The Play Of The Day
May 1, 2000
8:40 AM EST.
The NASDAQ enjoyed a 85.00 point plus point move to the upside as it closed higher for the second straight day ending the week at 3,861.00. Looking closer at the NASDAQ we see it traded in a range of less than 100.00 for the only the 3rd time since it was at its all time highs on March 10, 2000. Going back to March 28 the NASDAQ had a range of only 76 points, as it dropped off of 5,000 for the last time as it traded in a range of 5,022.23 - 4,946.00. Looking back to March 10, 2000, we again see the NASDAQ traded once again in a very tight range as it neared its all time highs of 5,132.00 and dropped down to 5,039.00 for a range of 93.00 points.
The reason I make this correlation today is not to say the NASDAQ is going to drop, but instead to make all of you aware that the NASDAQ those other 2 times that the NASDAQ most recently traded in a range of less then 100.00 points its was followed by fairly substantial drops of 600 points plus over the next 4 trading days.
As recently as 6 months ago a NASDAQ range of less then 50 points on the NASDAQ was the norm , but starting in mid November of 1999 that all changed as the NASDAQ made its way on massive volume to its all time highs that it would see less then 6 months later in March of 2,000. However in recent months going back over February and March as well as April the NASDAQ has averaged more then 200 point ranges from its high of the day to its low. If we compare what happened on
March 10, 2000, and March 28, 2000, the last two times ahead of Fridays range that the NASDAQ last traded in a less then 100 point range we do see it was followed by selloffs. It is also important to point out that both of those days also were preceded by more volume as the NASDAQ examining the data further looked very much like it had reached its top especially on March 10 , 2000, going all the way to 5132.00 before it pulled back.
What happens most often as the previous two examples show is that when a range tightens up and trades on less volume it is approaching a top. The fact that less buyers are willing to buy at increasing prices shows this. If a stock or for that matter the NASDAQ since the composite is made up of stocks meets an area of resistance and can't bust through it on increasing volume it most often is topping out. The NASDAQ with its 3rd lowest volume of the year only 1.5 billion shares may be showing us that it is ready for a rest.
In examining two stocks YHOO, and JDSU (two stocks we have also traded quite a lot lately) inside the NASDAQ 100 composite we can make some interesting comparisons. This past Thursday and Friday looking at JDSU we see a range of $86.00 to $96.00 a range of $10.00 on volume of 22,500 (about it's 30 day average volume. However on Friday on volume of less then 20 million its lowest of the week JDSU moved up again this time a range of $6.25 as it traded at over $100.00 and closed there for the first time since the NASDAQ was at 4,250.00. In looking at YHOO we see a similar trend as YHOO traded as low as 113.00 to as high as 125.50 on Thursday a range of $12.50 on about 10 million shares. Then on Friday on less then 8 million shares YHOO traded up yet again to as high as 131.8750 and as low as 124.68750 a range of $6.25 as well. The reason I point this out is JDSU and YHOO both traded higher on decreasing volume of 33% or more.
What this shows is the NASDAQ may very well be shorted as the volume lessens and stocks still go up as supply is limited on investors as well as Market technicians looking for pullbacks bet on the downside instead of the upside. The fact that the volume on the NASDAQ has been low, coupled with the YHOO and JDSU examples as well as the following days after NASDAQ ranges of less then 100 points lately we turn on the yellow caution light today. It looks like MSFT may lead us higher on the onset but something CNBC is saying is that the Tech sector appears to have shaken off interest rate worries. What it fails to state is the volume has also decreased rather dramatically. We will watch close to see if buyers are willing to bust the NASDAQ through 2 key points today 1 the 3914.00 area where it has support over it and the extremely crucial 4,009.00 range where it once had a double bottom now a double top.
Today's Play of The Day is: Microsoft Corporation (NASDAQNM: MSFT)
Microsoft Corporation, (NASDAQ:MSFT) develops, manufactures, licenses and supports a wide range of software products for a multitude of computing devices. Microsoft software includes scalable operating systems for intelligent devices, personal computers and servers; server applications for client/server environments; knowledge worker productivity applications; and software development tools. The Company's online efforts include the MSN network of Internet products and services; e-commerce platforms; and alliances with companies involved with broadband access and various forms of digital interactivity. Microsoft also licenses consumer software programs; sells PC input devices; trains and certifies system integrators; and researches and develops advanced technologies for future software products.
Stock fans, everyone knows Microsoft. Lets get to the skinny as to why I think it is a buy. 1.) MSFT is at a 16 month low. 2.) It is solid money maker with earnings and sports a 46% growth rate. 3.) The news is out. No more uncertainty. 4.) Are you really going to switch to Linux? I have been a user since the DOS days and the Windows keeps on getting better. 5.) So they split the company and shareholders get shares from both companies! Bonus. 6.) Very small risk at this price level.
Key Indicators: MSFT
Buy Area:$70.50 to $71.50
TARGET:$75.00 to $78.00
Time Frame: 2 to 6 days
Type of Trade: Swing Trade
RUN THE OPTIONS: MSFT
The MSFT May 72.50's look best at current levels
BONUS PLAY # 1 ANADIGICS, Inc. (NASDAQNM: ANAD)
ANADIGICS, Inc. designs, develops and manufactures radio frequency/microwave integrated circuit solutions for the communications industry, enabling manufacturers to enhance overall system performance and reduce manufacturing cost and time to market. The Company manufactures products targeted at the wireless communications, cable television/cable modem and fiber optics markets. In the wireless market, the Company focuses on applications (or solutions) for cellular and personal communications systems handsets. In the broadband market, ANADIGICS focuses on applications for cable television systems, cable modems and fiber optic communications systems.
Stock fans, Anadigics is in the top sector according to the ratings. But more importantly they have moved from the number 12 position three months ago to the number one position last week and the week before. The Electrical-Semiconductor Manufacture group is the leader. I researched the group and I like Anadigics for these reasons. Volume over the last 6 months has increased 92.5%. Volume over the last month has increased 34.3%. Volume last Friday was shy of doubling its daily average. Anadigics has strong earnings growth. the last four quarters have grown an impressive 260%, 999%, 900%, 700%. The stock is being accumulated and is 33% off of its high.
Key Indicators: ANAD
Buy Area:$73.00 to $75.50
TARGET:$79.28 to $86.83
Time Frame: 3 to 6 days
Type of Trade: Swing Trade
BONUS PLAY # 3 (NYSE:CRA)
This former bio tech high flyer added on more then 20 points as it went as high as 89.00 on Friday. The volume was not all that bad. However as previously mentioned CRA has an open gap in its range at 47.00 It having a low of 68.00 and a high of 89.00 that range is 21.00 If we apply that number to the bottom figure of 68.00 we hit 47.00 This may not happen over the next 10 days, but history says that sometime before going higher it should pull way back and test that $47.00 area. With it going to the moon Friday we will look for investors to be quick to seek profits today.
KEY INDICATORS: CRA
Sell Short: on Open
Buy Stop: $90.00
TARGET: $69.00 -61.00
Time Frame: 2- 10 days
Type of Trade: Swing trade
STOCKS ON OUR SCREENS TODAY:
CSCO - up but on low volume watch CSCO for the 72.50 range to perhaps hit a wall.
ORCL - up as well in pre market watch the volume to see if it can make 82.00. It looks to pull back it would seem.
YHOO- If it can't hold 134.50 it could test 113.00 before it finds 140.00 again
CMGI - It is a a key area but must break 75.00 on more volume to make a move back to 80.00
CORL- Watch it to drop with MSFT going higher.
DCLK- It may drop as well.
ANCR- We watch close today for 35.00
MFNX - We like it alot and it may make a 2 point move higher.
DELL - It should bounce back and maybe see 52.00 but it has to traded 30 million plus today to make it an actual up move.
MACR- It due to test 77.00 are before it finds 92.00
JDSU - If it can't break 106.50 and hold it on close then its may find the 80's again beofre it finds a big spot in its recent range at 110.00
EMC- It looks like it will continue to fall on more volume
Have a great day!
More to come....
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