Fallondpicks.com: Weekend commentary

With the 200-day MA fast approaching for the NASDAQ one can expect the bulls to make more of a stand than they did at the end of last week. The NASDAQ 100 was less fortunate as it cut below its 200-day MA and support of the former head-and-shoulder reversal pattern. But even this index is due some relief as slow stochastics entered oversold territory (just as they did in the NASDAQ). The semiconductor index was able to stall right on the 200-day MA and buyers may look to take advantage of this support level on Monday. Where the pain was most felt was in the secondary tech indices [$NASI, $NAA50 and $BPCOMPQ]. All three indicators lost key support, but at least the $NAA50 at 977 is closer to an intermediate term buy zone (650 and below) than its prior overbought 1650 in February. The $NASI at -54.99 and the $BPCOMPQ at 55.60 have room to run to oversold levels in the -950s and 30s respectively.

The biggest hit was taken in the small caps [Russell 2000] as sellers failed to utilize support at the 50-day MA as it had done in the past. Wannabe buyers may let this drift back to the 200-day MA before getting excited (and pump some volume support into the index). Large caps [Dow/S&P] were little better, but at least these indices can still look to support; the 50-day MA in the Dow and the lows of the April bear trap (1,280) in the S&P. Unfortunately the 50-day MA was of little help to the S&P and it could be the same story for the Dow.

Volatility took another step towards January highs as the indicator pushed a counter break of resistance following its fake break of support. Fear is not done yet and volatility can be expected to remain an issue over the coming weeks.

Traders will be looking to short the next bounce, but short term buying opportunities look favored at this time (maybe enough for a week long rally or two). Semiconductor's look best positioned on a risk:reward basis to benefit.

Fallond Newsletter update:

A second day of stop wipeouts has me busy. FDS compounded Thursday's selling with another drop on Friday. The stock hit its raised stop of $42.16 for a 3% loss. The stock featured as a Breakout for March 22nd. HNAB shed 13% on Friday to close below its 50-day MA. The stock hit its March 22nd stop for a 17% loss while the January 24th play closed for a 40% gain. NRG hit its May 8th (corrected) stop for a 4% loss while the March 1st Subscriber play closed for a 10% gain. SWS suffered a third day of heavier selling to hit its April 19th stop. The stock closed Friday below its 50-day MA. The December 19th Subscriber play closed for a 24% gain, while the January 30th Breakout play made a 12% gain and the April 19th play a 4% loss. TROW also finished the week below its 50-day MA. The April 3rd Breakout play closed for a 2% gain. TGB finally hit its raised stop after reporting earnings which failed to live up to the stock price. The stock featured as a Breakout for January 3rd, April 17th and May 9th. Each play closed for a 186% gain, 22% gain and a 14% loss respectively. TSP was a Breakout for February 7th and closed for a 7% loss, while the November 7th Subscriber play closed for a 10% gain. CEGE was a Subscriber pick for February 28th which fell to its stop after 6-weeks of declines (but should find support at the 200-day MA). The play closed for a 7% loss. GORX was a Subscriber pick from May 4th which failed to live up to its billing, it closed for a 8% loss. IONA featured to Subscribers for April 12th. The stock managed to find support at the 20-day MA, but not before hitting its stop for a 2% loss. MRDDF drifted into its stop from its consolidation breakout. The May 2nd Subscriber pick ended the week below the 20-day MA, registering a loss of 13%. NTWK dropped into its April 24th stop for a 12% loss. RADN's volatile action over the last couple of weeks whipped out its April 26th Subscriber play for a 12% loss.

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