6 stocks set to move in this market
In the late innings of a cyclical bull and the
action reflects a bounce to satisfy an oversold condition. The highs for the
current cycle have occurred. A major top formation is in place. The president of
the United States is unpopular. Any president loses popularity in a secular bear
environment. Presidents were kicked out of office back in the secular bear days
between the years 1966 and 1982. It is no surprise that the public has lost
confidence in the leadership ability of Gorge Bush. The stock market has
performed miserably during his tenure at the helm. America has engine trouble.
The US equity market is at the end of a major top formation and a real estate
break will not help. You can profit on the short side of the equation and stocks
that are real estate related are prime candidates to sell short. The choppy
action of the current market forces long only equity managers to hold more cash.
What is fascinating about the cash on the sidelines that causes one to pause
relative to the current reality is the extraordinary low cash exposure within
the equity mutual fund universe. The level of cash equals the low level of cash
at the end of the equity bubble in the winter of 2000. Mutual funds are long the
equity market and fully invested. That accounts for the churning action that
this market has displayed over the course of the year.
So, as we begin the day
today on the heals of a modest oversold rally the question about the quality of
the rally comes up. The rally is at this time poor in quality. The best course
of action to take is to sell the vulnerable longs into strength and certainly
short those stocks that are merely adjusting an oversold condition. Short up
stocks that are in decline after the bounce. Lets get into a few stocks that
attract my attention.
Evergreen Solar
(
ESLR |
Quote |
Chart |
News |
PowerRating) 9.04
I relentlessly hold on to the position I carry because the stock is just about
the best thing since sliced bread if you know what I mean. Do ya get it? This is
a real leader in an otherwise stingy market. I am involved and willing to add at
levels north of 9.65 and down to 8. It’s in a good range to trade and keep for a
while. Nothing wrong about keeping this for a while. Nothing at all. Its up over
106% this year and over 173% in the last 52-week and it is in a solid long-term
advance. It’s a play in energy. Alternative energy. Energy that works and saves
a bundle. That accounts for the popularity of the stock. Nothing wrong with
being involved in popular stocks. It’s in a rising trend isn’t it? Who can
really say when the advance runs its course? I use stops to enable the
recognition of that reality. CMVT is an example of a stock that moved out of an
advance, quickly formed a top and is now in decline. Why? Just gaze at the chart
and the tale (tail) is clear. You can tell a dog by the way it holds its tail.
Just gaze at the chart of ESLR and see the handwriting written in clear lines.
This dog wags a happy healthy tail (TALE). It has another gap to fill so the
8.40 zone may be a great place to grab more shares. It’s about being involved in
a winner. A leader that provides favorable odds to gain. Place the protective
stop at 7.39.
Nortel Networks
(
NT |
Quote |
Chart |
News |
PowerRating) 3.48
Don’t mind being involved in junk. Really don’t. As long as the junk provides a
chance to gain. This piece of junk jewelry is acting well right now. I am
involved and see that clearly. It is breaking up to new near term highs and is
angling toward resistance at 5.Check the chart and see a stock climbing off the
bottom and angling to the top of a major long-term baseline. It is actually
thrilling. It really is. It is a nice wave to ride right now and am milking it
for all I could. NT fires all cylinders. Still involved in JDSU and LU and TLAB.
Dogs each one. Dogs that are wagging a tale because money is flowing that way
right now. Just a push higher and those stocks will act favorably and provide
vibrant performance that translates into money made. So money could be made
being long NT. I am holding my position and will pyramid the stock as it angles
to higher price zones. I see a 5-dollar stock down the road passed a swing. Take
a swing turn in NT. That is the way to play it. Place the stop at 2.89.
Altria
(
MO |
Quote |
Chart |
News |
PowerRating) 74.39
That is the price that it is right now as the market just opened and I am late
this morning and that is ok. I am ok with that. Well I am into MO and took a
piece off the table near the highs yesterday and still own most of it. Nice pop
in heavy trade accounted for almost all of the gains in the Dow yesterday. It is
coming in gently thus far this morning. The day is young. MO is a stock I never
would have bought 6 years ago. I felt they killed people with there products and
didn’t want any part of it. Now I just see it as a chart. That is all I care
about. Its price movement, and a nice dividend to boot. Think the dividend is
meaningless. Well in this day in the market most just care only about that cause
they have little confidence that performance will come on stock appreciation.
Right now most stocks trade in bearish manner. They are behaving bearishly. That
accounts for the broad selling in October. MO did not gradually move up. No it
too took a hit last week. The action comes in reaction to earnings news. The
stock is on a roll. It is great shape and although I sold a piece because
breakouts typically get a test and there ought to be no exception here. So buy
this MO coming into the 70 range. A bear could take this market down and MO will
fall with it. It is MO that will likely perform well in a bear and a pullback is
a buying chance. Place the stop at its 200-day line at 66.75.
Infosys Technologies
(
INFY |
Quote |
Chart |
News |
PowerRating) 67.91
I shorted this stock yesterday. I anticipated sticking a toe in it and of course
failed to follow up this morning. I have done nothing yet and am waiting to see
where this market settles near the 11:30am hour. That is when I will begin to
trade long and short. Well this stock is a good short right now and it is a
timely short because the decline just began after forming a stunning top that
came on the heals of a swift advance. The stock is down 1.8%. That’s it for the
year so the decline is just getting started. The decline is young. Check out the
chart. Check out a ten-day chart. Check out an intra day chart. Check out any
chart and it all expresses the same image. INFY is in decline. It provides
favorable odds to succeed selling short. Place the stop at 70.25
Lockheed Martin
(
LMT |
Quote |
Chart |
News |
PowerRating) 60.95
LMT made a move testing its 200-day moving average and backed off. Not a good
sign. It is a good short right now with low risk. Low risk because the stop is
tightly placed above its declining 50-day line. The top is formed and the
decline is getting set to develop. It is in the process of rolling over. It is a
good bet to make money in LMT selling short. I am short this stock and intend to
make more money in it selling more shares short because the decline has just set
in and it becomes especially compelling under 58.90. It is perfect now because
it trades close to the stop loss points.
Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating) 38.18
Homeowners are tapped out. That is the sense of the real estate market right
now. Tapped out. So the stock movement in HD reflects that reality. No question
about the real estate market being in decline. Look at the action in HD. That
action reflects a real estate market that is past peak. That is what fed policy
has accomplished thus far. Inflation concerns have turned the consumer cautious.
Confidence is way down. That reflects the current action in HD. Will it makes new
low in this cycle? It has to hold 35 or it is doomed to land around 31 a share.
Quite the bearish trend setting up in HD don’t you agree? Short it up to
39.50.and again below 35. Use the moving averages to place the stop. This is a
low risk short.
Jack S. Rothstein
Rothstein Investment Advisory Services, Inc.
3600 Chain Bridge Road, Suite 200
Fairfax VA 22030
Phone 888-343-4825 — Fax 703-385-7232
www.jrmoney.com —
www.wealthcast.com
Jack Rothstein is the President of Rothstein Investment
Advisory Services, Inc. and is a 20-year veteran stock trader and a money
manager.
Mr. Rothstein also writes Wealthcast, a monthly newsletter about the technical
behavior of the markets. He has been quoted on Bloomberg, CNNFn, the Dick Davis
Digest and the Dow Jones Newswire. Since 1993, Mr. Rothstein also hosted
WealthCast, a radio show in the Washington DC area covering the stock market.