Thus far, tech stocks, as measured by the ultra 3X ETF, TYH, are declining within the channel I have been watching for several weeks. The question, which my stock buddy, Judy, raised when I first posted the channel was, will the bottom of the channel hold as it has in the past? No one knows. The key for me is to wait for the reversal, and to then wade in slowly, with stops below the low of the bounce. Meanwhile, the Worden T2108 Indicator is now in neutral territory, at 58%. Only 19% of the NASDAQ 100 stocks have a MACD that is above its signal line, the lowest percentage since last November’s decline. The low in this indicator last November was 9%. The key for me is to remain defensive, and to cut losses before they grow too large.
I thought you might like to see why we may be at the beginning of a short term decline in the tech stocks. TYH is the 3X ultra long tech ETF and it appears to be in a rising channel. TYH recently hit the top of the channel, which has been followed by a decline four times in the recent past. Nevertheless, the tech stocks remain in a longer term up-trend. The question is whether to sell a little now, or just hold on to see if the channel holds. Regardless, it seems to me that this may not be the time to take on new tech positions. Much better to buy closer to the bottom of the channel, if it holds.
But the long term Stage 2 (a la Weinstein, see his book to lower right) up-trend remains intact. Note, however, that the QQQQ does appear to be a little extended on this weekly chart too, having closed at the bottom of its last 5-day range.
Even as AAPL breaks from base. (All charts built using Worden TC2007)
Note on this daily chart that IMAX broke out to an all time high last week (on huge volume). My extraordinary stock picking friend, Judy, has been talking about IMAX since the stock was around $2. She of course bought it way back back then. It takes a while for the rest of us to catch up to Judy. She says the technical innovations in the recent 3D IMAX release, Avatar, is as big as when movies went from black and white to color. So, I own IMAX and am watching the story unfold.
There were 3 new highs and 106 new lows in my universe of 4,000 stocks on Wednesday. The QQQQ completed the 17th day of its short term down-trend. It would have to rise a lot more to begin a new up-trend. Still, I cannot resist buying an occasional strong stock during a counter trend rally. One stock I own a little of is AMZN, a stock championed by Judy.
AMZN had a huge gap up on January 30th when it beat earnings estimates, then consolidated for several weeks. (Looks like a head and shoulders bottom?) Today, AMZN appears to have broken out again. AMZN has a great new product in the Kindle 2 digital reader.