A New Leadership Index?

Comparing the Dow vs the Nasdaq

By Bryan Bottarelli
Tuesday, September 04, 2007 10:06 AM EDT
Tue, 4 Sep 2007 14:06:00 GMT

Dear Bottarelli Research Member,

As we begin the holiday-shortened trading week, we have an interesting technical correlation taking place between the Dow and the NASDAQ. While the Dow continues to find resistance at its 50-day moving average, the NASDAQ (represented by the QQQQ below) has already broken above this critical 50-day level. This shows that the NASDAQ, after years of underperformance, is now re-establishing itself as a leadership index. You can see this Dow/NASDAQ comparison below:

INDU

QQQQ

You can thank stocks like GOOG, RIMM, AAPL, and GRMN are leading this bullish NASDAQ charge, and because of this, I’d like to establish a new upside call play in navigation-maker Garmin (GRMN — NASDAQ).

GRMN

Chart-wise, after establishing a higher low, it now appears like GRMN is about to break out to a new 52-week high. And considering Apple is expected to make a big announcement tomorrow, this could be the catalyst that drives all of the NASDAQ-leaders higher. Let’s use this trigger to play an upside move thaty hits a new 52-week high on GRMN. Here’s the play:

PLAY: Buy the GRMN October 105 Calls (RZJ JA) at or under $8.60, good for the day. Current bid/ask spread is $8.20 to $8.50. Place a protective stop limit at $4.30.

We also continue to have a strong upside technical formation in Fluor Corporation (FLR). And we also have a possible bottom-formation in Goldman Sachs Group (GS – NYSE).Let’s keep an eye on these names for any possible call plays. When the timing is right, you’ll be the first to know.

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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