[Last night in the report we commented about when we would look at buying semiconductors in general, i.e., when their charts improved. This question followed today.] What would the charts show to reveal a true buy signal? Aren't most chip stocks slightly above the April lows? What do you look for? Are you expecting more downside? (July 17, 2001)
We would look for signs of more accumulation and not the back and forth, volatile action we are seeing. The stocks are totally news driven right now, and they are bought and sold day to day on high volume depending upon whether the news is favorable or not. We would look for more classic bases such as a double bottom or double bottom with handle. These occur in choppier markets, but they have a purpose: they weed out those that are not committed to the stock. Then they calm down a bit on low volume forming a handle (not in all cases), and then they breakout on strong volume as buyers want the stock and the only holders left want more money for it. Many of the chips are not there yet, though we did like the ALTR move out of its trading range last week. It is still way down at the bottom of its base, but that showed a higher volume move over resistance at the top of a 9-month flat trading range. It jumped over the 200 day MVA, has tested that gap higher and today moved up on stronger volume. That is more of a trend reversal gap, and something we will also play outside of a straight double bottom or cup with handle. ALTR looks pretty good, but it too is subject to news at this point.
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