- bull-market.com
THE BULL MARKET TECHNICAL INVESTOR
April 17, 2000
Volume 1, #4
"Off The Charts"
By Barry Habib and Art Adams.
Every week will give you an update of performance results and holdings.
We certainly picked a heck of a week to launch a newsletter! In our three
editions this past week we made 13 selections. Two never reached the
entry points we wanted. The 11 selections that we did trade have either
all reached the targeted price, causing us to exit the position with a
profit, or had hit the protective stops, causing us to exit the position
with a loss. Therefore our position is 100% Cash at present. Performance
to date is a loss of 1.7% after our first week. While we are not pleased
about posting a negative result, it compares very favorably to the major
indexes (Nasdaq down 25%, Dow down 7%, S&P down 10%.) This reinforces our
conviction that Protective Stops are a must. It also shows that there are
profits to be made in a down market with "Short" trades (selling before
you own the stock). We made huge quick profits on all three of our short
plays last week.
This was just an awful week for the equity markets. We thought it would
get bloody once the Nasdaq fell below the support at the 200-day Moving
Average (MA), and that's pretty much what it was.bloody. The stronger
than expected Consumer Price Index Report could not have come at a worse
time. These are indeed very trying times for the equities markets and
especially the Nasdaq, the market for the 21st century. There has been
tremendous upward momentum in the Nasdaq since the middle of last October
until the recent peak on March 10th. Now that same momentum has reversed
and is headed back in the other direction. This has been a case of
"momentum up, momentum down."
Friday's trading was certainly not a confidence booster as the Nasdaq
Composite Index continued to drop precipitously the last hour and closed
poorly. The Index ended the day down 355 points and well below its
200-day MA. If the market fails to stabilize, then the next level of
support would be in the range of 2,800 to 2,500. If we were to pick an
exact support number, it would be 2,632, from the low registered on
October 18, 1999.
Margin calls are forcing many people to liquidate their portfolios causing
excessive selling pressure and leading to a vicious cycle of selling in a
rapidly collapsing market. We expect more margin calls on Monday. Fund
managers are also selling holdings to raise cash. Market psychology has
done a 180-degree turn, confidence has been shattered and the result is
panic selling. Hopefully, we'll get the last of any shakeouts out of the
way early next week so the repair process can begin. Keep in mind there
has been a tremendous amount of damage done. From this year's high to
today's low, the Nasdaq has lost 36%. In order to get back to this year's
high recorded on March 10, the Nasdaq will have to rally more than 57% --
a difficult task for any market.
Warburg Dillon released the following information today pertaining to
Nasdaq bear markets.
Year Decline Mos. to Recover
73-74 59% 48
Oct 87 35% 20
89-90 33% 7
83-84 31% 18
July 98 29% 2
So what do we do? Is this a buying opportunity or a real decline and bear
market? Stocks are severely oversold, which makes it difficult to find
short sale candidates. However, this doesn't mean that it's time to step
in and bottom-fish for bargains. Often, an oversold condition becomes
even more oversold. If you try to go short, you're at risk from a sharp
rally from an oversold condition. If you try to go long, panic could set
back in, and stocks could drop even more.
Although there were a number of blue chip technology companies trading
higher in the after hours session on Friday, there is no guarantee this
will carry into a stronger opening on Monday. In fact, we believe there
is a high degree of probability there will be more downside to come at the
open on Monday. The real problem is, even if there is a bit of a rally,
traders will probably use it to sell into strength. With that said, be
very careful when trying to make any trades, or take a day off and do
nothing.
We're going to present a few trading possibilities because that's what you
can expect from The Bull Market Technical Investor as a subscriber but
this doesn't mean you have to trade. Remember that the essence of good
investing is to risk capital only when the odds are strongly in your favor
and the rewards appear to be many times your risk.
Here are the selections for this edition:
1. AngloGold, Ltd. (AU. $23)
2. Silicon Storage Technology (SSTI, $61) *** A SHORT play***
3. Amdocs Limited (DOX, $54.75) *** A SHORT play***
4. State Street Corp. (STT, $87) *** A SHORT play***
DISCUSSION
1. AngloGold, Ltd. (AU. $23)
Anglogold, Ltd. is the world's largest gold company, producing 8 million
ounces of gold a year. Two days ago, in what looks like a bold move to
appeal to individuals, AU announced it is setting up a golden web site to
market its gold and gold products such as gold coins, jewelry, bullion and
other items. Bobby Godsell, who has been the AngloGold CEO for three
years and is a South African, was quoted as saying "we claim no science
about the gold market. This is not an industry in great distress. We
made $250 million last year. Our stock has a 6 percent dividend, and our
financial performance is a lot better than a lot of Nasdaq stocks."
In times of uncertainty, gold stocks can become a defensive market play
and can generate quick short-term gains. We show a new buy signal for AU
derived from a Hammer/Hanging Man Candle Pattern, a Stochastic %D Moving
Average Crossover, and a Bullish Engulfing Lines Candle Pattern. Our
target is $27 with a protective stop loss set at $21.
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2. SILICON STORAGE TECHNOLOGY (SSTI, $61)
Silicon Storage Technology is a short play at Monday's opening. SSTI
closed below its short-term support level on Friday and we have a sell
signal generated from an Engulfing Lines Candle Pattern, a Momentum Peak,
and a Relative Strength Divergence. Our target is $53 with a stop loss
set at $64.
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3. AMDOCS LIMITED (DOX, $54.75)
Amdocs Limited is another short play for Monday. DOX gapped lower on
Friday 's open and closed below its lower Bollinger Band on heavier than
average volume. We show a sell signal for DOX generated from a Gap
Breakout, a Stochastic Peak, and a Relative Strength Divergence. Our
target is $45.75 with a protective stop set at $57.50.
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4. STATE STREET CORP. (STT, $87)
State Street Corp. is yet another short candidate for Monday morning. A
sell signal was produced from Price Rate of Change Crossover and Volume
Accumulation Percentage Divergence trading systems. Our price target is
$80 with a protective stop loss set at $91.
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OUR PHILOSOPHY
The Bull Market Technical Investor is designed for savvy, active equity
traders and those investors wanting to identify opportune times to buy or
sell high performance stocks based on technical analysis. The primary
objective of our technical analysis trading system is to maximize trading
profits by identifying key reversal points and breakouts of stocks as they
move in and out of their trading ranges.
Our computer-based trading system generates buy and sell signals for
selected stocks by applying over 125 trading systems to the historical
prices of each stock. The signals generated are based on daily stock
price data, the use of which most accurately discovers shorter-term
trading opportunities. The end result is a trading system that is very
sensitive to patterns in the way stocks trade in the markets. However,
quick reversals can and do occur in response to unexpected buying or
selling of any given stock, such as might result from the release or
expectation of news.
Subscribers who are long-term investors in any of the stocks mentioned in
The Bull Market Technical Investor need to understand that this system is
designed to allow trading of these stocks as they reach levels of support
and resistance, as they travel along or break out of their trading ranges.
A "Sell" signal, when it occurs, does not necessarily mean the stock is
not a good long-term investment, just as a "Buy" signal does not
necessarily mean it is a good long-term investment.
It is our intention to publish The Bull Market Technical Investor at least
three times per week and to keep it FREE as long as we can, supported by
advertising. Each issue will contain from one to three stock selections
we feel will provide you with high performance trading opportunities.
Barry Habib & Art Adams
TechnicalInvestor@Bull-Market.com
Todd Shaver
Editor in Chief
The Bull Market Technical Investor
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BIOGRAPHIES
Barry Habib is president of CMA; a New Jersey banking, insurance and
financial planning firm that manages over $400 million per year. CMA
employs over 40 people.
Mr. Habib, age 40, holds a degree in finance and economics and is
regularly featured on the CNBC television network. His monthly report
airs live on CNBC the first Wednesday of each month at 8:40AM ET.
Additionally, Barry is often featured on NBC, FOX, CNN, Dow Jones and
Bloomberg television for his market forecasts, technical analysis and
general market expertise. Barry is a regular guest on Business News
Network radio where he applies his technical analysis to stock selections.
You can tune in live over the Internet at 3:40PM ET every Friday @
www.businesstalkradio.net/. Barry also provides stock picks for The Bull
Market Report, which has a readership of over 100,000 subscribers. A
nationally recognized speaker, Mr. Habib is also a licensed member of NASD.
Art Adams has a strong background in mathematics, statistics, and research
methodologies and was formerly the Vice President of Technical Services
for Capital Markets Communications where he edited and produced a weekly
trading newsletter featured on Telescan's WallStreetCity web site. He was
also a former broker with Merrill Lynch specializing in technical analysis
of securities. Art is presently the president of a private investment
company. He has a doctorate, and is an active stock and options trader.
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Disclaimer: Barry Habib, Art Adams, Todd Shaver and other contributors to
this newsletter hold long positions in some of the securities mentioned
for purposes of investment or trading. Their views and/or opinions may
change rapidly and without notice. All information contained in the
newsletter is obtained from public sources and believed to be reliable,
but the accuracy of this information is not guaranteed.
The Bull Market Report, LLC is not a registered Investment Adviser or a
Broker/Dealer. Readers are advised that the report is issued solely for
informational purposes and is not to be construed as an offer to sell or
the solicitation of an offer to buy. The opinions and analyses included
herein are written in good faith, but no representation or warranty,
expressed or implied is made as to their accuracy, completeness or
correctness. Readers are urged to consult with their own independent
financial advisors with respect to any investment. All information
contained in this report should be independently verified with the
companies mentioned. In addition, no one connected with this newsletter
is taking any compensation of any kind from any companies that are
mentioned in the report.
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