Still Waiting

The Nasdaq and S&P 500 had major breakouts yesterday, but the bottoming patterns we pointed out in several leading stocks two weeks ago haven’t led to many breakouts just yet.

The inverse head and shoulders bottoming patterns have led to a few breakouts so far: CMGI and Network Appliance broke out a couple of weeks ago, and Netegrity broke out yesterday.

Netegrity cleared 40 resistance in style yesterday, and has long-term upside potential to 60-65, based on the size of that pattern (see chart below). The 40 level should now be support.

CMGI has been acting very nicely since its breakout, surprisingly so. The stock retraced to fill a gap at 4, and then turned higher. A move above 6.50 would give the stock a higher high, and 4 should now be support.

Network Appliance continues to struggle around the 23.50 breakout level, however. Support can be found at 23.50 and then again in the 21-22 area, and the stock’s run topped out at 29.50 recently. It has long-term upside potential to 35.

A word about timeframes and these chart patterns. Dow component United Technologies, this week’s Company of the Week, broke out of an inverse head and shoulders bottom last fall and took seven months to reach its objective of 85-87. These patterns take time to form, and they take time to fulfill their promise too.

Among the patterns we noted two weeks ago, we are still waiting for breakouts on Juniper Networks (first chart, must close above 67 to break out); Ciena (second chart, must close above 63 to break out), and Microsoft (third chart, must close above 73). And Check Point failed , having broken too far below the right shoulder it had formed previously (fourth chart). The stock did manage to clear 60 resistance yesterday, however.