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Sector Watch, Sunday, 06/17/2001

4 support alerts were hit by the decline on Friday. We have also reached that time where we must lower resistance to give traders a better idea of risk/reward. We will not be lowering resistance for RUT and BIX, since those sectors have continued to hold up during last weeks decline. Lowering support (DOW, INX, XBD, RLX). Lowering Resistance (All sectors except RUT and BIX).

Broad Market Sym Last Support Posture Resistance Alert
Dow Jones 30 DOW 10,623 10,500 11,000
S&P 500 SPX 1,214 1,200 1,290  
NASD Comp COMPX 2,028 1,950 2,265  
S&P 100 OEX 626 614 665  
Russell 2000 RUT 495 480 520  
NASD 100 NDX 1,701 1,600 2,000  
High Tech MSH 543 525 620  
Technology Sym Last Support Posture Resistance Alert
Biotech BTK 594 520 675  
Hardware XCI 786 740 910  
Software GSO 208 185 250  
Semiconductor SOX 608 540 700  
Networking NWX 348 338 460  
Internet INX 180 165 230
Finance Sym Last Support Posture Resistance Alert
Banking BIX 635 620 680  
Brokerage XBD 480 455 545
Insurance IUX 768 750 790  
Other Sym Last Support Posture Resistance Alert
Retail RLX 867 845 915
Drug DRG 402 390 415  
Healthcare HCX 828 800 855  
Airline XAL 138 132 154  
Oil & Gas OIX 339 325 355  

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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