Priceline Sends Internet Stocks Lower

An earnings warning from Pricline.com sent Internet and technology stocks lower on Wednesday, but the Dow and S&P 500 finished unchanged.

The ISDEX fell 28 to 750, but off its low of 737, and the Nasdaq lost 32 to 3656. The S&P 500 slipped half a point to 1426, and the Dow was down 2 to 10,628. Volume rose to 1.17 billion shares on the NYSE and 1.94 billion on the Nasdaq. Advancers led 14 to 13 on the NYSE, but decliners led 24 to 15 on the Nasdaq. For earnings reports, visit our earnings calendar and reported earnings. For after hours quotes and news, visit our new after hours trading site.

Priceline fell 7 7/8 to 10 3/4 after warning that third-quarter revenues will be $340-$345 million; analysts expected $360-$380 million. The company cited a shortfall in revenue from the sale of airline tickets. Cheap Tickets fell 1 1/16 to 9 1/2 in sympathy. A technical comment and chart on Priceline: When Priceline was at $25, we said it looked like there could be further downside ahead, and here’s why: the stock broke a descending triangle, a flat-bottomed pattern with a descending upper boundary, at $32 back in July. As the size of the pattern was 18 points from peak (50) to trough (32), that gave the stock downside potential to $14, or 18 points below the break.

Yahoo dropped 11 13/16 to 90 5/8, breaking important support at 99 1/2-99 3/4, the May and August bottoms. eBay lost 7 1/16 to 63 5/8.

Amazon.com fell 2 3/16 to 37 9/16. The Washington Post ran a front-page story accusing the company of using dynamic pricing, charging some users more than others based on ability to pay.

Bellwether Cisco Systems recovered 1 13/16 to 57 on a better-than-expected loss from 3Com .

TIBCO Software rose 4 1/4 to 89 1/4 after reporting earnings of 7 cents a share, 2 cents above estimates.

VerticalNet gained 2 7/8 to 33 1/8 on a Lehman Brothers Buy rating. However, Robinson Humphrey downgraded the stock to Outperform based on an email survey that found a large percentage of storefronts are undecided about whether to renew.

Commerce One gained 1 3/8 to 76 1/2 on news of an expanded partnership with Microsoft .

GoAmerica gained 1/16 to 8 1/4 on a partnership with Sierra Wireless to provide wireless data and Internet access for the Handspring Visor handheld computer.

ScreamingMedia.com gained 1 1/8 to 9 3/4 on a partnership with BroadVision .

FreeMarkets dropped 6 1/4 to 64 after trading as high as 74 3/8 on comments from Merrill Lynch that the company could beat revenue estimates by 15-20%.

Some technical comments on the market: Note: We will now be including charts with the technical market commentary; just click on the links in the story below to go to them. If you have trouble accessing the charts via the email newsletter version, try this link: http://www.afterhourstrading.com/column.html

Surprisingly, we had signs of a potential bottom today. First, the put/call ratio spiked up to .95 around 10:30-11 a.m., above the important .90 level, settling back to .62 by the close. It wasn’t accompanied by a huge spike in the volatility index (VIX), however, but it was nice to see some fear enter the market. Second, the Dow and S&P 500 formed classic dojis – rising and falling only to finish unchanged – a sign of

a possible change in direction. Given that the major indexes all held important support levels today, it’s a sign that the bulls could be ready to regain control of this market.

The Nasdaq held support at its October 1998 trendline around 3600. Lower than 3600, and that trendline would be broken for the first time since the May lows. Below that, critical support is the August bottom of 3521; lower than that, and the market could be headed for trouble. To the upside, resistance can be found about every 50 points starting with 3700. The first major Fibonacci test comes at 3859, the 38% retracement level of the 4259-3614 decline. One other sign that at least a short-term bottom could be established here is that the stochastics have reached very oversold levels on the Nasdaq. None of this means the market still can’t go lower, but if the bulls are going to pull this one out, they have enough here to do it.

The S&P 500 found support at its critical support level at 1420 (the black line. Also in the S&P chart, note the gray line, which is the broken October 1998 trendline; and the broken rising wedge, or a rally with converging boundary lines, that began the decline). 1420, where the S&P turned up last week and today, is on a line with the March (1340) and April (1361) bottoms. To the upside, major resistance can be found in the 1435-1440 area and then 1460.

The Dow also held critical support, the October 1998 trendline. That line is just under 10,600 now, so a move below last week’s low of 10,575 would be a big negative; the Dow turned up at 10,579 today. To the upside, if the Dow can clear 10,900, the old economy stocks could have room to run. The ISDEX broke 750-760 support today, but the selling stopped at 737, above the May uptrend line at about 725. To the upside, first resistance on the ISDEX is here, in the 750-760 range, then 787-800. Above that, two recent rallies have peaked around the 50% retracement level at 850.

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