The Play Of The Day
June 16, 2000
08:00 AM EST
Good Morning Stock Fans!
NASDAQ RECAP: "QCOM'S Downgrade Subsides the Rally!"
The NASDAQ bounced mid-day about 100.00 points off its current 200 day moving average of 3670.00 at 3,763.00.74. It then rallied 82.00 points off its low and closed at 3,845.74 up +48.33. The NASDAQ managed this rather "unethusitic" rally despite a down-grade of Qualcomm (NASDAQ:QCOM). The day's was filled for the most part with indecision as the gains came in the midst of a report
showing industrial production was much stronger in May 2,000 than
anyone expected -- up 0.4%. Investors based on their lack luster buying yesterday probably would have been happier to see evidence that the economy is indeed slowing.
Today's Economic Data: May Housing Starts:
Expected May: 02%
Actual May -3.9%
5 MIn REACTION: S and P Futures no change. NASDAQ Futures +2.50
(Triple Witching Today) Options, Index, and Futures all expire.
NASDAQ OUTLOOK TODAY: "BULLISH! BEARISH! Just What is this NASDAQ? 3,854.50 Might Just Tell Which!"
Is the NASDAQ ever going bust out of its now 15 day range of 3,767.00 - 3,893.00 (126.00 points) The NASDAQ over the past 90 days before this time period had averaged nearly 445 points every 5 days. It since June 2, 2000, has only been able to trade in a range of not even 1/3 of that!
So then Why is it STUCK!
Stock Fans! To answer that lets look at the two basic schools of thought that are pulling this market it would seem evenly up and down keeping it "stuck!" not able to bust higher or lower. The two sides can be represented in this example as they are in the market itself BULLS ( the investors thinking it goes higher out of its current tight range) and BEARS (those investors thinking that it goes lower outside its current range.
First lets examine the BULLish side.
The BULLS contend that the NASDAQ might be sitting in such a tight range as it is consolidating and waiting on perhaps more economic news or the FED to show that at least in June 2,000 there won't be another rate hike. The BULLS might be looking at the recent lack of conviction in the NASDAQ to push it higher over the 3,900.00 mark as one that comes very soon as history indicates a traditional summer rally upcoming. The trading pattern that the NASDAQ currently has that of a FLAG as it exploded up like a flag post off MAY 24, 2000, level of 3042.00 to 3,893.00 and then seems to just sit in a tight range creating a FLAG pole the a flag sitting in its current consolidating pattern. The FLAG pattern is very rare, but has happened in the past and it has indicated that a big rally bust out could be upcoming. The BULLS basically think that the NASDAQ is with the FED perhaps on hold in June 2,000 and based on the most recent economic data could be almost finished or even finished rasing rates, and when the FED truly doesn't on June 29, 2000, increase rates. In turn then the NASDAQ explodes out of its stuck range and rallies over 4,039.00 ending its BEAR MARKET position!
Now the BEARISH Side:
The BEARS says as one might think the exact opposite. They contend that the NASDAQ is one that just can't on current economic news bust higher. They look at its chart and its lack luster volume and call the most recent rally one of BEARISH proportions. The agree the NASDAQ has enjoyed a rally but it was down so much off its 52 week high of 5,048.00 when it late last month found a new 200 day low of 3042.00 that it was bound to have a rally but one that wasn't going hold or involve long term money and fall short of the needed 4,039.00 level and keep the index in its current state of a BEAR market as if it can't break 4,039.00 it is still 20% off its 52 week high of 5,048.00 leaving truly in a BEAR market.
This way of thinking also looks at the NASDAQ current chart and sees that the NASDAQ in its current trading state is setting up for a big drop as it has over the last 90 days when its unable to achieve a new 60 day high found a new 200 day low. The BEARS also look at the NASDAQ current 5 day trading trend and see lower highs lending further truth to the fact that it is unable to bust out and clear 3,900.00 leaving it ready to sell off. They are also quick to point out that the economy isn't slowing down based on gas prices and consumer confidence both being at almost record highs. They see more rate hikes coming indefinitely and see stocks in their current state as overbought and fail to see any value that would increase stocks in the NASDAQ and in turn send the index higher.
Stock Fans! The Question then is this.
Are the BULLS right, or are the BEARS right?
Well, Stock Fans, Since neither side can move the NASDAQ enough to one side or the other. It would seem then that neither the BULLS or the BEARS are right!
Now there perhaps are 2 KEY NUMBERS that could in the not to distant future if they are attained one way or the other make the BULLS or The BEARS right! Those 2 KEY NUMBERS could be the NASDAQ current 200 day moving average of 3,670.00 and its current value needed to break it out of its BEAR MARKET 4,039.00 Its these 2 numbers that should with perhaps little doubt determine who's right the BULLS or the BEARS!
If the NASDAQ can achieve 4,039.00 then it should according to recent history get plenty of investors to board the NASDAQ 4,000+ train and send the index perhaps to the 4,250.00 area. If it can make this move up off its current levels then it will leave no doubt the BULLS are right It would break out over 4,039.00 and leave its BEAR market state behind and truly even in a technical sense be BULLISH!
On the other hand if the NASDAQ can't bust 4,039.00 or even clear 3,893.00 in the next few days, and it trades lower and goes under 3,670 the current 200 day moving average on the NASDAQ then its ability and hope of clearing 4,039.00 to break it out of its current BEAR MARKET ends and then those BEARS are indeed right!
So then how will I look to play this crazy market today? Well, I suppose I will do what any RANGE Momentum Player would do. I will take the two KEY NUMBERS 4,039.00 and 3,670.00 compute the total range = (369.00 ) then access where the NASDAQ currently sits based on yesterdays close at 3,846.00 and see what number is closer.
(4,039.00 - 3,845.00 = 194.00)
(3,845.00 - 175.00 = 175.00 )
Based on the data above the middle of the range is 3,854.50! That's the true KEY NUMBER. I then if the NASDAQ trades over 3,854.50 based yesterday's close of 3,845.00 am BULLISH and if it trades under 3,854.50 Playing the NASDAQ this way until it breaks out one way or the other sure seems to be the logical thing to do as the ranges increase or decrease. So that's what I'll do!
Today's Play of The Day is: Rambus (NASDAQ:RMBS)
It has news today that Toshiba will use its technology. This stock is coming off a 4 for 1 split taking place just yesterday. Based on this news and current pre market trading it should trade higher today. It also looks to be heavily shorted as it did pull back quite a bit yesterday until investors followed the NASDAQ wave and pushed it higher. Since this stock is shorted it should off today's news have a great chance at a LONG players dream an and SHORT players nightmare a "Short Squeeze!" A short squeeze happens when buying overtakes the shorts and the lack of liquidity that was in place before causing the stock to drop off less volume reverses as volume comes in off the news and sends the stock sky rocketing. It doesn't as history states hold these levels but its a great play on momentum in a daytrade situation. Therefore I will look to play RMBS today and look for that SQUEEZE after current long players and shareholders of RMBS sell off the stock on its big overnight pop!
Looking at the trading graph $248.00 was before its 4 for 1 split big time 90 day resistance or $62.00 now. This level looks now to be support for RMBS and should cause it to drop back off its indicated open of 68.00 plus. It then should bounce off 62.00 and EXPLODE over $70.00 a share today if it can get a SHORT SQUEEZE in motion.
KEY INDICATORS: RMBS (LONG)
Buy Area: $63.25-62.00
Sell Stop: $58.8750
Time Frame: Today
Type of Trade: Daytrade
Sago's BONUS PLAY'S!
BONUS PLAY #1 Network Appliance, Inc (NasdaqNM: NTAP)
Network Appliance, Inc. and its subsidiaries are engaged in the design, manufacturing, marketing and support of high performance network-attached data storage and access devices, which provide fast, simple, reliable and cost-effective file service for data-intensive network environments. The Company pioneered the concept of the network appliance, an extension of the industry trend toward specialized devices that perform a specific function in the network, similar to the development of the router for network communications. Network Appliance filers and NetCache appliances are based on the Company's patented data access solutions, including Data ONTAP software and standards-compliant hardware.
Stock Fans, Network Appliance is one of those stocks that can blast off at any time. The daily fluctuations can shake even the firmest of investor. Network Appliance weekly chart looks for a nice pop. The Nasdaq chart looks to be forming a cup and handle formation as many of the Naz stocks. In my opinion it is time to buy. Whether the market breaks out here today or next Tuesday is not that important. I am buying leaders with strong RS ratings and or strong growth. Network Appliance has all of the above, RS 98 and a growth rate of 77%, 0% debt and the leader in their group of Computer Memory devices.
Key Indicators: NTAP
Buy Area:$78.50 to $79.25
TARGET:$87.175 to $91.1375
Time Frame: 3 to 10 days
Type of Trade: Swing Trade
Daytrade for $.75 - $ 1.50 point scalps. Avg. daily price range $7.68
BONUS PLAY # 2 eBay, Inc (NasdaqNM: EBAY)
eBay, Inc. offers a person-to-person Internet trading community. The Company pioneered online person-to-person trading by developing a Web-based community in which buyers and sellers are brought together in an auction format to trade personal items. The eBay service permits sellers to list items for sale, buyers to bid on items of interest, and all eBay users to browse through listed items in a fully automated, topically arranged service that is available online around the clock. The eBay community includes more than two million registered users, who use eBay as a place to socialize, discuss topics of common interest and ultimately to conduct business in an online trading environment. Through eBay, individuals can buy and sell items in more than 1,000 categories including collectibles, antiques, sports memorabilia, computers, toys, beanie babies, dolls, figures, coins, stamps, books, magazines, music, pottery, glass, photography, electronics, jewelry and gemstones.
Stock Fans, eBay had above average block trades on increasing volume. Ebay has solid support in this area. It sports a 69% growth rate. Stochastics look to have bottomed and the MACD bars look to make there journey up. Real close to a sweet spot. eBay has had many rumors as of late. Looking to add for a swing as well as daytrade.
Key Indicators: EBAY
Buy Area:$64.75 to $65.4375
TARGET:$72.00 to $75.27
Time Frame: 3 to 10 days
Type of Trade: Swing Trade
Daytrade for $.75 - $1.50 point scalps. Avg. daily price range $5.76
Pro Options Trader: Matteo Supplies us with Today's OPTION PLAY:
The NASDAQ 100 Tracking Stock (AMEX:QQQ) OPTIONS PUTS:
I believe that the NASDAQ will test 3,900.00 this a.m. possibly going as high as 3,915.00 but then should retreat to the 3,800.00 level. Next week is looking like a down week for the NASDAQ as I am expecting it to fill the gap still open down to 3,581.00 and possibly test 3,400.00 before the FED meeting June 27,28. Today may be the best time to open a swing position on QQQ puts. We'll look to play ther July $95.00 QQQ put with an entry point of 4 3/4 - 5. This put should move 1 point for every 2 points that the QQQ stock moves to the downside. We'll use a Stop loss of $4.00 This is a $5.00 day hold. If the NASDAQ does retrace to 3,581.00 this put would be worth at least $10. 00 Therefore we have a risk/reward ratio of 1:5. I'll take that any day. FIRM STOP LOSS at $4.00! Take your profits when they present themselves.
STOCKS ON OUR SCREENS TODAY:
RHAT- It doubled revs losst 2 cents looking for 4 cetns. It may see $30.00 over next 2 days.
LNUX- It may make a move off RHAT numbers.
WEBT- 44.00 big time resistence on this one. If it busts thruogh $57.00 is next
JDSU- $123.00 is the 5 day high $110.00 the 5 day low.
SDLI- $300.00 may be the top on this one. $270.00 looks to be 3 day support.
DCLK- It looks to have good support now at $40.00
UPS- Waiting on this one
ORCL- It could break $82.75 and $83.50 looks unattainable in this move up.
EXDS- Split coming it looks like $95.00 is out of reach. It should test $82.00-$81.00
CSCO-$67.00 plus and $62.3750 is the trading range. It has to bust out of this range one way or other soon.
JNPR- It splits today it went out at $231.00 yesterday it should after what looks to be a spike sell off on profit takers on the split. Support at $97.00
ELNT- This one should pull back more today and establish a low lower then yesterday's low of $52.1250
KIDE- I am going to begin to watch this one again with new products in the pipeline. $22.00 could send it to $25.00 where it has broke out in the past.
ASML- Philips Electronics is selling its ownership in this stock and its up on that.
QCOM- It should test $57.43750 before it breaks $66.00
Have a Great Day!
More to come....
and BigPlayStocks.com PRO TRADERS!