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Sector Watch, Sunday, 12/31/2000

Three resistance alerts were triggered on Friday. The RLX closed higher than our 850 alert as did the XAL when it hit our 166 alert. While the HCX hit our resistance alert at 945, it was not able to hold above that level. Raising resistance (RLX, HCX, XAL). Have a Happy New Year!

Broad Market Sym Last Support Posture Resistance Alert
Dow Jones 30 DOW 10,786 10,300 11,000  
S&P 500 SPX 1,320 1,255 1,390  
NASD Comp COMPX 2,470 2,300 3,025  
S&P 100 OEX 686 650 740  
Russell 2000 RUT 483 440 505  
NASD 100 NDX 2,341 2,175 2,790  
High Tech MSH 668 615 750  
Technology Sym Last Support Posture Resistance Alert
Biotech BTK 634 590 710  
Hardware XCI 904 860 1,130  
Software GSO 281 250 330  
Semiconductor SOX 676 530 690  
Networking NWX 730 645 860  
Internet INX 194 170 240  
Finance Sym Last Support Posture Resistance Alert
Banking BIX 646 585 670  
Brokerage XBD 561 500 585  
Insurance IUX 837 760 870  
Other Sym Last Support Posture Resistance Alert
Retail RLX 855 770 885
Drug DRG 447 420 460  
Healthcare HCX 940 875 960
Airline XAL 168 146 172
Oil & Gas OIX 313 284 330  

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.

 


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