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Market Humor

Stock Indexes Update

Stock Picks for Next Week

Definitions

P/E ratio - The percentage of investors wetting their pants as the market keeps crashing.

Cash Flow - The movement your money makes as it disappears down the Toilet.

Market Correction - The day after you buy stocks.

Bull Market - A random market movement causing an investor to mistake himself for a financial genius.

Bear Market - A 6 to 18-month period when the kids get no allowance, the wife gets no jewelry and the husband gets none.

Broker - Poorer than you were last year.

Momentum Investing - The fine art of buying high and selling low.

My Personal Strategies

1) I generally like to trade stocks that are trading between $2 and $20 - Better leverage on my money.

2) I rarely make decisions based on fundamentals as I believe fundamental information can be manipulated and/or lacking - Charts give a better picture of where the "real strength" of the stock lies.

3) I normally stay away from stocks that average less than 300,000 shares per day - Day and short term traders normally are not active in those stocks.

4) I do not get involved in a trade unless it has at least a 4-1 risk/reward ratio - Good money management tool.

5) I would rather miss a trade than get involved in a stock at a price I cannot defend - Main goal in my trading is to keep the principal safe.

6) I let the chart tell me when to get out of a trade. I do not cut my profits short just because I am in profit - Cutting your profits short skews the balance of profits versus losses.

7) I generally use "mental" stops - Traders often target stop loss areas and when hit turn the stock around.

Join The Oasis and receive chart information about stocks you personally follow as well as ideas about other stocks with powerful chart patterns.

Chart Analysis

Dow Jones - Friday Close 12398

Stock indexes seem in a short term topping action leading to a corrective phase.

DOW

The 12581 recent intra day 5-year high came in as a possible spike high with strong selling taking the index down negative intra-day, though closing in positive numbers. It cannot be considered a reversal high but can be looked upon as an important short-term top.

On Friday the DOW closed at 12398 which is below the 20 day MA at 12404. Support will be found at the most recent low and previous high at 12357-12361. The 50 day MA is presently at 12269 and should the 12357 support break that would be the next objective. Major support will be found at 12070.

The DOW has yet to have a re-test-of-the-high-at-12581 rally. The resistance will now be strong at 12500. Anticipated trading range for the week is likely to be 12361-12500. A rally back up to 12500 can be considered a re-test of the high as the spike high does not require more.

There has been a general trend in the past 4 years of seeing some form of sell-off of the indexes within the first 3 months of the year. In 2003 it was close to 1500 points, in 2004 it was nearly 600, in 2005 it was around 900, and in 2006 it was about 500.

The most comparable year was 2004 where the DOW had rallied, in the previous 6 months prior to Jan 2004, over 1600 points. This past year (2006) it rallied over 1900 in the same time frame. After the 1st week of January04 the DOW was only able to rally 130 points higher before the peak was seen on the 3rd week of February. It then proceeded to correct about 580 points by the end of March, and subsequently fell another 300 points by the end of October. The chart formation and previous-year-rally is quite similar and using 2004 as a model it could be said the DOW will likely correct, by the end of March, at least the same amount of points as in 2004.

NASDAQ

The NASDAQ has been a model of dissension among the indexes. The NASDAQ did not make new highs until several months after the DOW and S&P500 made theirs. It finally made its new highs by breaking the 2375 level and rallying to 2468. Since that high, made on Nov 24, both of the other indexes have continued to make new highs but the NASDAQ has only able to top its high by 2 points and has subsequently had several corrective drops that the other indexes have not yet had.

Things might be changing, in recent days, during this last drop in the DOW from 12581 down to 12393, the NASDAQ has held the strongest and could be signaling that it will now be the leader on the way up and the laggard on the way down.

The chart formation in the NASDAQ, contrary to the corrective-prone-looking DOW, has several indicators, which can be considered bullish. On the weekly chart there is a possible "cup-and-handle" as well as a "flag" which, if confirmed, could vault the NASDAQ into much higher territory. Evidently if the DOW does go into a 500-point correction I talked about above, the NASDAQ will likely suffer some of the brunt as well.

Nonetheless, a corrective move down to the 2342-2375 level would leave both of the bullish formations intact and still offer a more bullish scenario than a correction-prone DOW chart would offer. A corrective phase in the DOW might not be as negative to the NASDAQ considering the recent dissension factor in this index.

Possible trading range in the NASDAQ for this week could be 2440-2375.

S&P500

The chart on the S&P500 looks almost identical to the one on the DOW. Many of the same comments as the DOW apply.

Present support is 1377 and the 20 day MA is at 1370. A break below 1403 will likely vault the index for a re-test of the support and 20 day MA. Previous 5 year high at 1326. 50 day MA is presently around 1320. Break of support at 1377 will likely generate test of the 50 day MA and previous 5 year high. Likely range for the week is 1418-1385.

Stocks

CHART Outlooks

Due to the fact that I am expecting a corrective phase to begin shortly in the indexes I am going to be concentrating mainly on short positions.

UTSI (Friday Close 8.77)

I was recently somewhat long term bullish on this stock but the action and inability to rally out of a clearly defined trading range as well as what has now become a short term bearish-looking chart leads me to try to put on a short position for a fast profit. Stock has been trading actively between 8.63 and 9.18 and has built two double bottoms (one at 8.63 and one at 8.45). The inability of the double bottoms to generate a rally above resistance (9.33) has now turned into a negative. Strong resistance will now be found at 9.09, 9.18, and major at 9.33.Stock is trading below the 50 day MA (which is beginning to turn down) and closed on Friday below the 20 day MA at 8.90.

I am looking for a rally back up to 9.00 to go short (likely around 8.98) with an objective of 7.41. A perfect stop loss point would be 9.40 which means the stock would have to take out all the resistance levels (unlikely at this time). The 7.41 level is actually quite important for the long term as the 50 week MA is presently there as well as a couple of important previous lows on the weekly chart. I would not expect that level to be taken out easily.

A short position at 8.98 with a stop loss order at 9.38 looking to cover between 7.41-7.55 would offer a 4-1 risk/reward ratio. You could even look to reverse positions at that time as the long-term chart (1 year or more) looks bullish.

My rating on the trade is a 6 (on a scale of 1-10 with the strongest probability rating being 10).

ACOR (Friday close at 15.45)

ACOR chart has been weakening consistently over the past few weeks. After an initial rally from 2.22 in Sep06 all the way up to 20.60 in Nov06 this stock seems to be in a corrective phase. The stock is presently trading below both the 20 and 50 day MA with the 50 day MA starting to turn down (negative). Recent previous high on ACOR is 16.44 which can now be considered major resistance, especially in view that the 20 day MA is presently at that price as well.

Major support on the stock is the 14.44 level which was the first major correction low from the high made at 18.81 just prior to the rally to the 20.60 level.

The stock is under pressure and has no evident visual support below 14.44. The short is attractive especially since the stop loss point (16.50) is very clear. Based on the pressure seen it is likely the traders will be shooting to take out the large amount of stop loss orders that are likely to be under 14.44.

A 50% correction of the rally from 2.22 to 20.60 would give an objective of 11.40. The 50 week MA is presently under 11.00 so that objective would be very possible.

I will look to short ACOR between 15.55 and 15.80 with a stop at 16.50 looking for a first objective of testing the 14.44 level and subsequently breaking that level and causing the stock to fall into the mid 11's to low 12's.

My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).

XING (Friday close at 12.73)

XING recently made 4 year highs at 17.19 on Oct06 but has now failed to maintain itself even above the previous 4 year high at 14.70 and therefore the breakout can be considered a failure. Because of that reason the stock continues to be pressured and is now looking to find a level of support from which to recover.

It recently fell as low as 11.54 and responded strongly from that level (up to 14.20) but has also failed to maintain itself and close above the 13.85 price which is proving to be an important pivot point. XING finds itself trading under the 20 week MA as well as the 20 day MA (which it broke on Friday after failing to get above the 50 day MA it tested two days before).

There is a daily gap between 11.99 and 12.50 which is likely to get filled. I will be shorting any rallies up to 13.45 and all the way up to 13.85 using a stop loss point of 14.27. Objective on the trade is 10.62 which is where the 50 week MA resides. There is also a possibility of a drop as low as 9.60 which is where a previous important weekly low is found. Risk/reward ratio is approximately 4-1.

My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).

COMS (Friday close 4.03)

This trade can be a hit-and-run or a sit-and-wait trade depending on what happens this week. COMS hit a high of 9.36 on Jan04 and a low of 2.96 on Apr05. After a subsequent short covering rally which took the stock back up to 5.70 the stock has now gotten itself back under strong pressure. After a 7 month range where it traded between 5.30 and 4.00 with the 4.00 level having been seen now 3 times (triple bottom) it now looks ready to break it and go down to re-test the 2.96 low made in 05.

On the weekly chart we have a recent and very evident inverted flag formation that, if broken (a print of 3.89), projects down to 3.00. The high of the flag is 4.24, the low is 4.00, and the flagpole up to 5.22.

COMS is now below all the MA's as it broke the 20 day MA just last Friday.

I will sell any rally up to 4.20 with a stop loss at 4.30 or sell on the break below 3.95 (sell at 3.89 stop) and place a stop loss at 4.08. Risk/reward ratio is 4-1.

My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).