Last week, the broader markets had one of its better performing weeks of the last few months. One of the rally's leaders was semiconductors and I can't remember the last time I had the opportunity to say that. As you know, I put a lot of emphasis on the semis as an indicator of future movement in the market. Now understand the semis are bouncing off support and as I mentioned in a previous article, volatile reactions are typical and expected, so don't get too excited just yet.

If you had the opportunity to listen to my interview, I discussed that I am a top down investor. This means that I look at the direction of the broader averages, sectors and individual stocks within the prominent sectors.

Here is an example.  Notice the chart of the Information Technology sector. It's had a nice rally since mid-October on increasing volume. The last few days it has pulled back on decreasing volume.

Information Technology Sector

The next step I look at is the companies that make up the sector. One chart that stands out is Satyam Computer Services (SAY). Notice a similar chart patter to its sector, generally good volume on up days and less on down days. It tells me that the buyers are still willing to buy on any pullback. If Friday's high is taken out, I expect to see a continuation to the upside.

Satyam Computer Services

Remember your stops especially in markets like this. Just last week the talk was oversold, and now it's overbought. That tells us that we are in a market that is conducive to violent swings.

Tom Incorvia is a swing trader with 18 years of experience in the financial markets.  E-mail him at tincorvia@gmail.com.