Mid Week Analysis
(5/28/03)
Since this is a holiday shortened trading week I will keep this Mid Week Analysis rather short. I continue to see stocks breaking out of a Cup or Double Bottom pattern without developing a proper Handle. Another in a series of possible failed breakouts now includes APPX which formed a Double Bottom pattern but only developed a 2 Day Handle (H) before breaking out in mid May. Granted it did rise for about a week and made a nice short term move but it got whacked today on huge volume. This is why I don't like an index or a stock to breakout of a Cup or Double Bottom pattern without developing a proper Handle as they usually end up failing within a week or two.
Meanwhile the Nasdaq is also trying to breakout of a small 2 week Handle (H) after forming a 5 month Cup and is very close to its Pivot Point. As I have mentioned before I don't think it will be good for the Nasdaq in the longer term if it breaks out of its small Handle and continues higher like APPX did above before it got whacked today. I personally would like to see the Nasdaq trade sideways for a few more weeks and work on its Handle before making another significant move higher as I believe this would be more constructive for the longer term.
A lot of stocks have formed the right side of a Cup but really need to work on their Handles over the next few weeks before attempting to move higher.
A few stocks to watch include AMGN which has developed an Inverted Head and Shoulders pattern. Its breakout point is around $64.50.
ASVI is working on a 4 week Handle (H) after forming a 1 1/2 year Cup. Its Pivot Point is near $15.
RE is working on a 5 week Handle (H) after forming a 1 year Cup. Its Pivot Point is just above $72.
Meanwhile a couple of stocks tried to breakout yesterday such as RTC and TRMB. Although RTC is around 8% above its Pivot Point of $3.25 if it can clear the $3.60 level it may get a nice pop up to around $4.75.
TRMB is trying to break out of its 3 week Handle (H) and is just above its Pivot Point near $25.25.
If you decide to venture into anything make sure to have a proper Stop Loss Order in place just in case a breakout attempt fails to follow through. The major averages have made a decent move since mid March but they really need to consolidate their gains over the past several weeks before making another significant move higher in my opinion.