Last-Hour Save Just Delays the Inevitable

Was it good that the market was saved by the bell Wednesday? Well, I suppose it was saved before the bell, as it rallied in the final half hour of trading. Longtime readers know how I feel about the market getting saved: It just prolongs the inevitable.

This was particularly on my mind as I was thumbing through the charts; I kept having a sense of déjà vu. As I looked at a stock, such as Foster Wheeler (FWLT - commentary - Cramer's Take), I thought I'd seen that chart before, somewhere else, in another time.

Then it occurred to me: All these charts appeared similar to those of tech stocks in 2000. Perhaps it's not exact, but check this out.

Below is a chart of Yahoo! (YHOO - commentary - Cramer's Take) from early 1999 through late 2001. First, look at the base Yahoo! built in 1999. Then, look at the breakout in December of that year.

By late January, Yahoo! had peaked. But notice that while it came down, it really appeared to be building a small base. In March 2000, it had quite a rally, but that rally ultimately failed at a lower high.

Then it came down again, and for months on end it held at the top of support, where the stock originally broke out of its base. Once again, it appeared that a potential base was forming.

Yahoo! ultimately didn't give way until October 2000, nine months after it made its high.

Now look at Foster Wheeler. In particular, look at the base this stock built in the year prior to its breakout last fall. Now, its climb was clearly more subdued than Yahoo!, because Foster Wheeler took six months to peak, not one. But the funny thing is, the percentage rise from the breakout is just about the same, approximately 175%.

Now note Foster Wheeler's peak in February of this year. The stock came down, went sideways, appeared to be basing and in May, failed to make a new high (yet another example of why I fuss so much over the number of stocks making new highs!).

---

At the time of publication, Meisler had no positions in the stocks mentioned, although holdings can change at any time.

Helene Meisler writes a daily technical analysis column. Meisler trained at several Wall Street firms, including Goldman Sachs and SG Cowen, and has worked with the equity trading department at Cargill. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback; click here to send her an email.