I never thought I'd be writing five days a week, but here I am. Given that, two thoughts run through my mind:
"Gosh, I hope I can make this column interesting."
"A chart guy writing five days a week? Yep, that surely marks a market top."
Well, I can't do anything about the second one, except maybe warn you if things start to look shaky. As for the first, let me unveil my Big Strategy for Fridays:
I'll break this column into two parts. The first will be either some important charts in the news or specific charts I think you should think about. The second part will be along the lines of the weekend forums, where I'll field your questions, whether about charts or TA in general.
So, as always, questions and comments go to
email@example.com. I only ask that you attach your real name so I don't have to address you as TuffGuy1931jky@aol.com.
And with that, on with the show.
Bond, James Bond Battle
Who was right,
James "Bond" Cramer or
James "Bond" Padinha?
Boy, did you catch that grousing between the Honorable JJC and Jimmy P? CAT FIGHT! Ah, if only they had asked the all-knowing, all-seeing scribe with the answers. Unfortunately,
was not available. However, your humble servant is, and herewith a chart of that nasty 30-year bond.
As you can see, bonds had two major breakout points, both of which were good warning signs that yields would continue to rise.
So the chart supported Jimmy P. all along, making any kind of long position low odds. However, there was one point in the chart where everything could have gone JJC's way: If that support (oddly enough, labeled "support" on the chart) had been broken to the downside, Jimmy P. would have been dining on fedora stew.
Given all this, I'd have been short the bond after either breakout, with a stop below resistance (which then becomes support). If you're bullish, though, the other way to play it is to wait and go long if bonds break support on the downside. Less reward, of course, but also less risk. Anyway, it's all hindsight, something we technicians excel at.
Strong Stocks + Weak Markets = Opportunity
Flipping through my index of Internet stocks this past Sunday, I came to the conclusion that the Net was weak, if not dead. (See my next item.) That's why
caught my eye: a stock that hadn't been trending down, but instead had gone sideways. Given the nasty shocks that tech had endured last week, this was a bullish chart.
So bullish, in fact, that I wrote a note Sunday evening that said: "Put in buy stop for CUST at 43 1/8." It was at that price I had eyeballed the resistance line, and given the strength the stock was showing, I figured if it could take out the 43 mark, it would really fly.
In the snakebit department, though, I wrote the note in my Friday page, and by the time Monday rolled around -- with a clean, fresh "Monday" page -- I had completely forgotten about CUST. And, trust me, when that happens, those mental error stocks
work out. Blame it on Murphy, I guess.
Anyway, look at the CUST chart. An easy 6 to 8 points. Rats.
Was April the Top?
One of the advantages of keeping charts on your hard drive is the ability to quickly page through and get a feel for how the overall market is acting. By cramming your brain full with a lot of charts in a small time period, the salient points start to stick out. As I mentioned in the previous item, it was while doing this I had the realization that the top, at least for the Internet stocks, may have come in April. Just look at these six charts and see if you notice the similarity.
I picked these six charts because they clearly make my case. But this pattern is virtually identical with nearly every Internet stock, save the few exceptions like the aforementioned CustomTracks. Look at your own favorites and see if the pattern is the same.
But what do you do with this information? Nothing for now, except use it as a caution sign. One or two charts, I can understand. When identical patterns form in many charts, though, something's going on.
Charts in the News
Finally, from our readers, these requests, both of which are in the news.
requested a look at
, which has just announced an increased discounting schedule.
, a timely request for
, which is jumping into the Internet arena by
buying online drugstore
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication he had no positions in the stocks mentioned, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith also writes Technician's Take, which appears every Monday, Charted Territory, which runs Wednesdays, and TSC Technical Forum, which appears Saturdays and Sundays. While he cannot provide investment advice or recommendations, he welcomes your feedback at