANCE YESTERDAY AND TODAY,
WHILE IN BOTH CASES FALLING BACK BELOW THE 100SMA DUE TO OVERALL
MARKET WEAKNESS. TESTING THE UPSIDE 100SMA RESISTANCE IS BULLISH,
AS IT INDICATES THAT ENOUGH BUYING PRESSURE EXISTS TO BREAK
THROUGH THIS POINT. IN THE PAST, GATEWAY HAS TESTED ITS 100SMA
AS SUPPORT MORE CLEANLY...THAT IS, IT NEVER PASSED IT ON THE
DOWNSIDE AND STAYED BELOW IT FOR THREE DAYS, AS IT IS DOING
RIGHT NOW. I AM REFERRING TO THE DIPS WHICH OCCURRED ON 1-9-97 AND
11-4-96; 100SMA WAS TESTED AND MAINTAINED IN BOTH CASES. WHILE
THERE HAS BEEN A TECHNICAL FAILURE OF THE 100SMA SUPPORT RECENTLY,
MTS INDICATES AN OVERSOLD CONDITION COUPLED WITH RAPID ACCUMULATION.
INTERMEDIATE-TERM MOMENTUM IS READY TO REVERSE AND GO POSITION.
WHILE THERE ARE ALSO CONCERNS OF A SLOW-DOWN IN PC SALES, FROM
MY DISCUSSIONS WITH OTHERS (MORGAN STANLEY, ET AL.), I DON'T THINK
THIS WILL BE THE CASE THIS YEAR. I REITERATE A BUY RATING ON
GATEWAY, WITH TWO COMMENTS ATTACHED: THE AGGRESIVE BUYER CAN
PURCHASE NOW...I WOULD, HOWEVE, RECOMMEND THAT 56 1/2 BE MAINTAINED
ON A CLOSING BASIS BEFORE ENTERING LONG. UPSIDE TARGETS ARE
58, 60, 64.
INTL BUSINESS MACHINES (IBM): VERY QUICKLY, THE STRONG DOLLAR HAS
HURT PROFITS OVERSEAS, AND IBM HAS A BROAD GLOBAL PRESENCE. THERE
IS UPSIDE 100SMA RESISTANCE AT 149, WITH DOWNSIDE STATIC SUPPORT
AT 137, WHICH AS PUT IN ON 2-21-97. IBM IS AFFECTED ON TWO COUNTS:
BOTH AS A TECH STOCK, AND AS A DOW/BC STOCK. A HIKE IN RATES OR
A FUTHER DETERIORATION IN THE LONG BOND WILL HURT IBM MORE THAN
IT WOULD, SAY, A NASDAQ STOCK. IBM HAS YET TO REACH AN OVERSOLD
CONDITION, AND NEAR-TERM INDICATIONS ARE TO THE DOWNSIDE. I LOOK
FOR IBM TO TEST 137 SUPPORT BEFORE ANY FUTHER, SUBSTANTIAL UPSIDE
MOVE. MOVING ABOVE 150 SHOULD MAKE A RALLY TO 160-65 WITHOUT
MUCH TROUBLE. I HAVE NO RATING ON IBM, AS IT IS NOT A STOCK I
FOLLOW CLOSELY.
NETSCAPE (NSCP): I RATE NETSCAPE A BUY ON A SPECULATIVE BASIS.
FIRST THE TECHNICALS: UPSIDE RESISTANCE AT 30...CURRENT IN A
VERY OVERSOLD CONDITION WITH FAIR ACCUMULATION...EXTREMEMLY
BULLISH NEAR- AND LONG-TERM INDICATOR AND PRICE PATTERNS. FURTHER,
THERE IS A BULLISH DIVERGEANCE BETWEEN THE MTS INDICATORS AND THE
PRICE PATTERN. A BULLISH DIVERGEANCE OCCURS WHEN THE INDICATOR
"SAYS" ONE THING, AND THE PRICE PATTERN "SAYS" ANOTHER...THE INDI-
CATOR IS ALWAYS RIGHT (ON THE MTS). UPSIDE TARGET OVER 6-9 MOS.
BASED ON LONGER-TERM TRENDLINE ANALYSIS IS ~50, WITH UPSIDE
RESISTANCE AT 30, 36 AND 42 1/2.
USROBOTICS (USRX): USROBOTICS LOOKS VERY BULLISH FROM A TECHNICAL
PERSPECTIVE...MORE SO THAN EVEN CASCADE. USROBOTICS IS RESTING ON
VERY STRONG SUPPORT ON ITS 100SMA ON A WEEKLY CHART. IT TESTED
THIS SUPPORT OVER THE PAST TWO WEEKS, AND IS HOLDING WITH A
POSITIVE BIAS. LONG-TERM INDICATORS POINT TO AN OVERSOLD CONDITION
WITH FAIR ACCUMULATION. I RATE USROBOTICS A BUY WITH AN UPSIDE
TARGET OF 65, AND POSSIBLY 68 IF MARKET MOMENTUM BECOMES POSITIVE.
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I WILL TRY TO POST A FEW OF MY DAY TRADES AFTER I HAVE PLACED THEM.
WHILE YOU MAY NOT BE ABLE TO ACTUALLY USE THE RECOMMENDATIONS, YOU
WILL SEE HOW THEY/I OPERATE.
REGARDS,
ANDIE LIN |
