Dow and Nasdaq ready for technical rebound?

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Nov 11 2007
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Almost every single human being on the trading floor at Wall Street ran helter skelter searching for shelter from the stocks plunge. This time (last Friday) it was Wachovia Corp. and Qualcomm Inc. with their loan losses and weak quarter respectively that continued the previous day’s panic selling started by Cisco System Inc. The selling accelerated in the final minutes of Friday and subsequently Dow Jones sank 223.55 points to 13,042.74 while the Nasdaq Composite dropped by 68.06 points to 2,627.94.

As usual, it doesn’t matter if the stock (in this case Qualcomm) beats Wall Street’s estimate earnings. It’s all about guidance. And when Qualcomm guides financial year-2008 EPS (earnings per share) below consensus – $2.03-2.09 vs. $2.19 consensus, it was punished. Great! If only these investors could maintain the momentum with the current continuous selling program, I believe some of us should start laughing all the way to the bank. Making money would be much easier with such trend by buying Put Option and for investors who’re holding stocks / shares you can sell option contracts which is out of money, wait for the option to expire worthless with Friday expiration around the corner.
Dow Jones 1 year chartNasdaq 1 year chartBut could the 13,000 become a strong support level? From the chart it appears that way and the fact that it’s touching the 50-MA means the DJIA needs to wake up and flex its muscle. As for Nasdaq Composite, technical rebound should happen since 2,600 Babies drying for rate cutlevel is the cushion for the technology stocks. The next support level is within the 2,500 range. Hence the DJIA has little space while Nasdaq has about 127 points for further drop. Below these levels and you might wanna kiss your bull goodbye, medium-term. Nevertheless Uncle Ben might spring some surprises by continue to cut the interest rate in order to soothe the crying babies on the trading floors.

By the way, I had opened new positions on both Tiffany and Co. and Priceline.com Inc. which I short (Put Option) and long (Call Option) respectively last Friday. When market open for Monday trading regional stocks markets such as Hong Kong, Japan and Asia can expect another round of selloff. Going by the current trend 1,400 could perhaps be the most interesting level to watch out for Malaysia stock exchange.

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