Sunday, March 23, 2014

Following the Leaders Paints an Unclear Picture

The month of March has brought sideways action and a fairly tight range for all major indexes (Nasdaq closed at 4277 on 3/3 and closed Friday at 4276).  Considering the positive move all indexes had during the month of February, consolidation is expected and probably a good thing.  The action of leading stocks, however, has painted a somewhat different picture and is worth watching here.

Below are what I would call the leading stocks of this market, or at least the stocks that I look to on a nightly basis to get an overall impression of how individual stocks are acting.  When you look at these, many have pulled back much more than the overall indexes have done.  I don't take this as bullish.   There are some that are hanging in nicely and consolidating gains much like the market has been doing (KORS and FB would be good examples), but there are a lot more names that have pulled back quite a bit further than the overall market, breaking below key support like the 20 day EMA and the longer-term 50 day moving average (FEYE, SCTY, YELP for example).  This divergence could likely go two ways. 

Charts from TC2000, Courtesy of Worden Brothers, Inc.

If we start to see these leading names act better and move up to regain their moving averages, I would feel much better about the chances of this market breaking out of its current trading range and into new highs soon.  I worry however that what we may be seeing is some names being sold out of before the market shows actual "ugliness" and if that's the case, things could get nasty in a hurry.

I've been in cash for about a week now but made one small purchase on Friday.  I had watchlists ready to go all week and then just didn't see any of the names on those lists act the way I wanted them.  I think caution is warranted here until either the market shows better action than it did last week (where Friday's action was particularly nasty) or the leaders above start moving higher.  One area I may look at this week is the fuel cell names as they perhaps put a little bottom in on Friday (see below) but most of my powder will remain dry until I see better action.   Good luck.

Charts from TC2000, Courtesy of Worden Brothers, Inc.

Sunday, March 9, 2014

Stock Market Video - Outlook and Setups With Some Bottoming Plays - 3-9-14

Hi traders. The market had a little selling come in Thursday and Friday, but overall it continues to hold up very well. A bit more rest is not a bad thing here, as it would allow more setups to emerge. In the video, I highlight the stocks I am watching this week, along with what I look for in a long term bottom in a stock. There are several names recently that I have seen put in this potential clue and they are discussed in the video.  For instance, PLUG showed this same volume pattern late last year and is why I put it on my list of stocks for 2014.  I stupidly sold out however at $3 and then again last week because BLDP had earnings the next day.  Hope the video helps you out. 

Sunday, March 2, 2014

Shakeout or A Warning of Something Bigger?

Friday was a day much like other days this week, with the stock market moving higher and many individual stocks acting very well.  Something happened around 1:30 however and changed things greatly - an approximate 65 point drop in the Nasdaq in about an hour followed by a thirty point rally back up in the final hour is not something you see everyday.  Supposedly this drop had to do with the situation in Ukraine and actions taken by Russia.  Whatever it was, a lot of individual stocks were hit (at least temporarily) and look a lot uglier than they did the night before. 

Ever since February 5, the market has been grinding along with very little rest but since it continues to hold its short-term nine day exponential moving average, it is hard to get very bearish here.  Since Friday's sell-off seemed news-driven, it is even more difficult to put a lot of importance in it.  However, if Friday's lows are broken on Monday or Tuesday, then traders should reassess their outlook and give more credence to that sell-off Friday being a warning sign rather than a shakeout.

Nasdaq Daily

In terms of individual stocks, there are a lot of names out there that have had great runs and are extended (TSLA, VIPS, YY, FB, FEYE, SCTY are your leaders) and therefore not very actionable right now.  A week or so of rest for the overall market would not at all be a bad thing.  There aren't a ton of "easy" setups right now among high relative strength stocks.

Because of this, I went about trying to find stocks this weekend that are NOT extended.  A lot of these names are low-priced stocks that have been beaten down and basing for a long time.  Here's the list I came up with below.  I am definitely looking hard at a few of these names in particular early in the week, although I will be keeping an eye on the overall market as well.

 Charts from TC2000, Courtesy of Worden Brothers, Inc.