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Weekend Stock Market Analysis

(3/20/04)

The key short term support level to watch next week in the Dow is around 10100 (point A).  If this level is taken out then the next area of support for the Dow is in the 9850 to 9900 area.  The 9850 level is the Dow's 200 Day EMA (purple line) while the 9900 level is at the Dow's 23.6% Retracement (point B) calculated from the October 2002 low to the high made in January.  Meanwhile if the Dow can find short term support near 10100 and tries to mount a rally look for resistance at its 50 Day EMA (blue line) near 10400. 

The Nasdaq has been making a series of lower highs (H) and lower lows (L) since peaking in January.  The key short term support area to watch is around 1925 (point C).  If the 1925 level is taken out the next support area to the downside in the Nasdaq would be near its 200 Day EMA (purple line) around 1880.  Meanwhile if the Nasdaq can hold support near 1925 and tries to rally look for initial resistance at its 100 Day EMA near 1980.

The S&P 500 has been stuck in a trading range over the past 5 trading days between its 50 Day EMA (blue line) and 100 Day EMA (green line).  Eventually it's probably going to break one way or the other before much longer.  Either the S&P 500 will rise above its 50 Day EMA near 1125 and make a run up to its previous high near 1160 or it will break below its 100 Day EMA near 1105 and drop back to the 1060-1070 area.  The 1060 level near its 200 Day EMA (purple line) while the 1070 area (point D) is the S&P 500's 23.6% Retracement Level calculated from the October 2002 low to the early March high.     

Meanwhile the Semiconductor sector continues to breakdown as the Semiconductor Holders (SMH) have pierced both their 200 Day EMA and Neckline in association with a Head and Shoulders Top pattern.  It's critical that the SMH's find support near the 38 level next week.  If the SMH's don't then look for their next area of downside support at their 38.2% Retracement Level (calculated from the October 2002 low to the January high) near 35.  Suffice to say if the SMH's fail to hold support near 38 and continue to breakdown the rest of the market will likely follow as well.

For those of you following the Gold and Silver sector (XAU) it looks like the XAU is beginning to stabillize with a key support area near 93.  In the longer term the XAU still appears to have formed a Cup and is now beginning to develop a Handle (H).  If the XAU can eventually break above its longer term resistance area near 114 (which coincides with its 61.8% Retracement calculated from the 1996 high to the 2000 low) then it would probably rally up to its longer term 76.4% Retracement Level near 128 (point E). 

Another sector that looks interesting is the Oil Service sector as the Oil Service Holders (OIH) appear to have formed the right side of a 2 year Cup.  What I would look for now is the development of a constructive Handle over the next few weeks while holding support near the 69 level. 

Finally when the market is in a correction phase most stocks are going to follow the trend of the market which can provide shorting opportunities.  Although shorting stocks is more difficult to learn it can allow investors to play both sides of the market which can increase your profits.

Let's look at one possible opportunity if the market continues to trend lower.  NTES had a strong thrust downward over the past few weeks but has been wedging higher over the past 4 trading days on diminishing volume and is encountering resistance near its 50 Day EMA (blue line).  In addition NTES has developed a small Symmetric Triangle pattern which is usually a signal that a substantial move is nearing.  In this example my entry point on NTES would be just below its 100 Day EMA (green line) near $47 to play a potential move to the downside.  My initial target price would be around the $43 level which is at the 200 Day EMA (green line).  Now you also have to be prepared to get out of NTES if it breaks to the upside instead from its Symmetrical Triangle pattern.  In this example my protective Stop Loss Order would be set just above the 50 Day EMA near $49 or so.      

How can a Premium Membership to amateur-investor.net benefit you as an investor?   We focus on stocks which are exhibiting favorable Sales and Earnings Growth that have developed a favorable chart pattern such as a "Cup and Handle", "Double Bottom", "Flat Base" or "Symmetrical Triangle".  These stocks are then included in our "Stocks to Watch List" which gives investors a quick reference to those stocks which may provide the best buying opportunities to the long side in the weeks ahead.  Each stock in our "Stocks to Watch List" includes specific Buy Prices, Stop Loss Prices (very important) and projected Target Prices.   In addition we also maintain a list of Stocks which may provide shorting opportunities as well as shown by the example of NTES above. 

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