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Weekly Wizards

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Days or Weeks Still Ahead Before Bulls Break

Wed, Oct 7 2009, 05:39 GMT
by Mike Paulenoff, Jack Steiman, Harry Boxer

AdviceTrade.com

Harry Boxer, On 6 Charts to Watch (TheTechTrader.com)

NutriSystems Inc. (NTRI) may not look like such a great stock when you're looking at the chart, but with the great news that came out in the aftermarket Monday, their stock began to move.
NutriSystems is going retail for the first time ever and Walmart will be distributing their products in 3200 stores. This is huge for NutriSystems.

The stock ran up to 19, then back down to 16.90, then back up to 18 ½ on heavy volume. It certainly looks like it's going to gap tomorrow. There's a band of resistance up around the 20-21 zone that I would be focusing on for tomorrow. If it does gap up there may be an extra couple of points tagged on the end.
Certainly has a lot of potential.

China TransInfo Technology Corp (CTFO) had a terrific session Monday. Great looking chart pattern. Technicals are fantastic. Jumped to an all-time high of 10.05. Up 1.09 or 12.17%. Looks like it could start to accelerate. The target is around 11-11 ½ zone. I think it could get there tomorrow, potentially.

Spreadtrum Communications, Inc. (SPRD) had a real strong session. Up 40 cents or almost 9%. The chart shows a big key breakout about two weeks ago when it spiked up, ran up steadily, pulled back to moving average, reversed, then bounced another 40 cents today. It looks like it's headed up towards the top of the channel right now measuring about 6 1/2. I suspect that would be the near-term target.

OMNOVA Solutions Inc. (OMN) has a terrific chart pattern. Sharply rising degree of ascent. The head-and-shoulders kind of bottoming pattern took place over the last couple of months with a price-volume surge breakaway, a two-day mini flag, low volume today. It popped 59 cents or 9% on 1.6 million shares traded. Good volume. Top of the channel measures up close to 11 or more. That's 4 points from where it started today and we could see it start to run.

India Global Capital (IGC), which I want to hone in on after the surge last week, pulled back gently, volume dissipated, got very quiet. OBV, Money Stream, Balance of Power, all very strong, indicating this stock wants to go higher. My next target is around 2.50. Beyond that something around 3-3.10 zone. That would be my goal for this stock over the next couple of weeks.

Lastly is Select Comfort Corporation (SCSS), which has been really smoking since the July surge. A new angle of ascent calls for move to 7 ½ range. That's a 2 point move from here. The key to today's action was a 2 ½-week flag pattern that finally broke to the upside with a surge. This stock jumped 69 cents on 1.5 million shares or nearly 15% on the biggest volume of the month, and that all goes well for future price progress.

Mike Paulenoff, On Gold/Silver Acceleration and S&P 500 Pivot Levels (MPTrader.com)

First up this morning we we look at Gold vs. the Dollar Index in the aftermath of the rate hike by the Australian Central Bank (to 3.25% from 3.00%). I guess we now know what the G-20 was cooking up over the weekend -- an exit strategy that starts with a trial balloon from the Aussie Central Bank initiating a reversal the direction of interest rates.

Spot gold prices popped $9 this morning to 1027.12, and are on their way to test the $1033 high from last year, largely in reaction to the continued upmove in the resource-based currencies (CAD, AUS, S.Africa) versus the U.S. dollar. In addition, the fact that the Aussie Central Bank has "blinked" suggests that it is worried about the potential for an inflationary recovery, which only encourages gold bulls that there's much more to "get ahead of the curve" by adding to their long positions.

Like gold, silver too is set up technically for upside acceleration towards a test of its long-term resistance line, now at $20.10, and thereafter for a test of its March $21.40 high. Two ETFs we're playing to take advantage of the moves in silver and gold are the Market Vectors Gold Miners ETF (GDX) and the iShares Silver Trust (SLV). I will be interested to see if today's up-gap in the SLV is filled down to 16.45/40, or alternatively if the SLV trades up or sideways from current levels (16.80/70). The latter scenario would argue for another powerful thrust that revisits the Sept 17 high at 17.26 on the way to my optimal target zone of 17.30/50.

Lastly this morning, we look at the S&P 500 index via its e-mini futures contract, which trades nearly round the clock. Last night I wrote that the latest bout of weakness from 1075.75 to 1012.00 did not violate any critical support, and that the fact that the index closed above the Sept 27 low (1035.75) provides meaningful technical evidence that a new upleg commenced at 1012.00 that has its next test at 1055-1060.

Sure enough, the e-mini S&P tacked on another 8-10 points in pre-open trading. My sense is that the index will be extremely overbought near-term as it approaches 1055/60 and will have to pull back from there. That nature of that bout of weakness will be very telling from a technical perspective. If the pullback is shallow and lacks volatility, then the likelihood will be that the upmove off of 1012 indeed is a new upleg that remains incomplete on the upside -- and thereafter should head for new highs above 1075.75.

Conversely, a volatile, deep bout of weakness that retraces into the 1025/20 area will be a warning that all of the action between the Sept 23 high at 1075.75 and the October 2 low at 1012 is a congestion or developing top area. For the time being, though, let's expect more strength during the first portion of today's session. 

Jack Steiman, On Days or Weeks Still Ahead Before Bulls Break (SwingTradeOnline.com)

The market has clearly unwound off overbought and some of those divergences are being wiped out gradually.

That's the good news. There's bad news.

The leaders, Apple Inc. (AAPL), Google Inc. (GOOG), and the like, still have terrible divergences on their daily charts that may somehow work themselves out without too much market damage but they don't look very good. In addition to that, the volume on the way down off the top was very heavy with terrible advance/decline lines. These things alone do not say all is lost. It's just something to note and keep in the back of our minds.

There is an interesting dynamic going on here. Let's start with the 60 minute charts. If we move back down, there is no question that we'll print massive positive divergences. On the other hand, when looking at the daily charts, they remain buried with stochastics still down at the bottom.

However, the MACD's, on any move up in the market, will likely print yet another negative divergence. That's not etched in stone but likely. What this means is that it'll be next to impossible to break this market down in the short term, say some days to weeks.

Beyond that, we will need to watch those daily charts very closely to see if they'll give further insight as to what to expect from further market upside. The bulls, for now, should not worry about breaking down here. Beyond that, they still need to keep those red flags up. Nothing aggressive longer term here.

We are now trading between the 20- and 50-day exponential moving averages. The S&P 500 numbers are 1018/1043. For the Nasdaq they are 2027/2084 and for those who care about the Dow, those levels are 9417/9626. It can take days to truly firm up, so even if we don't clear back through the 20's right away, as long as those 50's hold, the 20's can go in time. Don't be impatient with a process. This market is still in a bull market trend until we lose the 50's folks and don't forget it. Technology and the financials will need to lead us higher.

Published on  Wed, Oct 7 2009, 05:55 GMT