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Sector Watch, Tuesday, 04/03/2001

8 support alerts were triggered on Tuesday, mostly in technology sectors. Several non-tech sectors are also getting ready to crack support levels, should the current market trend continue. In order to give bearish traders a better idea of where a short-term rally could occur to, we are lowering resistance levels for all sectors. Lowering support (COMPX, NDX, MSH, XCI, NWX, INX, XBD). Lowering resistance (all sectors).

Broad Market Sym Last Support Posture Resistance Alert
Dow Jones 30 DOW 9,486 9,050 10,100  
S&P 500 SPX 1,106 1,050 1,200  
NASD Comp COMPX 1,673 1,650 1,980
S&P 100 OEX 562 545 610  
Russell 2000 RUT 427 415 460  
NASD 100 NDX 1,399 1,350 1,750
High Tech MSH 474 425 590
Technology Sym Last Support Posture Resistance Alert
Biotech BTK 418 360 500  
Hardware XCI 677 625 805
Software GSO 157 150 195  
Semiconductor SOX 491 475 640
Networking NWX 355 325 495
Internet INX 124 100 170
Finance Sym Last Support Posture Resistance Alert
Banking BIX 622 545 650  
Brokerage XBD 404 375 495
Insurance IUX 716 645 750  
Other Sym Last Support Posture Resistance Alert
Retail RLX 829 770 860  
Drug DRG 369 335 390  
Healthcare HCX 761 700 810  
Airline XAL 134 118 145  
Oil & Gas OIX 299 296 335  

Sector Watch Description

The Sector Watch is a tool that has been designed to give you a snapshot glance of where the major market sector and indices are headed. The goal is for a visual representation within a specific area to help in gauging future movement. The description of each column is as follows.

SYM - This is the symbol that many charting services use for the corresponding sector.

LAST - Last trade value for the corresponding sector at 4:00 EST on the day (upper right corner) of the report.

SUPPORT - A level over the past three weeks where demand has been greater than or equal to supply. If this level were broken it could signal a bearish tone toward the sector/group. When support areas are broken, we then look for what could be the next level of support for that particular sector.

POSTURE - A graphical representation of a particular range that a sector is trading in. Traders should monitor this area against previous reports. Those sectors showing increasing demand should be moving from support to resistance. Conversely, those sectors where supply is greater should be moving down from resistance to support.

RESISTANCE - A level where supply has been greater than or equal to demand. If this level were broken it could signal a bullish tone toward the sector/group. When resistance areas are broken, we then look for what could be the next level of resistance for that particular group.

ALERT - A notification to traders that a previous level of support or resistance was broken and that action may be warranted.

This tool can be useful for bullish and bearish traders. When you've identified a sector that is of interest to you, you can then concentrate on stocks within that sector, thus making for a more focused and alert trader.

We realize that there are different kinds of bullish traders. There are those that like to buy stocks on pullbacks and those that prefer to buy "momentum", stocks that are breaking out of consolidation or to new highs. Whichever strategy you are most comfortable with, the Sector Watch will help you quickly identify the level, within a trading range, where a particular sector is trading.

A bullish trader that prefers to buy "strong stocks" on pullbacks would be most likely to concentrate on a sector they have identified as having a bullish trend, that is currently trading in the lower half of the trading range and closer to a level of support. A bullish trader that prefers to buy "strong stocks" with momentum would focus on those sectors that have been in up-trends, and are trading near key resistance levels, where a significant breakout may occur.

Bearish traders can also benefit from this tool when determining levels at which to sell. There are two types of bearish traders. There are those that attempt to sell rallies and those that sell when a level of support has been broken.

Understanding risk is a concept that many traders and investors have trouble with. Not all sectors consistently move between support and resistance levels. At given times, sectors may tend to stay in the upper half of trading ranges, while others are stuck in a lower range. If you're bullish or bearish on a particular sector, you can use support/resistance levels to help assess and manage risk by implementing the use of stops below/above those levels.


Copyright 2001

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