Monday, June 9, 2008

Action Under the Surface Worse That Indices Show, Lots of Stocks Breakdown

Although the Dow finished with nice gains and all the indices closed off their lows with the afternoon recovery, my scans show me that it was still not a great day in the market. There were only 83 higher-volume moves of over 4% today, while there were 256 higher volume moves of 4% to the downside. As that stat indicates, there were many stocks, some of which were recent winners, that had severe technical breakdowns today. The action underneath the surface tells me that we are still likely headed lower, and that the late bounce may have just been some oversold relief.

Nasdaq, S&P 500
Here are some of the stocks that had breakdowns today. Due to the afternoon bounce, many of these finished well off their lows, but still broke important trendlines or support levels. The four charts below illustrate this, and you can check out BOOM, AMZN, HITT, HOLX, SPWR, GOOG, PCLN, CSIQ, SINA, DGLY, MSCC, MPWR, PSEM, and SATC as other examples of charts that finished off the lows but still look technically damaged.

AAPL, BIDU, MA, VMW

Here are some of the stocks that looked decent and had put in nice runs until today. They now look awful. Others to look at here inclue CYD, FUQI, SOLF, and QTWW.

SOL, TSL, XIDE, UFPT

These are the shorts I took today. I put the weekly chart of ANGO up as well as the daily to show some of the overhead resistance this stock is facing and why I thought it was worth a short here. I am willing to take a few more shorts on depending on the chart, but will be careful because it is possible for a bounce here, especially in the financial sector. I would not be shorting this area right now.

ANGO
CSR, APOL
Here are four shorts that I will be watching tomorrow. Many of the shorts I posted this weekend worked out well today, but in most cases are a bit extended now to the downside, and chasing them here could cause you trouble.

CBI, EPIQ, CECO, CALM
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

The momentum in oil and commodity stocks continued today, even with crude trading down. Right now, this is the only sector I would even consider going long in, as the possibility of a climax-type run in these stocks is a possibility. Some are already showing those tendencies. These are the best oil stocks I see right now - you must be careful because most are very extended and I wouldn't chase. You saw Friday how the overall market action can pull down any stock, regardless of the sector, so if the market keeps falling here, then these stocks could reverse quickly as well. Just be careful.

NGAS, CFW, CPX, HERO
PXP, WH, ENT, ROYL

I found some steel stocks setting up in decent short-term patterns tonight so I would consider these as well as they fit into the commodity theme.

STLD, GNA, MRB, MEA
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

We'll see if the late bounce means anything for tomorrow, but if you look at intraday charts of the past week, the S&P could not rally past what is some short-term overhead resistance at the 1370 area today, and with the Nasdaq now below its 3 month trendline, I think the possibility of much lower prices still exists, possibly this week. I am aware of the possibility of a bounce here, as the indexes are somewhat oversold short-term, and will keep my stop losses levels true. I know this market has a mind of its own and does whatever it wants to do, usually whatever makes the least sense. But overall, the trend is definitely lower, and it makes sense to follow the trend here as much as possible. Best of luck Tuesday.

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