Internet and technology shares took a breather Wednesday morning after a strong recent run-up.
The ISDEX was down 11 to 766 and the Nasdaq fell 2 to 4011. The S&P 500 declined 3 to 1472, but the beleaguered Dow gained 20 to 10,455 after testing 10,400. Volume was 460 million on the NYSE, in line with Tuesday’s 1 billion-share pace, but volume declined on the Nasdaq to 700 million shares. Declining issues led 15 to 10 on the Big Board and 19 to 15 on the Nasdaq. Traders shook off negative earnings news from Oracle
and Intel
, but the big news of the day is likely to be the outcome of the OPEC meeting.
Shares of Yahoo! fell 4 3/4 to 143 1/4 after Lehman Brothers initiated coverage of Yahoo and the Internet media group with a Neutral rating. The stock turned back yesterday at the key resistance level of 150.
Akamai soared 16 13/32 to 110 13/32 after Chase H&Q analyst David Levy initiated coverage with a Buy rating and a price target of 175-180.
One positive aspect of Oracle’s earnings report was that it revealed strength in business-to-business e-commerce solutions. Ariba gained 3 13/16 to 93 13/16, extending its gains after clearing a two-month base yesterday. Based on the size of Ariba’s rectangle pattern (49 to 83), the stock could potentially go as high as 117. Shares of PurchasePro
gained 2 1/4 to 38 3/4.
Shares of Commerce One , up 1 5/8 to 44 5/8, and AppNet
, up 1 3/16 to 34 1/2, recovered a day after announcing merger plans, hoping to speed the development of B2B exchanges.
Shares of OnDisplay declined 1/4 to 72. The stock broke out of an ascending triangle at 68 yesterday, a classic bottoming pattern. Shares of AOL
declined 5/8 to 57 1/4 a day after breaking its downtrend on high volume. Shareholders are expected to vote on the company’s merger with Time Warner
on Friday.
Red Hat extended its gains, up 3 7/16 to 33 5/8, a day after news that Dell
announced that it will expand customer support for Linux software, putting it on a par with Dell’s support for Microsoft Windows.
Inktomi gained 2 13/16 to 148 1/16, a day after rising 5 3/4 on positive comments from Merrill Lynch. The company expects 30% sequential growth for the next two to four quarters.
Exodus Communications gave back 3 to 51 3/8 after splitting its shares 2-for-1. The company also filed with the SEC to sell up to $2 billion in new debt and equity securities in one or more public offerings over the next two years.
Virata Corp gained 4 7/8 to 54 7/8 after pre-announcing first quarter revenues of $25-27 million, a 115% increase from the prior quarter. The company also announced a proposed offering of 4 million shares and the acquisition of Excess Bandwidth Corp. for $315 million in stock.
Fiber optics stocks resumed their leadership. Corning gained 2 3/16 to 245 1/2, SDL Inc.
gained 6 1/4 to 301 13/16, and Osicom
added 10 11/16 to 78.
Some technical comments on the market: Nice chart patterns on the Nasdaq and ISDEX, a neutral one on the S&P 500, and a downright ugly one on the Dow: the new-old dichotomy is back. That’s not good for two reasons: healthy markets move in sync, and we all know how the dichotomy ended the first time. That said, the Nasdaq’s resilience in the face of bad news is a plus. We’re just under the 50% retracement level at 4087; a break of that would tip the equilibrium to the upside. We turned back at 4050 yesterday and 4040 today. On the downside, we want to stay above 3900 (3893), which would constitute a retr
acement tothe upper boundary of the consolidation range, a not uncommon occurrence. A move below that would give us a false breakout. Again, breadth needs to improve to make this advance sustainable. The ISDEX could be forming a cup-and-handle, and is just below major resistance at 800. A break of that level would be a real plus for Net stocks. Again, the two most important numbers to watch are 1480 on the S&P 500 and 10,375 on the Dow: the upper and lower boundaries, respectively, of their bearish diamond patterns. A clean break of either number should tell us a lot about the market’s direction. On the S&P, a close above 1507, the 78.6% retracement level, would be a real plus; the index’s recent rallies have all ended when the futures reached the 1508 level. A break of the Dow’s lower diamond boundary would set up a test of the base of its bearish descending triangle in the 10,200-10,300 range. A break of 10,200 would probably send us to about 9,500 on the Dow (the move predicted by the descending triangle), although a break of the diamond pattern would predict an ultimate downside of 8,400 or lower. A break of 10,775 to the upside would be bullish.
