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Technology Stocks : Alliance Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (8538)	9/23/2000 4:43:59 PM
From: DJBEINO	Read Replies (1) \| Respond to of 9582

Momentum Picks: Coming Week's Weakness Good Time to Acquire Semiconductors The current high-strength (long-term) wave ratio structure is very bullish right now, which can be seen by the flat nature of the selling over the past few months. Toronto, ONT, September 25 /SHfn/ -- This past week was obviously all about the semiconductor stocks, although the networking group had not had a particularly good period leading up to Friday's selling either. However, as explained below, the semiconductors should weaken further in the coming week and it will be a good time to acquire some for a short-term trade. Given the significance of the semiconductor sector in the NASDAQ [NASDAQ], we will focus on the Philadelphia Semiconductor (SOX) index below. sidebar The weekly chart below shows that the SOX index is in the process of consolidating the strong up wave that occurred earlier this year. The current high-strength (long-term) wave ratio structure is very bullish right now, which can be seen by the flat nature of the selling over the past few months. The key word here, however, is the word "current," as this particular down wave is not yet complete. If we look at the previous high-strength sell waves that have occurred in the SOX, we will see that the past two sell waves have been 13 and 10 months, respectively. They were also made up of two smaller internal cycles. The current down wave appears to be close to half way of what the others were. What this implies to me is that we are likely to see the bottom some time over the next month or so and begin a one to three-month up wave that should see the SOX bounce but not make new highs. This rally will then be followed by another sell wave that should see the SOX index drop down below the 800 level and this should occur sometime in early 2001. So we should be prepared for the semiconductors to continue selling off after a short rally in the coming week. If we continue to look at history for a bit of guidance in these situations, we will also notice that the lowest level reached on the TVAL was in the minus eight range and currently the TVAL is well above those readings. This would be consistent with either two things happening. The first would be that the semiconductor stocks are about to rally strongly to significant new highs, which is unlikely. The second is that they still have more time to go on the downside before they reach the bottom of this high-strength down wave that began in March of this year. If we begin to focus in now on the short term, we can see that the weekly ALR Osc. has reached levels where it has traditionally predicted the turn up of the index. Normally when the ALR reaches this point, it tends to be early by one to three weeks. So we should be prepared for the semiconductors to continue selling off after a short rally in the coming week. Another reason why I believe that we still have some additional downside over the next few weeks is that the difference between the current TVAL reading and the 100-day TVAL average is not at levels consistent with previous bottoms. Given of rate of decay in the TVAL, this would again point to a bottom occurring sometime over the next month. Obviously, the past is not a perfect projector of future price activity. What I try to derive from previous indicator readings is some level of investor psychology that we can apply to the outlook going forward. The bottom line with the semiconductor stocks is that they are increasing in economic significance with the growth of computers and networks. They are likely to have a very attractive bounce when this sell wave comes to end. But until we get some type of reversal activity and a confirmation of that reversal, we will need to view the trades as shorter term in nature. This does not mean that there is not or will not be substantial upside. Just look at the last few medium-term up waves, which saw the SOX index rise close to 35% to 40% in a very short period of time. Short-term forecast I expect that the SOX index will continue selling off short term. The question is: Will it bounce or just extend the current wave. My experience in trading S&P futures makes me bet on the fact that Monday will see things continue on the downside. Normally, when we get a big gap down, the arbitrage buying gives the indices a temporary boost. But then selling tends to follow and we are very likely going to see new near-term lows. The positive aspect here is that the TVAL is diverging from the price and this indicates that a medium-strength up wave is likely to develop. Combine this with the weekly indications of a turning point and the coming week should be a good week to acquire semiconductors. Dave Poxon, formerly a proprietary stock trader, is now president of an institutional research firm that provides proprietary technical research services to institutions with in excess of $100 million of assets under administration. He writes exclusively on stocks for StockHouse.ca and StockHouse.com. David's proprietary indicators are components from an advanced proprietary technical theory he has developed through years of analysis and trading experience. The result is the Dynamic ALR Wave Theory™ or DAWT. This theory uses proprietary analytic methods to overcome the weaknesses of traditional technical analysis. The theory and its indicators have been designed to help predict turning points in securities more accurately and sooner than traditional technical tools. Click here for a description of his technical indicators. stockhouse.com