Ask The Trader
Wednesday, March 07, 2001
Play-By-Play On Two Split Candidates
In looking at your Split Candidates Index, I happened across Sungard. What do you think of its chart?
Sungard Data Systems (NASDAQ:SDS) has indeed been a bright spot within the stormy NASDAQ. The provider of IT systems to the financial community has seen its stock appreciate 88% over the past year and 23% since the beginning of 2001.
What I like most about the chart on SDS is the fact that although the stock sold off after its new highs in February, it did so on light volume and bounced right off its breakout pivot point. This tells me that investors were confident in the previous breakout. In fact, in a further show of strength, the stock has embarked on another attempt at a new high since the bounce off support.
May I get your opinion on ICOS? I noticed it was just added to your Split Candidates list and I am looking for a biotech play.
Like most biotech issues, ICOS Corporation (NASDAQ:ICOS) has proven to be volatile. Looking past its volatility, however, we can see that ICOS has also carved out a nice looking inverse head and shoulders formation.
The head and shoulders formation in ICOS was exactly what we like to see in this type of reversal pattern minus one key element. Notice how volume accelerated on the move higher from the head in late December but dried up on the breakout move on 1/24/01. If anything, we would want to see volume greater on the breakout move. This is probably why the stock stalled after the breakout and hugged its neckline for one month before making another move higher.
Due to the lack of conviction on the breakout, I would say ICOS is vulnerable to a sell off. However, the next lower- risk buy point may present itself if the stock can build a base around its current level followed by a break and close above $55 on volume of at least 800,000 shares traded. Therefore, although the chart is basically encouraging, I would be patient with ICOS and let the stock prove its strength before pulling the trigger on this biotech play.
Good Luck and Have a Profitable Trading Day
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