A Gas-Induced Rally

Just when the markets looked like they were going to begin yet
another vicious sell-off, the American Gas Association released a
report showing a 3.7% increase in natural gas inventories. Viewing the
potential for a drop in the price of this commodity as a plus for the
business and individuals, traders came in with their pocketbooks
open.  The rally took the indexes substantially off their lows.
The leaders were the Semiconductors
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$SOX |
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, the Biotechs
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$BTK |
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,
the Transports
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and the Cyclicals
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.  But,
now what??  Clearly, every rally has been furiously sold into.
Can the markets muster up enough strength to put together a few
positive days?  The overhead resistance is getting staggering but
nervous shorts could help to ignite something interesting in the
markets as they are very oversold right now.  I’m watching stocks
like
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AMAT |
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,
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BRCD |
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,
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KLAC |
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,
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NVLS |
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,
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QLGC |
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,
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PMCS |
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, and the like (the list of beaten down stocks is pretty
long, pick your favorites) for potential long candidates.  Bear
in mind, you have to be ready to get out of the plays quickly on any
market downside reversal but the potential is certainly here right now
for a one to three day rally.  In the long term, the chances are
these stocks are going lower, some of the them much lower, but we may
have the chance to play a few long here if the market cooperates

I’m including a chart of the retailing index here as well for two
reasons. The main reason is to follow up on some targets I noted in my
commentary two weeks ago. The index played out beautifully off the
identified support and resistance zones.  Like many of the other
indexes, the retailing index put in a nice looking bottoming bar today
and could be ready for a brief rally to the upside.  I will be
monitoring this index closely (what else is new!) for any signs of
weakness as I think the chart is showing us that lower prices are
still in the cards. The other reason I’m including the chart is to
illustrate how the use of many different forms of analysis helped clue
us into a very profitable trade. Candlesticks patterns, fibonacci,
trendlines all came together for us here and studying this chart can
be helpful in identifying similar setups in the future.

Given the potential for some upside in the tech sector, I’m looking
at some of the “safe-haven” sectors as potential short
candidates.  The healthcare-related stocks have certainly enjoyed
substantial runs while the tech-heavy Nasdaq has collapsed
recently.  I’ve posted a few charts below with my comments on
each. 

 

Other stocks to watch in the sector are: 
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AAS |
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,
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AMHC |
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,
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CMX |
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,
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MMS |
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,
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PATH |
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,
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PRHC |
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,
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TGH |
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,
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TRI |
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and
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.  Be sure to look at both daily and weekly charts
on all of these.  Also take note of the many stock rating
reiterations coming out in the sector coupled with some pretty
substantial insider selling – I think you’ll be reminded of some other
sectors both Goran Yordanoff and myself have shorted successfully in
the past.

Other interesting short candidates I’m watching are in the
restaurant sector – these include: 
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APPB |
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,
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CBRL |
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,
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IHP |
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,
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JBX |
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, and
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RI |
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.

Happy trading!

Carolyn

P.S.  Newsweek’s cover story this week entitled “Are You
Maxed Out” was very interesting.  If you haven’t read it
yet, the full story can be found at www.newsweek.com 
– a direct link is:  https://www.msnbc.com/news/615517.asp?0nw=n1d  
It’s a must read, in my opinion.

 

 

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