Pulse: Tech Stocks Come Back Strong, but Can Rally Be Sustained?

Technology stocks staged an impressive comeback, but the question remained whether it was just a bounce after a bunch of down days or something that could be sustained.

The Nasdaq ended the day up 139.08, or 3.7%, to 3865.60, extending gains into the close as shorts were forced to cover positions. TheStreet.com Internet Sector index closed up 19.21, or 2.5%, at 791.79.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 19.21 +2.5% 791.79 TSC E-Commerce 0.77 +1.7% 45.39 TSC E-Finance 17/32 +1.1% 47 9/16 Nasdaq 139.08 +3.7% 3865.60

After the close, Dick Dickson, technical analyst with Scott & Stringfellow, was asked by TheStreet.com whether he was sticking with the call he had made before the open that the market would likely see a short-term bounce that would not be sustainable longer term. He said he was staying with his call even though it could still rally some more from here, but unravel in the next few days. He said he would need to rethink his position if the Nasdaq closed above 4000. Dickson also said that short term, the Nasdaq was the least oversold of the indicators, so in a rally it could be the first that is overbought, meaning it was hastening the end of the rally with such a big advance like today.

On a day when much of the tech sector was running wild there were some standouts. Juniper Networks (JNPR Quote) closed up $17.94, or 9%, to $209.94 after introducing new network devices.

And Redback Networks (RBAK Quote) added $15.94, or 11.5%, to $155. Redback will be teaming with Inktomi (INKT Quote), Portal Software (PRSF Quote), and Sun Microsystems (SUNW Quote) to provide an integrated broadband service delivery framework, which will enable the distribution, personalization and billing of broadband services. Inktomi added $2.59, or 2%, to $123, while Portal closed up $2.88, or 7%, to $42.75 and Sun added $2.44, or 2%, to $117.69.

Barnes & Noble.com (BNBN Quote) closed up $1.38, or 30%, to $5.94 on news it would replace Amazon.com (AMZN Quote) as the premier bookseller on Yahoo!'s directory, including a featured merchant on its shopping site. Amazon, which said it had decided to team with America Online (AOL Quote) and not Yahoo!, closed down $2.06, or 4.8%, at $40.75. The online retailer held an analysts' day in Reno, Nev.

Among business-to-business plays, Ariba (ARBA Quote) closed up $11.06, or 7.7%, at $155 as analysts had nice things to say about the software company after its user's conference yesterday. Also, Ariba and i2 Technologies (ITWO Quote) benefited from news that Transora, a business-to-business marketplace for the consumer food products and services industry, would use technology from the two companies to power its service. i2 added $12.81, or 7.6%, at $182.25.

2:22 p.m.: Tech Strong in Afternoon Trading

Technology stocks were maintaining gains and the Nasdaq was at trading up 83.4 to 3809.9 in afternoon trading. TheStreet.com Internet Sector index was up 8.66 to 781.24.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 8.66 +1.12% 781.24 TSC E-Commerce 0.65 +1.46% 45.27 TSC E-Finance 0.06 -0.13% 46.97 Nasdaq 83.4 +2.24% 3809.9

Over at our RealMoney.com sister site, James Cramer was attempting to figure out where things were going with tech. Here's part of his take.

"The tug of war here is how much negativity is already in stocks. When it comes to Intel (INTC Quote)), to Microsoft (MSFT Quote), and now to Sanmina (SANM Quote), we think too much negativity is now discounted. There is too much pessimism. But it is all case by case. We can't make a sweeping generalization about all stocks. One by one we analyze. We can't afford to decide that all of tech has bottomed. Some simply haven't come down as hard as others."

Cramer also has some advice about how you can figure out whether the market has bottomed. "When I worked with my wife, she used to use the one-third rule in corrections. When you think a correction has run its course, probably a third of the stocks have bottomed. Another third are bottoming. And another third aren't there yet. That's pretty much where we think we are in tech right now."

On the move

Among stocks on the move, Amazon.com (AMZN Quote) was down 7.3%. The company was holding an analysts' day today in Reno, Nev., but was weaker on news that barnesandnoble.com (BNBN Quote) would replace Amazon as a featured merchant on its shopping site. In a separate story, TheStreet.com wrote about the bookseller soaring on the news. Barnesandnoble.com was jumping 30.1%.

Also a standout, but on the upside, was Juniper Networks (JNPR Quote), up 9.4% to $210. The company announced it had added to new edge routers to its product portfolio. The news was having an impact on some other companies as well. In a note on the new additions, Salomon Smith Barney analysts wrote that Juniper would be competing at the very high end of Foundry Networks' (FDRY Quote) and Extreme Networks' (EXTR Quote) target markets. Even before the Juniper announcement, Salomon had upped its price target on the stock to $310 from $245. Foundry moved 5.7% lower, while Extreme was up 6.4%.

Having an up-and-down day was Stamps.com (STMP Quote). The Internet postage firm traded up about 15% early on, after the company announced its Internet postage system would be integrated into Microsoft Works 6.0 and Works Suite 2001. But investors may have been focusing on a negative note on the company from Salomon, which lowered its revenue estimate on the company yesterday. In addition, the company was sued yesterday by Pitney Bowes (PBI Quote) over patent infringements, charges that Stamps.com denied.

11 a.m.: Nasdaq Bouncing Back as Bargain-Hunters Refill Their Coffers

Buy the dip, or sell into it? The answer to both questions could be Yes.

In early trading, the Nasdaq was up 61 to 3787 TheStreet.com Internet Sector index was up 9 to 781.

Net/Tech Indices INDEX CHANGE % VALUE TSC Internet 8.39 +1.10% 780.97 TSC E-Commerce 1.13 +2.53% 45.75 TSC E-Finance 0.06 +0.13% 47.09 Nasdaq 56.50 +1.52% 3783.02

In his pre-opening note, Dick Dickson, technical analyst with Scott & Stringfellow, noted that the market could bounce over the next couple of sessions. He noted that some of his short-term indicators were giving buy indications and, combined with the market's oversold condition, should be enough to produce a bounce.

"But that's all we're expecting," he wrote. Dickson indicated that with intermediate-term indicators giving "clear-cut sell signals," and the market was still relatively overbought for the intermediate term, "we don't see any bounce here turning into a sustained rally. Rather it should just set the stage for a further decline that should, in turn, produce a significant low sometime over the next four to six weeks."

Among stocks in the news, Barnes & Noble.com (BNBN Quote) has been one of many out-of favor e-commerce stocks, but was up 32.2% today on news that it would replace Amazon.com (AMZN Quote) as the premier online bookseller on Yahoo!. Amazon did not renew its three-year marketing agreement with Yahoo!, according to The New York Times, paving the way for Barnes & Noble.com to link up with Yahoo!(YHOO Quote).

Perhaps more importantly to investors of Yahoo!, the company was tight-lipped regarding the its advertising revenue at a Banc of America Securities Investment Conference attended by our own Tish Williams.

Ariba (ARBA Quote) was up 3.8% after the business-to-business software company held a user's conference yesterday. Credit Suisse First Boston analyst Chris Vroom wrote that although the company's fundamentals "could not be stronger," with likely upside to fiscal fourth-quarter numbers, he did not expect the same "torrid increase" that was seen in the third quarter. Ariba's revenues grew around 100% in that quarter.

Check out Joe "B2B" Bousquin's piece on the battle between Ariba and Commerce One (CMRC Quote).

Ariba also was benefiting from news that Transora, a business-to-business marketplace for the consumer food products and services industry, would use technology from Ariba and i2 Technologies (ITWO Quote) to power its service.

Also on the upside, Juniper Networks (JNPR Quote) was up 5.4%. The company debuted some new high-end network devices today.