Stockscom Report for Thursday Aug 2, 2001

Publisher: Colin Alexander     Editor: Ken Wilson (450-691-4617)

Subscriptions and Administration: Pierre Fichaud (866-487-9711)

 Tradable moves on the Nasdaq, Dow

Major Change in Direction This Week

All three major markets have made surprising moves to the upside this week, but more importantly both the Dow and the Nasdaq were able to cross downtrend lines from their May highs and 25-day moving averages. Of these two markets, the Nasdaq demonstrates the greater strength on the basis of an additional trend breaker – it has managed to cross the downtrend line in force since September 2000. At this point in time, this breach is miniscule, but it is important nonetheless.

We now have several indicators pointing to further positive moves on the Nasdaq including W formations not only on the daily price chart but also on daily and weekly stochastics and OBV (On balance volume) complements these with rising W’s again on the daily and weekly charts.

Fundamentally little has changed in the economy. Unemployment reports published today show slowing growth of the weekly unemployment claims, which may be a harbinger of things to come. The monthly report is due out on Friday morning and this should provide an even better indication of the state of employment. In the case of inventories, a new monthly drop means that businesses have been clearing their shelves and eventually inventories will need to be rebuilt, but with business activities being curtailed, this upturn may not occur for awhile.

Also released today were the factory order figures for the month of June. These figures came in below the consensus estimates thus giving credence to the belief that business investment is not picking up.

With an unpredictable and volatile environment such as this, we need to be careful how we play this uptrend in the Nasdaq. We want to ensure that our risk / reward ratio favors those stocks moving up; therefore we buy only those displaying very strong upward chart actions. And we don’t want to risk too much capital so we begin by taking small positions, which can be added to at a later date when there is additional certainty in the market direction. As a reminder, rarely are the leaders of the last market boom the leaders of the next market boom so we can immediately ignore the likes of NT, GLW, and JDSU.

We have several stock selections displaying great chart action and with the additional push provided by a market in motion, these stocks should continue to fare well. They are the following:

TXN

GSB

IDCO

CPWR

QCOM

IFF

SYMC

CAT

TMX

All of these stocks exhibit strong charts and consequently offer a great reward to risk.

In much the same vein, we recommend covering two of our current shorts. These are:

JNPR

MU

These two look susceptible to follow the footsteps of a rising Nasdaq especially Micron which, as part of the chip sector, bathed in today’s positive comments from Merrill Lynch with regards to the chip industry. An upbeat report from Intel also generated enthusiasm for this downtrodden sector.

New Buy Recommendations:

TXN

GSB

IDCO

CPWR

QCOM

IFF

SYMC

CAT

TMX

New Short Sales

None.

Stock Positions to Sell/Exit:

JNPR

MU

List of Current Stock Recommendations:

Action Ratings. The following is the legend for designating immediate action
for our stock recommendations. The first is B, meaning the stock is timely
to buy but the case for doing so right here is not overwhelming. Either the
stock may have gotten ahead of itself and may be vulnerable to a retracement or
else the stock has been performing disappointingly but may simply be
regrouping. B+ and B++ indicate stocks for which there is a technical case
to buy now, with plusses adding weight according to how many there are, up
to a maximum of two. Stocks rated H are ones to hold, awaiting confirmation
to buy more or to sell. SELL, of course, means what it says. It seldom pays
to override this designation. In the case of stocks held short, the rating is S where positions should be retained. S+ and S++ indicate stocks for which there is a technical case to add to the positions with plusses adding weight similar to long positions. The maximum number of plus signs is 2.

Stocks marked # are eligible for Canadian RSP funds. Otherwise there is a
30 percent restriction on foreign stocks held in these accounts.

·       Rolled from the March contract and price adjusted

Short Sales