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Publisher: Colin Alexander Editor: Ken Wilson (450-691-4617)
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Technically Speaking
The S&P 500 is leading the parade as chart technicals continue to line up properly in a return to bullish stock action, which culminated in an impressive finish on Friday. Despite the critical move lower to 1200 around the middle of the previous week, support triggered by a combination of the approaching 200-day moving average coupled with the lower channel line of the upward moving trend acted as a solid boundary providing the boost required to ensure a healthy bounce. We consider the neckline of this reverse head and shoulders pattern (measured from the beginning of 2005 to early July) to be located at approximately 1220 and since the head bottoms out at 1140, a difference of 80 points, the expectation is that we should see the S&P peaking at 1300 for this rally.
There’s a similar story for Nasdaq here and arguably a stronger case is made for continuation of the bullish rally seen in stocks. For the Nasdaq Composite, the neckline of the reverse head and shoulders is located at 2100 and with the bottom of the head at 1900, there is reason to believe that the index will reach an apex of 2300 over the course of this current rally. Also notable as it pertains to the Nasdaq, is the resurgence of the Nasdaq-100 over the past few months. Over much of the year, the ND-100 performed noticeably weaker than its more widely-representative sibling however the latest retracement just completed in August, demonstrated that the power, at least temporarily, has returned to the larger cap stocks in Nasdaq. The upward moving channel’s bottom boundary has been solid and straight with distinct lows in late April, early July and the most recent in late August.
The Dow Jones has begun shaping up a little better in the past few weeks and indeed the angle of ascent while not nearly as steep as either of the other two, remains steady nonetheless. With Friday’s move higher, there are even indications that the 10,750 level is a possible target in the next few days. While not a new high for 2005, it would remain a key step in the march toward a new high.
New Buy Recommendations:
Qualcomm (QCOM) – The chart for QCOM strongly suggests that we are on the cusp of a near term breakout. While 2005 didn’t start well for QCOM with the large gap lower in January, the subsequent six months was spent consolidating at the lower price level with various tests of support especially in April and early July. A gap higher in mid-July seems to have been the catalyst for further probes higher and Thursday’s move was sufficient to close the gap left open from Jan 19 and essentially now what is left behind is a large six-month island. On the weekly chart, we are looking at a confirmation move this week of a Lindahl buy signal from a few weeks ago.
New Short Sales
None.
Stock Positions to Sell/Exit:
None.
Portfolio Comments:
New stops have been added to the list while others have been modified. Those that have blanks, are being carried unstopped for now. Please see our complete list of stops in the table below.
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.
N.B. There are no longer restrictions on foreign stocks held in Canadian retirement savings accounts.
|
Date of Entry |
Name |
Symbol |
Entry Price |
Current Price |
Stop |
Action Rating |
|
|
Am Sci & Eng Inc |
ASEI |
49.25 |
68.55 |
|
B
|
|
|
Autodesk Inc. |
ADSK |
40.22 |
43.72 |
|
B
|
|
|
Captiva Software |
CPTV |
14.03 |
21.16 |
18.00 |
B |
|
|
Commercial Metal |
CMC |
32.70 |
33.32 |
|
B |
|
05/10/05 |
Humana |
HUM |
36.30 |
50.03 |
40.00 |
B |
|
08/15/05 |
Nvidia |
NVDA |
30.05 |
32.19 |
|
B
|
|
05/10/05 |
Pacificare Health |
PHS |
62.60 |
78.98 |
73.00 |
B |
|
07/25/05 |
Precision Drilling |
PDS |
41.50 |
50.15 |
41.00 |
B |
|
03/08/04 |
Transcanada Corp |
TRP |
21.34 |
28.48 |
25.10 |
B |
|
08/15/05 |
Websidestory |
WSSI |
16.74 |
17.75 |
|
B |
New stops in BOLD
* Stop on a closing basis
** Buy if above entry price
*** Split-adjusted price