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ARCHIVE:    JUNE 1999-JULY 2000  

An InvestorLinks article
distributed every market day.

Ariba Inc  (NASDAQ: ARBA)
Market Call™ for July 5, 2000
Contributed by Mark Seleznov, TrendTrader.com.

The purpose of this Market Call section is to educate readers in technical analysis patterns and indicators. As with all investment information, you need to research information and consult your financial advisor before initiating any strategies that are contained in Market Call.

Also, you must realize that as with all trading strategies, opinions can change quickly depending on market conditions and developments.

This column tries to present historical examples, potential set ups, and examples of entry and exit strategies.

Regardless of the direction of the general market, some stocks will move in the other direction. The market is in a sideways pattern, however we see some stocks breaking up while others are breaking down.

I do not like to play a hero picking bottoms, but rather wait for a turn. We are seeing some stocks turn, while others continue to falter.

The breakout may be to new 52 week highs, new monthly highs or any time frame that shows a continuation of a stocks current trend.

Support, Resistance and Breakouts

Think of security prices as a war. It is a battle between a bull (the buyer) and a bear (the seller). The bulls push prices higher and the bears push prices lower. A buyer that feels an area has good value, will buy at that level. The seller that feels that a stock has reached fair value, will sell at that higher fair value price. The direction prices actually move reveals who has won the battle.

Remember when a trade takes place, a buyer and seller agreed to a price. There was a buyer and a seller involved in the transaction. The buyer feels the stock will go up. The seller wants to move on to another stock that he may feel will appreciate faster.

Support levels are the price where the majority of traders feel the value is a good buy.

Resistance is the level in which the majority of traders feel prices will move lower.

When the majority of traders and investors change their expectations, these support and resistance areas get violated and a new trend may be beginning. This can occur due to changes in expectation of earnings, new product development, change of personnel, cut backs or expansions.

One interesting pattern that traders see after a breakout, is that the stock or index retraces a part of the initial move by about 50%. If the 50% retracement does not hold, the stock or index can still be in a trend if the previous breakout resistance holds.

Let's look at Ariba Inc. (NASDAQ: ARBA).

In this example, here is a stock that is making new 3 month highs. ARBA was a real momentum stock in 1999. After falling from its March high of 198, ARBA dropped to 50.

Since the May 24 NASDAQ lows, ARBA has been recovering nicely. Most recently, ARBA showed a June 21 high of 99 �.

ARBA looks poised to once again break to new 3 month highs now.

If ARBA opens up or unchanged, I would Buy ARBA here. I would place a stop at 96.

The expectation is a break to new highs and run again from here.

If the stock opens down, do NOT take the trade.

Chart courtesy of
 


Interested in adding Market Call to your website?
Click here for details: Market Call Information

Mark A. Seleznov is a General Securities Principal and Managing Partner of Trend Trader, LLC, a NASD, SIPC broker/dealer firm located in Scottsdale, Arizona. A professional trader for over 25 years, Mark was a Market Maker on the Philadelphia Stock Exchange, a Retail Registered Representative, and futures trader. Mark is an author and recognized expert in equity Day Trading. He conducts seminars in Equity Day Trading and offers his firm traders training and support. If his firm holds any positions in the public companies he writes about, it will be noted at the bottom of his article.

Market Calls is a daily syndicated column on trading by Mark A. Seleznov, Managing Partner of Trend Trader, LLC. For information on obtaining Market Calls for your web site, newspapers, or publication, contact
Trend Trader, LLC at 602-948-1146

Disclaimer: Trading in securities may not be suitable for all individuals. Consult your broker or other professional to determine your suitability. This is not an offer to buy or sell securities. The advice given above is of a general nature and should not be taken as a recommendation to buy or sell the referenced security.

 
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Last modified: March 17, 2001

Published By Tulips and Bears LLC