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Ask The Trader
Wednesday, December 27, 2000

Let's Review A Recent Play Pick: Take Three

What technical indicators gave you the buy signal on XL Capital?

The old saying of, "The trend is your friend," comes to mind when describing the main reason behind the XL Capital (XL) trade. We first saw that the whole insurance sector was doing well, as indicated by the S&P Insurance Index (IUX.X). We then honed in on the technically strong stocks within the sector. XL rose to the surface because of the great support that the 50-dma had offered since all the way back in July. It was very apparent that buyers were willing to step in and support the stock whenever it retraced back to the 50-dma.

At the time of the pick, we were seeking stability as well as the potential for gains, so the safety net that the 50-dma was offering was very appealing. Also, the risk/reward scenario was in our favor, as measured by the amount we could loose if the stock slipped back to the 50-dma, compared to the potential gains we felt were feasible from the hot insurance stock.

Good Luck and Have a Profitable Trading Day

Craig Seidler
Assistant Editor


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