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Bedford Option Review - Recent Sample Issue

Bedford Option Review

March 29, 2004
Volume 108, Issue 20

Support Levels Resistance Levels

Close S1 S2 S3 R1 R2 R3

DOW 10212.97 10170.60 10110.20 9909.20 10289.70 10365.20 10414.20

OEX 543.52 542.20 539.40 528.10 546.10 552.90 559.10

SPX 1108.06 1105.60 1101.60 1089.30 1113.20 1126.10 1135.20

OTC 1960.02 1945.90 1927.90 1896.70 1979.20 1990.10 2014.60

We thought that bulls might get to the SPX 1,118 level Friday. As it turns the high for the session was just 1,115.30. Of course all of this occurred before the market went on to close very near the worse levels of the session. The losses were modest in the grand scheme of things -- after all, stocks had rallied better than 17 SPX points Thursday -- but the weakness still leaves a negative impression going into trade today. We have been looking for a good technical rally. On the charts there was resistance at both the 20 and 50-day moving averages. For today these averages are at 1,117.84 and 1,121.94 respectively. Although we are not the types to use indicators, both the Stochastic and MACD indicators are just now turning higher so bulls do have some room to move higher in the short-term but given the relatively weak volume off the recent lows, there is going to be plenty of nervous selling near the overhead moving averages. For bulls the good news is that we are now entering earnings season and there have been very few warnings of note. This should mean that bulls might get a boost from earnings. In the short-term we will watch the SPX 1,105 and 1,101 support levels.

Friday in this section we wrote about a variety of resistance levels assumed to be in-play for that session. The only one that really came into play was the 38.20 percent retracement level of the recent decline from SPX 1,163 to 1,087. The good news is that the market did not lose the 50-hour moving average at 1,106.40. We are looking for a pullback to that level early today. Indeed, we would not be terribly surprised if bulls did not return in large numbers until the 1,105 level was reached. If bulls lose that level the last line of defense is the breakout level from early last week at 1,102.
Portfolios

Stop and Pop

The Stop and Pop portfolio is a mixture of our best bullish continuation patterns. Stocks are selected from a variety of bull flags, pennants, symmetrical and ascending triangles. New positions are added when the pivot level is triggered and removed when the stop level is hit.

Symbol Name Pattern Price Pivot Stop %

HAL Halliburton Bull Flag 28.96 26.53 24 9.18%

SHRP Sharper Image Bull Flag 33.16 35.10 30.80 (5.53%)

KO Coca Cola Bull Flag 48.78 50.90 47 -

LEND Accredited Home Symmetrical Triangle 36.04 36.70 33 (4.17%)

Bottoms' Up

The Bottom's Up portfolio is designed to capture stocks emerging from key reversal patterns such as the double bottom, head and shoulders bottom and longer-term flat base. New positions are added when the pivot level is triggered and removed when the stop level is hit.

Symbol Name Pattern Price Pivot Stop %

T
AT&T Corp. Double Bottom 19.99 20.45 17 (2.25%)

AVP Avon Products Double Bottom 74.74 64.30 61 -

MYG Maytag Double Bottom 29.77 27.90 25.10 6.70%

JBL Jabil Circuits Double Bottom 28.80 27.60 25 4.35%

FDX Fedex Corp. HS Bottom 72.79 68.35 66 6.50%

KLAC KLA Tencor Double Bottom 51.01 50.40 47 1.21%

CTXS Citrix Systems Double Bottom 22.40 21.30 20.10 -

Action Heroes

The action Heroes portfolio is our most volatile portfolio and strives to identify stocks with dramatic changes in trend amid a surge in volume.  New positions are added when the pivot level is triggered and removed when the stop level is hit.

Symbol Name Pattern Price Pivot Stop %

LC Liberty Corp. Ascending Triangle 45.95 47 44.10 (2.23%)

APOL
Apollo Group Bull Flag 87.07 69.90 67.20 24.56%

Q
Quest Double Bottom 4.31 3.95 3.40 9.11%

GTW
Gateway Double Bottom 5.26 4.79 3.90 9.81%

PBI
Pitney Bowes Bull Flag 41.21 41.30 39 (0.21%)

CVX
ChevronTexaco Ascending Triangle 85.28 89 84 (4.18%)

AAPL
Apple Computer Symmetrical Triangle 27.35 24.30 21.20 12.55%

NOC
Northrop Grumman Cup with Handle 96.99 97.70 94.10 (0.73%)

MMM
3M Corp. Symmetrical Triangle 79.98 79.20 76.10 0.98%

ERTS
Electronic Arts Symmetrical Triangle 52.21 48.50 46 7.65%

WOR
Worthington Cup with Handle 18.65 17.70 16 -

YHOO
Yahoo! Symmetrical Triangle 46.92 45.10 43.10 4.04%

C
Citigroup Ascending Triangle 49.93 51.10 48.30 (2.29%)

NSM
National Semicond. Ascending Triangle 42.65 42.60 41 -

SYMC
Symantec Symmetrical Triangle 46.91 46.30 43 1.32%

Six Months in a Leaky Boat

The Six Months in a Leaky Boat portfolio looks for stocks falling out of massive top patterns such as weekly head and shoulders tops, rounding and double tops. In this case, sinking is a good thing.

Symbol Name Pattern Price Pivot Stop %

QLGC QLogic Descending Triangle 42.05 42.70 45 1.52%

PCAR PACCAR Symmetrical Triangle 54.59 53 56 (3.00%)

SEBL Siebel Systems HS Top 11.59 12 13.30 3.42%

DCN Dana Corp. HS Top 18.61 20.10 22 7.41%

NWL Newell Corp. Double Top 23.20 23.60 27 1.69%

BR Burlington Res. Double Top 60.85 60.30 63.60 (0.91%)

RIG TransOcean HS Top 28.15 29 31.60 2.93%

APA Apache Corp. Double Top 41.53 40.10 41 -

OXY Occidental Pete. Double Top 43.50 43 46 -

WFMI Whole Foods Double Top 74.66 73 77 -

Say It Ain't So

Occasionally stocks become over-owned and over loved. In such cases declines come from the most unlikely of circumstances. The Say It Ain't So portfolio looks for stocks rising to relative new highs on shrinking volume. Rising wedges, small double tops and island reversal are common here.

Symbol Name Pattern Price Pivot Stop %

WHR Whirlpool Bear Flag 68.12 71.50 72.90 -

NE Noble Drilling Bear Flag 37.71 39 41.90 3.31%

Featured Stocks

We're going to keep a relatively low profile today as we try to assess just how strong is the conviction in the bull camp. We are looking to add one new put position for Whole Foods (WFMI) if the stock continues lower.

Whole Foods WFMI) is building a huge top. The technical pattern is the dreaded head and shoulders top formation. We want to sell weakness through the 73 level only. A decline to that level would be a solid break of the 50-day moving average.

Open Option Positions

We had a pretty uneventful week, last week. We are still holding MMM. Maintain parameters.

Position Entry Current Target Stop +/(-)

10 MMM APR 80C 1.80 1.50 3.00 1.00 (300)

* reflects closing transaction Open Profits (300)

(s) reflects a short sale

TOTAL PROFITS THIS WEEK $0

The above mentioned recommendations are deemed accurate they are not guaranteed nor can it be said that these strategies or recommendations will result in a profit. The Principals of the New Daytrader and the Bedford Option Review may have or may in the future have positions in the securities mentioned above. Past performance is not necessarily indicative of future results. Before trading options you should understand the risks including the fact that when an option is purchased the entire premium is at risk. In addition, anytime an option is purchased or sold, transaction costs including brokerage fees are at risk. No representation is made that any account is likely to achieve profits or losses similar to those shown, or in any amount. Any account may experience different results depending on factors such as timing of trades and account size. Bedford & Associates does not offer refunds for subscriptions in whole or in part.
Copyright © 2004 Bedford & Associates Research Group

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