Monday’s Stock Watch
The broader markets
made slight gains for the day, holding on to a good week of upside momentum.
This trading range which began in late September is now in its eighth week,
which is the exact length of the rally we had earlier this spring. Concurrently,
some of our indicators are suggesting some downside. So far this market has been
unwilling to sell off in any dramatic way. There is speculation that an economic
recovery is in store for us next year, after 10 rate cuts by the Fed, but the lack of heavy buying
has yet to endorse this. At some point
a correction may be attempted, but until proven otherwise the uptrend is intact.
The Dow Jones Industrial Average
(
$INDU |
Quote |
Chart |
News |
PowerRating) closed up
0.21%
to 9608.00. The S&P 500 [$SPX| $SPX] closed up
0.14%
to
1,120.12.
The Nasdaq
(
$COMPQ |
Quote |
Chart |
News |
PowerRating) closed up
0.04%
to
1,828.48.
Overall NYSE volume was
1,082,555,000. NYSE
advancing issues were
1,592, with up volume at
565,142,000; declining issues were
1,480, with down volume at
508,505,000. Overall Nasdaq volume was
1,517,942,000. Nasdaq advancing issues were
1,731, with
up volume at
860,000,000; declining issues were
1,812
with down volume at
639,517,000. The NYSE had
7 new 52-week highs, and 3 new 52-week lows. The Nasdaq had seven new 52-week highs
and seven new 52-week lows. The property/causality industry led with four of the new
highs made today.
Top sector gainers:
Oil Index
(
$XOI.X |
Quote |
Chart |
News |
PowerRating) up
2.42% to
518.9
Inter@ctive Week Internet
Idx up 1.49% to 139.02
Losing sectors:
Biotechnology Index
(
$BTK.X |
Quote |
Chart |
News |
PowerRating) down
1.85% at
555.03
Airline Index
(
$XAL.X |
Quote |
Chart |
News |
PowerRating) down
1.26% to
69.22
As Intermediate Term traders, we need the right market, the right groups, the
right companies and the right patterns to make money. On the surface, the Naz
rally that began in September has had all the ingredients to be believable.
Sentiment indicators hit the desired extreme levels at or about the bottom on
September 21. The put/call ratio hit 1.27 the day before. We also got our follow
through day to confirm the rally. After eight weeks, the index is up 31% in a
definitive up trend. Accumulation days have far outnumbered distribution days
over that period of time.
So what are we missing? Leading stocks breaking out of sound bases and
sticking. Tim Truebenbach doesn’t talk about bull markets and bear
markets. He talks about good markets and bad markets. Good markets (for IT
traders) are markets when we make money. Bad markets are when we can’t make
money. This is a bad market. We don’t have lots of leading stocks breaking out
of sound bases. For the most part, we have had a few potential leading stocks
failing after their breakouts. Until this changes and we get the right market or
a “good” market, the message is that Intermediate Term traders in the
know are still defensive. Discussion of groups and stocks setting up becomes
academic.Â
To underscore this point, Taro Pharmaceuticals
(
TARO |
Quote |
Chart |
News |
PowerRating)
suffered another day of losses after its breakout on Wednesday. This stock had
all the ingredients: an RS of 99, EPS growth and Revenue growth last quarter of
167% and 49% respectively, leading fundamentals in it’s group. All the way
down the checklist, it met the criteria. It broke out nicely, then dumped.
Bearing in mind the market backdrop, Thq Inc.
(
THQI |
Quote |
Chart |
News |
PowerRating)
continues to form its handle. However, volume has been well above average the
last two days. The stock fell 4.36% today on almost two times normal volume. The
publisher of entertainment software for home video games sports recent EPS
growth of 133% and Revenue growth of almost 30%. Historical EPS growth is
excellent. The company experienced negative growth two quarters ago, which is
not optimal. Institutional sponsorship, return on equity and profit margins are
all healthy. The Multimedia & Graphics Software Group is an average
performer with few high RS stocks.
Recent Breakouts
Company Name |
Symbol |
Relative Strength |
Price |
Average Volume |
| Copart Inc. |
( CPRT | Quote | Chart | News | PowerRating) |
96 |
32.81 |
692,400 |
| Genesis Microchip |
( GNSS | Quote | Chart | News | PowerRating) |
98 |
45.09 |
2,269,500 |
| Nvidia Corp. |
( NVDA | Quote | Chart | News | PowerRating) |
94 |
53.11 |
10,349,600 |
| Panera Bread Co. |
( PNRA | Quote | Chart | News | PowerRating) |
96 |
44.15 |
305,800 |
| Taro Pharmaceuticals | ( TARO | Quote | Chart | News | PowerRating) |
98 | 39.90 | 783,100 |
Stocks Forming Handles
Company Name |
Symbol |
Relative Strength |
Price |
Average Volume |
| Integra LifeSciences |
( IART | Quote | Chart | News | PowerRating) |
96 |
29.10 |
346,800 |
| Krispy Kreme Doughnuts |
( KKD | Quote | Chart | News | PowerRating) |
95 |
35.37 |
681,600 |
| PEC Solutions | ( PECS | Quote | Chart | News | PowerRating) |
98 |
24.00 |
299,300 |
| THQ Inc. |
[THQI|THQI} | 96 |
52.70 |
1,400,400 |
Stocks Building Bases
Company Name |
Symbol |
Relative Strength |
Price |
Average Volume |
| Career Education Corp. | ( CECO | Quote | Chart | News | PowerRating) |
92 | 31.10 | 1,097,200 |
Remember that all securities are
risky. In any trade, you should always reduce your risk by adjusting position
size and placing open protective stops where you will sell your long or
cover your short in case the market turns against you. For an introduction to
combining price stops with position sizing, see our lesson,
Risky
Business.