Acampora: Technical View of the Dow

07/11/2003 12:00 am EST


Ralph Acampora

Director of Technical Studies, New York Institute of Finance

"The breakout and retest phase appears to be drawing to a close," says Ralph Acampora, director of Technical Research at Prudential Securities. He is one of the most astute analysts on Wall Street, and he has set the trend for presenting complex technical information in an understandable, unhedged manner. Here he reviews the Dow 30.

"Very short-term prices seem to have gotten a bit ‘washed out’. Once again, upside pluralities in market breadth continue to work as the backbone of this bullish environment. Our mantra has been and continues to be ‘focus on individual issues and not the averages.’ In the final analysis the technical aspects of the current near term consolidation are impressive and suggest to us that resolution to the upside will be the outcome as the breakout and retest phase draws to a conclusion. The longer-term outlook for equity markets remains very constructive as we continue in the earlier stages of cyclical bull market. 

Acampora has conducted a technical review of the stocks in the Dow Jones. He notes, "Technically, 13 of the 30 Dow components show major base credentials." Among them, six earn a buy rating from the Prudential Equity Group: Alcoa Inc. (AA NYSE), American Express (AXP NYSE), General Electric (GE NYSE), General Motors (GM NYSE), Honeywell International (HON NYSE), and Walt Disney (DIS NYSE). Two additional Dow components show minor base credentials, but also receive the Equity Group’s buy rating: Altria Group (MO NYSE) and Home Depot (HD NYSE).

Acampora also notes that from a technical standpoint, four Dow components are in strong uptrends. Only one, however, receives a buy rating: United Technologies (UTX NYSE). The technician also notes that five Dow stock remain in wide trading ranges. Among them, the only buy-rated issue is 3M Corp. (MMM NYSE).

Acampora continues, "This analysis suggests to us that 25 out of the 30 DJIA components offer limited downside risk. In addition, we continue to see fewer and fewer groups populating our avoid lists and an ever growing number of groups making it onto our investable lists. We want to highlight a few groups that have yet to, but offer the potential for an upside breakout. These groups include: Aluminum, Apparel & Accessories, Employment Services, Gas Utility, Industrial Conglomerates, Life & Health Insurance. Our primary observation over the last several months has been the same--more and more stocks are technically attractive."

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