After Early Stumble, Net Sector Regains Its Balance

One analyst calls the recent activity in the sector 'a train wreck waiting to happen.'
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For the second straight day, the technology sector got confused about which direction to take. After faking out investors with a dip in early-morning trading, the market turned north and continued on its path to higher ground.

TheStreet.com Internet Sector

index was up 15.82, or 1.4%, at 1122.44 in recent trading. It was in negative territory for about a half-hour in the morning, trading as low as 1101.19 before finding support. While the temptation to book some profits remains great, there also appears to be little reason to think the buying frenzy will not continue.

Dick Dickson, technical analyst with

Scott & Stringfellow

, told

TSC

that many factors are at work in supporting the Internet sector. He said money managers who are pressed for performance are being forced to buy into the stocks. In addition, traders know that a lot of money will be coming into the market at the start of the new year (the January effect), so they see little risk right now.

"It's like a broker sitting in a bullpen who hears his co-workers talking about a wonderful stock. He looks at it and says it doesn't make sense

to buy, but day after day, he hears about this wonderful performance," Dickson said. "Eventually, he caves in and buys the stock, and that's what you have going on right now. There's just so much money being made in these things people can't stay away from them. They're afraid they're going to miss out or they have missed out and they say, 'I'm not going to miss out anymore.'"

But even with all the things the sector has going for it, Dickson said he can't bring himself to invest heavily in it.

"It's a train wreck waiting to happen. You know it is," he said. "You know the train is going to wreck, but you don't want to step in front of it because it might keep going for a mile down the road before it wrecks and you still end up flattened."

Among the better performers today was

RealNetworks

(RNWK) - Get Report

, up 19 1/2, or 12%, at 178 3/8. The company introduced new technology Thursday that it claims will stream high-quality computer-generated video. RealNetworks said it had partnered with

WebGlide

, which will integrate its technology into RealNetworks RealSystem G2 to deliver high-quality video. RealNetworks Chairman and CEO Rob Glaser said that the new technology would provide three-dimensional technology that will enable consumers to see the products they are buying in 3-D.

Also,

China.com

(CHINA)

, which has had a back-and-forth run due to recent developments in trade talks, was back on the offensive, up 17 1/2, or 13%, at 154 1/2. The company said it had entered into a partnership with Singapore-based

Panpac Media.com

, an Internet content developer and provider and publisher of special-interest magazines. In return for a 10% stake in Panpac Media.com, China.com will give Panpac 296,612 post-split shares of its stock. China.com and Panpac will provide each other with additional content to enhance their respective portals.

And the latest IPO hit,

FreeMarkets

(FMKT:Nasdaq), was virtually guaranteed success even before it made its first trade. In recent trading, the business-to-business online auctioneer was up 223, or 465%, at 271. Ahead of FreeMarkets'

opening,

Bear Stearns

initiated coverage of the stock with a buy rating and a 300 price target.

Yesterday's

hot IPO,

VA Linux

(LNUX)

, was seeing a bit of profit-taking, down 9 1/4, or 4%, at 230 after trading as high as 266 3/4.

Also on the downside,

i2 Technologies

(ITWO)

was seeing profit-taking today after rallying 23 1/2 points Thursday after

Robertson Stephens

reiterated a buy rating on the stock. It was down 18 1/4, or 11%, at 146 3/4.