Mike Paulenoff, On Expected Blow-Off Spike (MPTrader.com)
Once again on Monday the S&P 500 eked out a small gain, the 6th consecutive positive close since the 12/31/09 low at 1109.75. This particular pattern, when the price structure bumps up against its upper Bollinger Band line, usually ends in a blow-off type spike that pierces the line by 1-1 1/2% prior to a nasty downside reversal that presses prices back beneath the upper BBnd line. Should such a scenario unfold in the next session for instance, we can expect the S&P 500 emini contract to climb quickly into the 1160-1166 area prior to a downside reversal and initiation of a corrective period. At this juncture, only a decline that breaks the rising 20 DMA at 1120 will negatively impact the current uptrend. From my hourly work (not shown in the attached daily chart), we must also keep an eye on the 1136 support area for signs of deterioration of the "micro" bull trend.
One individual issue we like is Bank of America (BAC). The stock has a near-term pattern that points higher to 18 at a minimum in the upcoming hours/days. A sustained climb above 18 will trigger an upside target of 20. Any near-term weakness should hold above 16.30 ahead of the anticipated loop to the upside to 18. JPM earnings this Friday morning likely will have a significant impact on the price action of BAC. In the JPM release, the positive technical set-up argues for a run at 18, if not higher.
Another chart we like is Pfizer (PFE). The most salient feature of the chart pattern is the 5-week series of horizontal (flat) price peaks juxtaposed against the series of higher pullback lows that extend all the way back to last March. In other words, we have 11 months of "rising lows" pushing up against a 5-week price "lid". Which force has more power -- the rising lows line or the flat top? From my perspective, the very powerful underlying intermediate-term uptrend should "blow the lid" off of the flat top's line just under 19.00 and in so doing unleash a sharp, powerful upmove that projects next to 20.20/50 and then to 22.00. At this juncture, only a decline that breaks 18.19 will begin to compromise the timing of the impending upside breakout.
Jack Steiman, On Need for Unwinding (SwingTradeOnline.com)
This earnings season is particularly important to Wall Street because the market has moved up quite a bit in anticipation of much better numbers thus there better be some solid delivery to those expectations. If there isn't, the market will fall harder than it has since the March 2009 lows. If the news is good overall, the market will likely remain in its confirmed up trend. The time is upon us. Let the fun begin.
Intel (INTC) reports on Thursday and there's a very anticipated report from financial giant JP Morgan Chase (JMP) Friday. Both will move the markets. Intel is a true proxy for the real economy. Their chips are in everything and thus a good report from them means demand from the makers of those goods is improving. The market would certainly like that. JPM is considered the best run financial institution in the world with Jamie Dimon at the helm and thus big things are expected there. If things are not good there, the market will think things are very bad in the rest of that sector and rightly so.
We are starting to see some big caps get hit and there's nothing bad about that although many will think it means market death. Not true. These stocks are very overbought and could use a prolonged period of basing to lower to unwind some very overbought oscillators not only on the daily charts but on the weekly charts as well. Not the best combination for more upside although these stocks are loved. Not easy to keep them down but we are seeing some struggles there.
Many are breaking below their 50-day exponential moving averages. Some have also broken their 20-day exponential moving averages as well. Stocks such as Baidu (BIDU) are trading below both critical moving averages. Google (GOOG) is trading below its 20's but above its 50's. Apple (AAPL) and Goldman Sachs (GS) are closing in on their 50's. GS closer. Amazon (AMZN) is below its 20's. For a very long time these stocks all traded well above their 20's and 50's so we're seeing some changes in behavior. All of them need to be watched for further erosion. Nothing bad for now and really, but like I said, more selling and even some breakdowns would do these stocks some good.
They really do need to unwind. If it can be done mostly from a lateral posture, that's great. No matter what, they do need some real unwinding.
Bottom line remains the same. The market is on a buy signal. The market is overbought. It needs to be played cautiously. It needs to be respected for what can happen if you let your guard down. This is a market that demands exposure but not 100% of your dollars. New plays should be done when things have unwound on an individual stock. Buying overbought for the sake of froth can really hurt you. Be careful!
Harry Boxer, On Growth Stocks to Watch (TheTechTrader.com)
Today a number of stocks will be reviewed, mostly growth stocks that we've been following
ArcSight Inc. (ARST) is a stock we've had on the Fab 40 List for quite awhile with a strong trend in place for a year now. Recently this stock came down, moved back up, retested and formed a kind of cup and handle, broke out and over the last 5-6 days formed a beautiful bull flag. This stock looks like it's going to explode and run higher.
Initial trading target is at 31 1/2 - 3/4. Beyond that the longer-term target is up in the low 40s.
Energy XXI Bermuda Ltd. (EXXI) had a fantastic session Monday, jumping 40% up 1.05. The breakaway gap broke out of an entire 2-3 month base with a price-volume surge. I'm looking for an extended move here. There is some resistance just above 4, but I think this is a 6-7 stock down the road.
There's been a big move recently with Pacific Ethanol (PEIX), as this stock exploded out of a pennant or coil and ran, nearly tripling value in just 2-3 sessions. Heavy volume at 52 million shares traded Monday. Stock looks like it has more to go potentially, as momentum is strong. Looking for a move to 3-3 1/2, maybe 4-4 1/4, short-term.
Taser International (TASR), a portfolio position, after a 1-year base is exploding at the 5.50 - 5.60 area. It ran up to the resistance level, backed off gently, and then came on Monday, exploding for another 63 cents or 11% on nearly 4.7 million. I expect a follow through Tuesday and over the next couple of days, getting up towards 6 3/4 area. A take out of that could lead to something up around 8.
BioFuel Energy (BIOF) had a price volume surge on 3 million taking the stock from 3.42 to 4.13 or 20.7%. China Automotive Systems (CAAS) continues to be a monster having moved from about the 2 level up to 26 over the course of the last year. It was up another 1.87 Monday.
Jerome "Mel" Hickerson, On SPX 1150 Repelling the Rally (MarketsPath.com)
The week opened with the typical Monday morning pressure from the futures, gapped up and set the high for the session just two minutes after the open. From there, the index began an orderly consolidation and retreat setting the low of the day at 12:48, after which the regular afternoon ramp upward commenced. From 1:00 through the close the indices marched slowly upward, closing near the afternoon highs.
Monday's session marked the sixth consecutive positive close for the SPX, equaling the longest winning streak since the rally began almost a year ago. Once again, it was not an easy win; the index spent much of the day in the red.
The action Monday seemed to be largely driven by two factors: 1) The overnight futures dominated the open, and 2) Waiting for earnings reports after the close. Most of the day just seemed to be holding its breath and waiting.
Alcoa (AA) reported a .01 per share profit while the consensus was expecting something like .06. It seems likely that this will affect Tuesday's open, although it's how the guidance is perceived that is more crucial than the actual earnings. But the Alcoa earnings report is rarely a report with lasting impact.
For Tuesday, our model continues to call for a pullback. The further we inch upward, the further I think we move when we turn downward. I feel confident that we are likely to make this turn Tuesday or Wednesday, with a move back into the 1105ish area likely before we bounce. I've been saying since late October that I thought 1150 would be our high, and we were within a fraction of that Monday, so it seems to make sense that we turn soon.
