Nasdaq 200 day Precedence:
This happens to be my second technology report this week, which I have not done in sometime, but I felt it was appropriate given the nice comeback we have seen from the major averages. And when that occurs, risk appetite returns and money will flow into technology. I was impressed last week with the action in The Russell 2000 which rose more than 4%, as it is often viewed as a leading indicator. Wednesday was a solid session post election, with a nice follow through session to recapture its 200 day SMA (I prefer moves on just generic buying however, not news related events). Thursday was a bit indecisive for me, as we can see on the chart below that the Nasdaq recouped its 200 day SMA on 10/16 up 2.9%, only to fall back below 2 sessions later. A definitive break below that line for a second time in less than a month to me would troubling. The tech heavy benchmark has run top to bottom more than 600 handles since the lows on 10/29, and I will continue to suggest that the type of volatile action we have seen as of late is indicative of topping action. But my opinion is extremely inferior to actual PRICE action.
Electronic Equipment and Component Group:
We have mentioned many times that the subsectors within technology that we like to focus on include semiconductors and software names. Often overlooked are the hardware and electronic components space, and that could create opportunity. Of course there are laggard plays like a SONO which should have probably never come public. It is only trading 13 weeks now, and in all truthfulness was a tough time to be brought to market, but it now trades more than 40% off most recent highs (up 5.9% this week will most likely give it its first back to back weekly gains). On the bright side there has been M&A activity with ESIO being swallowed by MKSI, ZBRA sitting just off all time highs, NATI battling with the very round 50 number, and the small cap play AMSC being pulled almost magnetically to the very round 10 number, a figure it has not been in contact with for more than 2 years. Below is the chart of yet another positive story from the space ITGR.
Examples:
Software leaders until recently were pretty abundant. Firm and broad leadership, or too much of a good thing? Below is the chart of ZS, a name that is doing decent chart repair, and how it was looked at in this Mondays Technology Report. It is a somewhat recent IPO, which can have these types of plays flying under the radar, coming public in March of this year. The chart had the look of a 4 month bearish head and shoulders formation with a neckline near 34, and a break below that level would have had a measured move to the very round 20 figure. That obviously never happened, and a great example of the importance of PRICE confirmation. It is now back above its 50 day SMA and now has to stay above that line for a few sessions before it can hone in on the add on above the 48.34 cup base pivot. Remember the best stocks always will provide additional entries to the UPSIDE. The stock is on a current 9 day winning streak.