Bulls' Bigger Picture Still Strong
Weekly Wizards for Tue April 19th 2011
Jack Steiman, www.SwingTradeOnline.com, on Bulls' Bigger Picture Still Strong
The market was given an excuse to sell Monday, but it really was nothing from nothing in terms of hurting the overall big picture bull market, which we are still in 100%. When the market goes down hard for a day or so, even if it's just intraday, fear ramps up. Fear is the king of all emotions, so it takes no work by the market to get some going. A handle, or down period, does the trick in most instances. So Monday we got a strong gap down. The lows were reached early in the day, and then the market spent the rest of the day recovering as all bull markets do. This doesn't mean we can't go much lower. We can. Monday, however, showed you why you don't short a bull market. Too tough to get any sustained downside action, even when sentiment is a real problem. You work that headache off in spurts.
The one thing I have noticed thus far is that earnings have not been as strong as most would expect. A larger number of misses than I would have expected this early into this reporting quarter. But it is early, and most of the better companies have not stated their numbers quite yet. When they do in the coming days and weeks, I suspect things will take a turn for the better. The overall market is suggesting that will be the case. If the market thought earnings were going to be bad overall this reporting period, the market would be selling much harder than it is currently. The market, somehow, seems to know all things. Google Inc. (GOOG), which has been having some problems for a while now in terms of growth, is struggling. When they missed, it was no shock to the market, even though the stock sold off very hard. The market was able to shake off their bad news. The market would have a much tougher time shaking off bad reports from the likes of Apple Inc. (AAPL) or Baidu, Inc. (BIDU). Apple's earnings are out Wednesday evening and needs to be watched very closely for more market insight. If it's good you know the market will rock higher. If it's bad, the market will sell off, though maybe not as much as one would think.
Now that the market is down about 3.5% off the Nasdaq highs, you'll start to hear more and more bears come out of hibernation. They'll tell you how things were out of control to the upside for no reason and how this market will now find a way to begin the next bear move. This is fear and pessimism doing their thing. This is a normal response to the recent selling, especially on a day like Monday, even though Monday was really just a gnat of selling. Any excuse they can find to tell us how the bull is dead will come out in a big way now, especially if the selling continues to increase for a while to allow the bulls to cool down. I would suggest you give the bull market the benefit of the doubt and try not to get caught up in all the negative banter. There is absolutely nothing bearish taking place right now. It's a positive that we're selling a tad here, and that's all it's been. This isn't selling folks.
Support is clear as can be. We lost the 50-day exponential moving averages Monday, but not by very much. They can be taken back quite easily, although it would be best if that didn't take place just from the perspective of keeping bearishness raised up for a while longer. I would like to see the bull-bear spread get down into the percentages in the 20's, and out of the 30's, especially that nasty 41.6% printed two weeks back. The 50-day is now at 2740 on the Nasdaq and 1307 on the S&P 500. The problem is we also have gap downs today, which will make a strong recapture very difficult, even if we get back over by a little bit. 1313 is that gap top and will be very tough resistance for the bulls, while it'll also be tough to just blow back through 1307.
Six points of tough resistance says easy on new long plays here. The Nasdaq has strong support at 2700 down to the trend line at 2690. Very tough for the bears to remove. We will likely continue to ping-pong around for some time with good nights of earnings followed by bad nights of earnings. This whipsaw will continue to erode bullishness, which is a very good thing for the bull's bigger picture. Hang in there and be patient.
Jack Steiman is author of SwingTradeOnline, a journal of his market analysis and stock trading alerts. Jack had 94 winning trades out of 145 2010 (171% total return) -- and is 33 for 53 so far in 2011! Sign up for a Free 21-Day Trial!
Mike Paulenoff, of www.MPTrader.com, on Near-Term Panic Low?
Yesterday's knee-jerk flight to dollars in the aftermath of S&P's warning about the U.S. debt rating popped the cash Dollar Index (DXY) above initial resistance at 75.20, and then to a test of its 4 month down trendline at 75.80. Let's notice that the trendline thwarted the rally and has reversed the DXY so far today towards a test of yesterday's initial upside breakout point (now support) at 85.20.
Inability of 75.20 to contain the weakness will begin to indicate that a relief rally from last week's lows at 74.61 is over and that the dominant dollar downtrend has resumed. Only a sharp rally that hurdles and sustains above 75.80 will indicate that the DXY has established a significant low.
Yesterday's dollar strength weakened commodity prices, in general, and Brent Oil, in particular. Brent Oil pressed from last Friday's high at $123.85 into this morning's low at $119.65. But, so far, last week's pullback lows at $119.50/60 remain intact, just as the DXY resumes its weakness, suggesting that currency-related pressure on prices is dissipating. As long as $119.70/50 support contains any further weakness, all of the action off of the April 10 peak at $127.02 represents a correction in a still-viable bull phase that points to yet another new high into the $131-$134 target zone.
Increasingly, yesterday's "debt warning" sell-off, followed by a strong upside reversal, looks like a classic near-term panic low. That said, the larger question is whether or not yesterday's low at 1298.25 in the emini S&P 500 also represents the end of the entire correction off of the April 6 high at 1336.50, or, alternatively, is a minor rally within a larger corrective process dictated by the Feb-April Double Top pattern.
Right now, only upside continuation that hurdles key resistance between 1315 and 1320 will confirm that a new bull leg is in progress. Otherwise, we will have to see how the pattern develops off of yesterday's low for clues about the efficacy of the April weakness.
See Dollar, Oil, and S&P 500 chart.
Mike Paulenoff is author of MPTrader.com, a diary of his intraday chart analysis and trade alerts on both ETFs and key ETF component stocks. He had 162 winning trades out of 260 in 2010 (125% total return) and is 17 for 20 in his most recent trades! Sign up for FREE 15-Day Trial!
Harry Boxer, of www.TheTechTrader.com, on 4 Charts to Watch
There are still a lot of good looking charts on the long side. The market has been struggling, but we've managed to call out some of the top stocks.
Amarin Corporation plc (AMRN), which we've been watching for weeks, broke out of a declining channel last week and flagged for a few days, and then exploded on drug news on Monday, jumping 8.33, or 95.5%, on historical volume of 54.4 million shares. That's huge for this stock, and it closed not far off the top of the range. Based on the action early on, and then the comeback early in the day, I'm expecting this stock to be in the low 20s short-term. Look for a trading target of at least 19-20, maybe even as high as 22 1/2.
Majesco Entertainment Co. (COOL) is a very nicely formed, low-priced stock that has moved up from under 1.00 to the 3 1/2 - 4.00 range. It has been consolidating for the last couple weeks. The little flag that has broken out in the last week pulled back Friday, reversed again, moved back up from 3.27 to 3.79, and closed at 3.64 on Monday. It's up a little bit at 3.4%, but, more importantly, the technicals look great. It looks like this stock is headed for somewhere around the 5 1/2-3/4 range.
Sky-mobi Limited (MOBI) had a nice move on Monday, up 1.49, or 9.6%, to 17.02. Volume increased again, and technicals surged. This stock is really in a strong surge mode and looks like it could get to 19-20 short-term.
Youku.com Inc (YOKU) has been trending beautifully ever since it pulled back in February to the 29 range. It has now shot up to 65 1/2 from 29 in the last couple months. It continues to look good. We are at short-term resistance at the top of the channel, but a spike here could put it into the low-70s range.
See Harry's Charts of the Day video analysis on these stocks.
Other stocks in our Charts of the Day video are Elan Corp. plc (ELN), Immunogen Inc. (IMGN), Keynote Systems Inc. (KEYN), MAKO Surgical Corp. (MAKO), Molycorp, Inc. (MCP), Merit Medical Systems, Inc. (MMSI), Neoprobe Corp. (NEOP), PFSweb Inc. (PFSW), Insulet Corporation (PODD), Qihoo 360 Technology Co. Ltd. A (QIHU), Rediff.com India Ltd. (REDF), Sify Technologies Limited (SIFY), and Synthesis Energy Systems, Inc. (SYMX).
Harry Boxer is author of TheTechTrader.com, a real-time diary of his day and swing trade alerts, including live audio-video of Harry discussing his charts throughout the trading session. Sign up for a Free 15-Day Trial!
Sinisa Persich, www.TraderHr.com, on Free Stock Pick: BKS (Short)
Barnes & Noble, Inc. (BKS), which has been in free fall since February when the company announced it will suspend dividend payment, broke out of a descending triangle pattern today, fell below key support in the 9.00 area, and had its lowest close ever. It's likely this bearish trend will continue in the coming days, especially if the overall market correction continues.
My short-term target for BKS is at next support at around the 8.00 area, but it could drop even more to 7.30 area, which is my secondary target. Preferred entry (sell stop) price is at 8.65, with a stop at 8.95.
Sinisa Persich is a technical analyst and author of TraderHR, our newest AdviceTrade service, featuring his daily, small-cap, swing trade set-ups for yielding profits in both up and down markets. He has 32 winning trades out of 49 so far in 2011. Sign up for a Free 15-Day Trial!