The Nasdaq has also built a bullish divergence in the 40-day SARSI indicator, which shows an underlying bullish current in the index.
An individual large-cap technology stock that traders can focus on is Hewlett Packard. HPQ was a strong name in the group and acted as leadership in the sector prior to the bear market decline in late December. HPQ corrected sharply then and has since formed a bullish double bottom reversal pattern. This is a minor reversal pattern and marks the low in the intermediate-term corrective cycle for HPQ. The stock has broken out over the neckline of the formation and has since pulled back and consolidated the gains. HPQ has a bullish setup in place to continue the uptrend. The stock is back on the offensive and it's showing us bullish energy.
Traders can get long HPQ at this level and use a failure of the neckline at $45 as a stop loss. If bullish sentiment starts creeping into this market after some of the highest bearish sentiment readings we have seen since 2002, the Nasdaq and the technology sector could produce some relative outperformance in the weeks and months ahead. Hewlett Packard is in a strong technical position to benefit from any bullish change in the technology sector and the stock should act as leadership in the group.
Technical Analysis Start to Watch for Divergence 3/26/2008 8:06 AM EDT We're nearing the point that the indicators can confirm staying power in the rally.
Technical Analysis Buy This Car Parts Company 3/25/2008 10:57 AM EDT LKQ offers a compelling business model for a slower economy.
At the time of publication, John Hughes and Scott Maragioglio had no positions in stocks mentioned.
Hughes and Maragioglio co-founded Epiphany Equity Research, which has developed and utilizes proprietary tools to identify and track liquidity changes in the market indices and sectors. Hughes advises numerous asset managers, hedge funds and institutions managing in excess of $30 billion. Maragioglio is a member of the market technicians association (MTA) as well as The American Association of Professional Technical Analysts (AAPTA) and holds a Chartered Market Technician (CMT) designation. Maragioglio has also served on the board of directors of the AAPTA.
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