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

To: Lee Lichterman III who wrote (17402)	11/5/1998 7:38:00 AM
From: dennis michael patterson	Read Replies (1) \| Respond to of 42787

Lee. I am starting to feel stupid. I sold all my longs, bought some OEX puts, and a looking, finally, to buy those IBM puts. Here is some help for you: ____________________________________________________________________ TECHNICAL REGISTER: Thursday, November 05, 1998 ____________________________________________________________________ THE TECHNICAL REGISTER By Mr. Chartist CORRECTION AHEAD! November 5, 1998 Wednesday's DJIA double-bottom at 2:59 p.m. and 3:17 p.m. put to rest many idle speculations that the current rally had ended. After the DJIA peaked at 11:15 p.m., it looked like the bears would end the day cheering. During that 3:44 hour-stretch, the DJIA dumped nearly 140 points before the bulls tacked on 43 points in the final 30 minutes. Nonetheless, the words, "pricey" and "overpriced," continue to be echoed by market analysts. The important question over the next 2 trading days is: "Will the DJIA rally overcome the August 2nd hump? We believe a minor correction should occur, during the next 4-10 days. On October 22nd, the RSI level peaked at 88.61 and the DJIA dropped by 227.33 points. The current RSI level, for the DJIA, stands at 85.45. The %K line crossed the %D line on the Slow Stochastics (92.39 versus 94.61), both lines of which are in overbought territory. The NASDAQ confirms such a possibility. The RSI level is now 91.40 - the highest it has been over the past 2 years. Both Slow Stochastic lines are above 98. These are overbought indicators. The NASDAQ must overcome the August 9th hump by closing at or above Wednesday's level; this index requires another 37 points to pierce the August 2nd resistance. The Slow Stochastic lines, for the S&P 500 Index, have also crossed. The S&P 500 Index needs to maintain its current level, or lose no more than 13 points to keep its momentum above the August 2nd halfway level. This possible correction should allow many of you to close your losing equity put positions, or short positions, with a minimum of pain and possibly some profits. Fundamentally, we offer this logic behind our conclusion: (1) This rally is based upon a November 17th interest rate cut; (2) the bonds are falling, something that indicates an interest rate cut may not necessarily be forthcoming; (3) mortgage rates are rising, not falling; (4) the Federal Reserve has not cut rates during a rising market, only during a falling market. We are not ruling out an interest rate cut, during the November 17th FOMC meeting, but it appears increasingly improbable. HARDEST HIT The hardest hit stocks during such a correction would be the Internet stocks: YHOO, AMZN, EBAY, AOL, XCIT and others. YHOO is now trading above its upper Bollinger Band and boasts Slow Stochastic lines above 90, with the %K line at 99.70. AOL is trading within the upper range of the Bollinger Bands, but has a %K line reading 99.58 and an RSI level of 85.14. AMZN has lower readings in the SS lines and RSI, both of which are overbought - but it exhibited a hanging man in Wednesday's trading. EBAY appears to have hit the ceiling with an elongated dark cloud cover forming and a declining RSI level, down to 91.43, which is well overbought. XCIT has hit a $40/share ceiling with a hanging man. We advise you closely monitor the Internet stocks and contact your stockbroker for the appropriate November series equity put options in the above stocks. RECOMMENDED SHORTSALES IBM has double-topped on its weekly and daily technical charts. IBM also shows an RSI level in overbought territory and crossed/declining Slow Stochastic lines. We believe that IBM will lead the next market correction. Wednesday's trading brought a hanging man and the weekly chart now exhibits a spinning top following a long bullish candle. Confirmation of this correction should occur on Thursday. Gamblers may wish to closely study this and jump the gun to exploit this potential decline. We prefer to avoid yet another head fake by awaiting confirmation on the hanging man. Disney (DIS) has completed a bearish engulfing pattern, which also closed the window. The Slow Stochastic lines have crossed in overbought territory. We suggest waiting for a confirmation with an opening below $28-3/16 or trading below $27-15/16. DRUG STOCKS The Pharmaceutical Index (DRG.X) confirmed its day-earlier dark cloud cover with another strong decline on Wednesday. The weekly candlestick chart shows a gravestone doji after a long bullish candle - this is very bearish. The Slow Stochastic lines have crossed and are now declining in this index. You may wish to capitalize upon this weakness with equity put options on selected drug stocks. Pfizer (PFE) exhibited a bearish engulfing pattern on Wednesday. PFE also has declining SS lines and turning MACD lines. PFE closed at $106. There is strong support at $105 and more at $103-5/8. We suggest you consider the PFE November series equity put options at this time for a potential drop below $100/share. Merck (MRK) completed a dark cloud cover, which nearly mimics a bearish engulfing reversal. MRK also has crossed and declining Slow Stochastic lines. MRK closed at $138-5/16. There may be strong support around $132-1/4. We suggest you consider the MRK November series equity put options at this time for a potential drop below $130/share. UPDATES American Airlines (AMR) signals indicate the peak has been reached and this stock should now decline. AMR now has a shooting star on its weekly chart and a double-bearish candle day - the first we've seen in AMR since its late September meltdown to $45-5/8. Now may be the time to average out those November AMR equity put options. Microsoft (MSFT) now shows a double reverse hammer and the ongoing decline of its SS lines. The same parameters, which were discussed in last night's report, continue to apply. Any shock to the financial markets could quickly send MSFT below $100/share. Dell Computer (DELL) dipped to its $64-1/4 support level and closed strongly late in the day. The SS lines continue to decline, and are still in overbought territory. We were right the first time about AT&T (T) and wrong the second time. AT&T declined strongly on Wednesday and should now continue lower, to between $58 and $59/share. NOTICE: MORE UPDATES THIS WEEKEND