Acampora Goes CheckFree

05/02/2003 12:00 am EST


Ralph Acampora

Director of Technical Studies, New York Institute of Finance

Few financial individuals carry the clout of Ralph Acampora, managing director, who has served as Prudential Securities' director of technical analysis since July 1990. He is a widely recognized industry leader in the field of technical market analysis who recently authored his first book, The Fourth Mega Market: Now Through 2011. Here he discusses his bullish market outlook as well as some favorite stocks.

Ralph Acampora of Prudential Securities, says, "We are releasing a major work entitled: Dow 10,000—The Making of a Cyclical Bull Market . The uptrend that developed appears to be in effect.  We expect all of the European market indexes to move higher and eventually retest their overhead resistance levels which were created several months ago. This action is in line with what we expect in the States. Since March when the ‘war rally’ began, large cap stocks, especially growth, began to outperform. If our cyclical bull thesis is correct, then we can expect further upside follow through in large cap stocks.

The basis for our optimism is rooted in the belief that many individual stocks are building impressive base formations. Normally a base takes three to six months but now we see them at least ten months in duration. The bigger the base, the higher the upside space tends to be. The bottom-up approach is what fascinates us most about this market environment. Here are a few names we list in our report: Amdocs (DOX NYSE),   FedEx Corp. (FDX NYSE),  Lexmark Int’l (LXK NYSE),  Pulte Homes (PHM  NYSE),  SLM Corp. (SLM NYSE), rated Hold, Toro (TTC NYSE), and WCI Communications (WCI NYSE), a large cap technology stock that has recently been a standout. We continue to be impressed with a growing list of names that either appear to be establishing or completing respectable base patterns. Names that we favor include Countrywide Financial (CFC NYSE), E-bay Inc. (EBAY NASDAQ), Micromuse (MUSE NASDAQ),  Zimmer Holdings (ZMH NYSE), and Sierra Health Services (SIE NYSE).

"In addition, we screen the Prudential Securities research universe based on the three different research disciplines used by the department— technical, quantitative, and fundamental. Those ideas we call ‘Thrice-Blessed’ are those that are favored by all three of the Prudential Securities research disciplines—fundamental, quantitative, and technical. We have chosen a name from our Thrice-Blessed list as an example of the market environment as we see it from a technical standpoint. Checkfree Corp. (CKFR NASDAQ), rated Buy, is an example of one of the larger base breakouts we have identified. After a two-year downtrend off its early 2000 high the shares of Checkfree began a basing process that lasted approximately 18 months. This breakout is classic in nature. After rallying close to the upper end of the base the shares were able to absorb the remaining overhead supply and with a burst of activity (volume) was able to gap up through the neckline of the pattern. On a short-term basis, it would be very normal to see the shares pull back a bit and retest the breakout level before resuming the preexisting intermediate-term uptrend. Longer term, the depth and length of the base suggests a move to a least the $40 level, with initial resistance at the low-$30 level. Depending on the risk tolerance of the individual accounts, stop-out levels of $24 and $20 can be utilized."

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