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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Gersh Avery who wrote (17102)	10/28/1998 7:13:00 AM
From: dennis michael patterson	Read Replies (1) \| Respond to of 42787

What do you think of this? ____________________________________________________________________ TECHNICAL REGISTER: Wednesday, October 28, 1998 ____________________________________________________________________ THE TECHNICAL REGISTER By Mr. Chartist October 28, 1998 MORE SHOOTING STARS Tuesday was the day of shooting stars, especially for the more spectacularly performing sectors and stocks. Just as a long bullish hammer can forecast the beginning of a major rally, the long shooting star can predict a tumble in the markets. The October 8th bullish hammer in the NASDAQ 100 Index (NDX.X) took this index from a low of 1063.27 to Tuesday's high of 1413.90, a gain of more than 350 points in 13 trading days. The weekly chart also shows a shooting star, one that also brought a double top (matching the 9/27 week ending top of 1413.16. For the month of October, on the monthly chart, there is also a hanging man and a triple top on the NDX (August: 1421.40, September: 1413.16 and October: 1413.90. The NASDAQ composite index displayed a weak dark cloud cover on the daily chart and a shooting star on the weekly chart. The S&P 500 Index exhibited a daily and weekly shooting star and a weekly double top (1084.06 and 1086.06). Tuesday's failure to confirm a reverse hammer in the DJIA sent it lower. Tuesday was the sixth consecutive trading lapse at DJIA 8500, with a double top at the 8532-33 level. Tuesday's trading also confirmed the previous week's shooting star and engulfed the real body of that candle - both remain negative signals on the DJIA. INTERNET STOCKS The Internet stocks are showing technical signs of faltering. Amazon.Com (AMZN) displayed a bearish engulfing reversal signal on Tuesday, with a failure to pierce the $125 resistance level (with a daily close above it). Of all the various Internet stocks, AMZN has historically tended to respond well to the candlesticks. Example: Engulfing reversal on September 28-28 with a double top at $120 led to a decline to $80/share 7 trading days later. Example: Dark Cloud Cover on August 24-25 led to a 5-day decline that bottomed at $65/share -- from a high of $137-1/2. If you are suited to traded such extremely volatile stocks, then you may wish to consider trading the out-of-the-money AMZN November series equity puts: November 95 (ZQNWS), November 100 (ZQNWT), November 105 (ZQNWA) and November 110 (ZQNWB). Yahoo! Inc (YHOO) showed a strong dark cloud cover on Tuesday and shows a shooting star on the weekly chart, with a weekly double top at $132. This also makes it the 3rd weekly failure in 5 weeks to close above $130/share. Depending on how you read the daily chart, this is the 4th attempt to close at $132/share -- all of which failed. The previous failure saw a tumble in YHOO shares to $97-1/2 in three trading days (October 6-8). Again, if you are prepared to trade these volatile Internet stocks, then you may wish to consider trading the out-of-the-money YHOO November series equity puts: November 105 (YHQWA), November 110 (YHQWB), November 115 (YHQWC) and November 120 (YHQWD). BANK, OIL and GOLD STOCKS We hope to issue a Mid-Day alert covering these areas on Wednesday. SMALL-CAP STOCKS We continue to remain cynical about the "recovery" in the small-cap sector. The Wilshire Smallcap Index (WSX.X) displayed a daily shooting star. The National OTC Index (XOC.X) showed a dark cloud cover. The Russell 2000 Index (RUT.X) showed a shooting star and its futures counterpart, December Russell 2000 Index futures (RLZ8), showed a daily dark cloud cover and weekly shooting star. CHEMICAL INDEX The S&P Chemical Index (CEX.X) exhibited a confirmation failure on a reverse hammer on Tuesday. The weekly chart shows a black shoe following a black suit - very bearish. We look to DuPont (DD) for trading action in this sector. The support level for DD is $58/share. A break below that might take DD to a $52-1/2 support. Knowing this, you may wish to trade the DD November series equity put options: November 55 (DDWK) or November 60 (DDWL). RETAIL INDEX The S&P Retail Index (RLX.X) has more than confirmed last Thursday's dark cloud cover and now shows an evening star reversal on its weekly chart. Depending on how quickly the RLX loses its 649 support level, we might then find you the opportunity to short the retail stocks. You may wish to trade, or place on your watch list, Wal Mart Stores (WMT), J.C. Penney (JCP), or Sears Roebuck (S). Sears (S) could be vulnerable to its previous double bottom of $39-1/16. Sears touched its interim support level of $42-13/16, closing Tuesday at $43. The November series equity put options offer two interesting plays: November 40 puts (SWH) and November 45 puts (SWJ). WMT has an interim support of $62-5/8, which it approached on Tuesday, closing at $63-1/4. WMT is vulnerable to $60/share and below that to $53-1/8. There are two suggested WMT November series put options: November 60 puts (WMTWL) and November 65 puts (WMTWM). JCP has strong support at $48-3/4. A break below this level may offer some slight opportunity. It may be better to just short the stock as the options are thinly traded. There is some slight activity in the November 45 equity put options (JCPWI). TECH STOCKS Based on our observations of the NASDAQ 100 (NDX.X), we recommend staying short on the major tech stocks and holding on to their equity put options until further notice.