Certification And End Of Month

The defensive stocks were flat Friday as the oversold techs and biotechs rallied into the 1:00 pm close. I would imagine no shorts wanted to get surprised going into the weekend with possible Florida soap-opera news. 

We are now 12 weeks into this recent decline which started 9/1, which was the .618 retracement level to 4147 for the Nasdaq 100 (NDX | Quote | Chart | News | PowerRating) vs. the 3/24 4816 high. That is a 36% decline from 4147 and a 45% decline from the 3/24 4816 high. The 2667 low last Wednesday, put it 29% below the 200-day EMA of 3442, which is an extreme oversold condition. There is room for a good oversold rally back to the 50-day EMA of 3205 which is 20% from the 2667 or, if they really get excited, a 25%-30% rally back to the 200-day EMA. As a short-term trader, you just want to board the train when it changes direction long or short. 

The SOX, which topped out before the NDX 100 has declined 56% from its March 14 high and is starting to make some noise that it would lead a move if we get the oversold rally. Just a run back to its 200-day EMA of 887 is a 31% advance. The SOX closed Friday up 8.8%.

The S&P 500 has declined 15.9% from the 1553 March 24 high to the 1306 11/18 low. The index is only 7.6% below its 200-day EMA and has positively diverged from the Nasdaq 100 (NDX | Quote | Chart | News | PowerRating) which is itself undergoing a valuation purge and in many camps is still too high, especially in the chosen ones. 

Whether that takes the NDX down to the 2496 .618 retracement level or beyond, we can't know, but it's not a decision a daytrader has to make. 

Pattern Setups

This morning, I want to give you a wider list of stocks to put on your alert list and we should start with the semis:

(MU | Quote | Chart | News | PowerRating) (which reversed six weeks of highs on Friday), (AMAT | Quote | Chart | News | PowerRating) (which reversed the last ten days highs and closes), (TER | Quote | Chart | News | PowerRating) (which reversed eight weeks of highs and closes and closed above its 20- and 50-day EMA). Also (KLAC | Quote | Chart | News | PowerRating), (TXN | Quote | Chart | News | PowerRating), (AMD | Quote | Chart | News | PowerRating) and (QLGC | Quote | Chart | News | PowerRating) (which is still above all of its 10-, 20-, 50- and 200-day EMAs and should be at the top of your list). 

The SMHs, which made a higher swingpoint low on Friday, closing at 58.49 just below its 200-day EMA of 58.98, is an excellent way, as I have mentioned often, to play the group if you want to make a position play.

From the list of the chosen stocks (and these stocks are all still above their 200-day EMAs or right at it), take a look at (ADBE | Quote | Chart | News | PowerRating) (which is still above its 50- and 200-day EMA), (BRCD | Quote | Chart | News | PowerRating), (CHKP | Quote | Chart | News | PowerRating), (SEBL | Quote | Chart | News | PowerRating), (SANM | Quote | Chart | News | PowerRating), (CIEN | Quote | Chart | News | PowerRating), (VSTR | Quote | Chart | News | PowerRating), (EMC | Quote | Chart | News | PowerRating) and (CMVT | Quote | Chart | News | PowerRating).

Some of the chosen ones searching for a level but are still below their 200-day EMA (but they had narrow-range top-of-the-range closes on Friday and could provide good opportunity today) are (PMCS | Quote | Chart | News | PowerRating), (JDSU | Quote | Chart | News | PowerRating) and (SCMR | Quote | Chart | News | PowerRating).

A conservative way to play a short-term tech rally from a position standpoint would be the XLK SPDR's, which closed at 38.20. They have held a double bottom of 37.06 since 11/13. If we get a move, you have a good risk reward vs. the 37.06 double-bottom stop level.

As I look at the screen, the S&P futures are up 13 and the NDX 100 futures are up 79, so we have a certification bounce in process and also the end-of-the-month action this week so you will have some excellent opportunities.

Have a good trading day.

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