Nuance
Communications (NASDAQ: NUAN)
Market Call™ for January 31, 2001
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.
Combining Our Indicators For
Confirmation
Two of my favorite trading indicators are Moving Average Crossovers and
MACD. When these two indicators are in sync, trading signals tend to be
more reliable.
I also use and watch channel breakouts of support and resistance.
As always, we need to manage risk and use stops.
Even with the large drop in Nuance Communications on Tuesday, I feel there
is still room for this stock to fall even lower. The 5 period moving
average crossed over the 20 period moving average early in the morning and
began to space apart from it as the stock started dropping more rapidly
later in the day. The MACD was trending positively toward the 0 line
yesterday, but quickly turned back to a downtrend with today’s price
movement. There also appears to be a breakdown through support when the
stock traded through 43.
Moving Averages and Moving Average
Crossovers
The moving average crossover method calculates two moving averages, each
based on a different number of periods of trading data. When the
shorter-term (fewer period) average crosses above the longer-term average
from below, this is a buy signal. When the shorter-term average crosses
below the longer-term average from above, this is a sell signal.
Moving averages are used to smooth prices, dampening the distractions of
short price movement so that the underlying trend is clearer. Moving
averages always lag the market and, therefore, will never buy market bottoms
or sell market tops. Like any other trend-following system, the moving
average crossover will perform best when markets are trending because it
automatically places the trader on the right side of every extended move.
When markets are moving sideways, however, the lack of extended moves will
cause losses.
I would be looking to short NUAN at about 41 � and keeping a buy stop of 2
points at 43 �.
Please keep in mind that there is a Fed meeting on Wednesday. I will not
speculate to the outcome of this meeting. A 50 basis drop in rates is
expected. Anything else, and all bets are off. Be sure to have your stop
orders in place and to keep close attention to Wednesday’s Fed
announcements.
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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: February 01, 2001
Published By Tulips and Bears
LLC
