color=#008000>Down 50 points, up 50 points. What's 100 points
among friends? And that's just in a day.
That's the sort of volatility
traders have had to contend with lately on the Nasdaq Composite. This is why you
must really wait until the trading session closes before deciding whether the
market is still okay or weakening.Â
Wednesday's strong close on
increased volume continues to suggest the Nasdaq Composite remains on firm
footing. Moreover, a number of leading stocks that had the opportunity to fall
apart at current levels found support and closed higher. For instance, Qualcomm
[QCOM>QCOM] closed up 1 7/8 to 423 1/8 after falling 16 1/4 points to an
intraday low of 405, while Go2Net [GNET>GNET] came rushing back at the close
and S1 Corp [SONE>SONE] continued to push higher on volume from its recent
base breakout.Â
Be that as it may, the broader market was definitely
weak - even on the Nasdaq Composite, which has exuded far better breadth over
the past two months relative to the NYSE Composite. Even Wednesday, 48 points of
the Dow Jones Industrial Average's 65-point gain came from one issue -
Microsoft. Mr. Softee also accounted for 58% of the S&P 500's gain
Wednesday. But, again, the Nasdaq Composite and its growth components have been
the market for most of this year. So it's here where you need to focus your
attention.
Most leading growth stocks are currently very extended in
price. Therefore, low-risk entry points in the growth-stock arena are relatively
nonexistent - at least from an intermediate-term standpoint. So if you're long,
it will pay to be very careful at this point and to watch how the leading stocks
act. Do they resist decline as was the case Wednesday with Qualcomm? And if some
leaders begin to fall hard do other, do newer leading stocks pick up the slack?
That's what's been going on over the past several sessions.
In
Internet-land, some leading issues just finished off perhaps the first breakout
run of an even larger advance ahead. Names like Yahoo! [YHOO>YHOO] and CMGI
[CMGI>CMGI] come to mind. If this is the case, then some corrective action
from here would be normal as part of a new, base-building phase. Bear in mind,
though, a new, technical basing pattern from here will be much shorter in time
than the one it took to set up the recent move higher. On the other hand, a
serious downside price break on heavy volume in the near future would signal the
extent of the whole move is likely over.Â
The whole idea in
following O'Neil's CANSLIM system is to buy stocks at absolutely the right
moment for immediate gain. However, considering the recent advance in the Nasdaq
Composite, identifying stocks that meet our strict buy criteria at this time is
getting much more difficult. So, again, go slow and use
caution.
