Microsoft
Corp (NASDAQ: MSFT)
Market Call™ for February 5, 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.
The last 2 days were disappointing for Bulls as we went up to a
previous
resistance in the Dow at 11,000 and could not break through, and the
NASDAQ
rally failed too.
Many stocks have already broken support areas and are on Sell signals.
Some
late Friday breakdowns were quick and nasty.
As always, stops must be in place for all trades.
Support and 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 examine the recent action
in Microsoft, MSFT.
A series of break ups on January 17, 18, and 19 and 24 put MSFT in an
uptrend, defined by breakouts to higher prices.
A long consolidation from January 24 through Friday February 2 had
characteristics of lower highs than the high made on January 29.
The sell off late on January 31 was followed by another attempted
rally
that failed.
We closed Friday right at support at 60 13/16. Any break below 60
3/8, the
low made on the morning of February 1 would be seen as a break down of
support. If MSFT holds here, another attempt to move higher may
occur.
I would play this one by exiting any longs at 60 3/8 and initiating a
Short
below 60 3/8.
If a Short is entered, I would place my stop at 61 7/8.
Do not Short unless MSFT completes the break down.
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.
Copyright �
1998-2000 Tulips and Bears LLC.
All Rights Reserved. Republication of this material,
including posting to message boards or news groups,
without the prior written consent of Tulips and Bears LLC
is strictly prohibited.
Last modified: February 06, 2001
Published By Tulips and Bears
LLC
