Jan. 28, 2000
With the end of the month upon us, there's so much chatter about the January indicator and its significance. This indicator was first brought to our attention by Yale Hirsch, who writes and edits
The Stock Trader's Almanac
. The basic premise is "as January goes, so goes the year."
Join the discussion on
Message Boards.I'm certain it must work to a large degree or everyone wouldn't be quoting it and its statistics. However, I have never used this sort of rule-of-thumb indicator and am not as concerned with one particular month as I am with the market's health and the action in individual stocks.
January certainly has been quite a volatile month, with wild market swings coming daily and even intraday. At this time, it's hard for me to imagine these big swings will go away anytime soon; so few groups now have the sort of bases that say a sustainable move to the upside is in the cards. But at the same time, so many stocks are down so much already from last year's narrowly participated-in rally that it's hard to imagine the market just falling apart in here either. Instead we'll likely keep getting group rotation after group rotation until either all the money is used up or the bases get bigger.
Over the past month, I have recommended quite a number of health care stocks in my column. Many readers have asked me to follow up on those recommendations, so a quick review of those stocks might be appropriate here. In addition, I was asked during my
online chat two weeks ago which were my favorite stocks in the
New Tech 30, so I'll go over some of the more interesting charts I find in that group.
First, the review of the health care names. Of the four stocks I recommended
Jan. 11, three are now in need of consolidations:
has yet to break out and appears to still be buyable right here.
Jan. 18, I recommended 12 stocks. Once again, most have run quite far and are in need of consolidation. Those names are
Of that list, those that haven't yet moved but are still fine charts and should work their way higher from here include
requires a special note: It was just around 40 when I wrote that column the night before, but before the market opened, the buyers appeared and ran the stock to 80. When that happens, all I can say is that it's time to look elsewhere if you don't own that one because stocks that spike 40 before the market opens are not ones I feel comfortable with. The stock is now back at 60 and will likely bounce around between 40 and 80 for quite some time.
. Biogen has since been added to the
and continues to act well; my target price remains around 120. Merck is very early in its base-building and will likely do much more backing and filling. I believe it will emerge victoriously on the upside when the base is complete.
Jan. 21, I recommended
, which has had quite a run. My target price is 28.
Now, on to the New Tech 30. I will not review each name but will make some general comments, highlighting those charts I feel are most compelling. In general, many are in the midst of corrections. As I posted many of these charts after the close Thursday, I recognized how many did not make lower lows from Tuesday. While I feel the time frame is too short for a real positive divergence, it is noteworthy since the
actually traded about 50 points lower than its Tuesday intraday low. That sort of action reaffirms these as support levels.
The worst-looking chart is
as its action this week has left an island up above. An island is a short-term reversal pattern; it does not denote a long-term top. However, as a rule, it does typically send prices back for a complete retracement of the previous move. That means that Qualcomm now has serious resistance at the bottom of the island in the low 140s and it is likely to move back toward the 100 level where it broke out from.
One of the more interesting charts in this group is
Copper Mountain Networks
, for several reasons. First, take a look at the action in August, with the spike up to a marginal new high that couldn't sustain itself and led into quite a slide, forcing the stock to spend the past five months basing. I point this out because as you flip through many of these highflying technology charts, you can see this pattern emerging in some charts. For example,
traded to 215 this week only to back off to 175 yesterday. Should this stock turn lower from here and leave that spike high behind, I suspect it will begin to look like Copper Mountain did last summer and fall.
But the good news is that Copper Mountain now has a base in place. Oh sure, it's got that resistance in the low to mid-60s but look at all the work it's done recently: lots of backing and filling, getting stronger with higher highs on each rally and higher lows on each setback. I expect this stock will now work its way higher, eating through the resistance with rallies and minor pullbacks, much the same way it's moved up from 40. A breakout from this base at around 65 would give us a calculated target of around 95 (the high of 65 minus the low of 35 equals 30; add 30 to 65 -- the breakout -- and you get 95).
What about the market as a whole? We have not yet reached a maximum oversold reading, and likely will not until after the
meeting. In the meantime, the support levels on the big three averages were confirmed yet again yesterday. And fewer stocks making new lows each time tells us they are acting better when they're down.
Helene Meisler, based in Singapore, writes a technical analysis column on the U.S. equity markets on Tuesdays and Fridays, and updates her charts daily on TheStreet.com. Meisler trained at several Wall Street firms, including Goldman Sachs and Cowen, and has worked with the equity trading department at Cargill. At time of publication, she was long Healtheon/WebMD, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. She appreciates your feedback at
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