Secondary Indicators Look Positive
The major averages are looking pretty ragged
for a market that is trying to begin a new rally. Wednesday’s distribution
does not bode well for the market’s chances of a successful move much higher.
On the positive side, many of the secondary indicators I like to follow are
pointing more and more toward a rally. Unfortunately, these are secondary
indicators because they are not always very timely and they can remain locked in
a bearish stance while the market actually continues downward.
For now, it appears best to hang out on the sidelines and wait for the market
to make up its mind. Either it will take out the rally’s lows of 981 on the
S&P 500 and 1445 on the Nasdaq, or we’ll see a rally on heavier trade.
Either way, there is very little in the way of stocks to go after for a low-risk
entry with the odds in our corner.
Chattem
(
CHTT |
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PowerRating) is holding onto a
successful breakout following its push through 32.60 on 6/12. The stock’s
success or failure is worth watching even though its breakout faces several
obstacles, two of which are the overall market and the company’s choppy
quarterly earnings.
Small-cap stock Mothers Work
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MWRK |
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PowerRating)
broke out of a high, tight flag formation today. The pivot stood at 37.70, and
the stock is currently trading around 39 as I write this. Average volume is only
52k, so it is definitely one to be cautious around. This stock also faces
several obstacles in its pursuit of higher prices, with the most obvious being
the market.
The two sectors that I’m interested in following right now are the
homebuilders and auto parts sellers. Homebuilders are interesting because of
their prior run-up through the last two quarters and continued growth in the
U.S. housing market. NVR
(
NVR |
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PowerRating) is
bumping up against its 50-day moving average, and it is always worth noting how
a stock acts around the 50-day. Ryland
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PowerRating)
has managed to climb back above its 50-day MA as it works through a base that
stands at seven weeks in length.
Auto parts stocks are interesting because as I went through my weekend
research, I noticed a lot of them popping up on my screen. Whenever I see more
than one stock from a group start to catch my eye, I tend to focus more on that
group. Autozone
(
AZO |
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PowerRating) is one of the
companies from the group and has already shown solid resilience despite the
overall market.
Advanced Auto Parts
(
AAP |
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News |
PowerRating) has been
pushing towards the top of its flat six-week base over the past few days. The
company went public in November and broke out of its first base in late April.
If the market can solidify with some accumulation, this stock may stand a solid
chance of moving higher.
For now, it continues to be a time to watch, wait and learn. I will be doing
the latter this weekend in an attempt to continue my education in Los
Angeles, at the IBD workshop on Saturday. I anticipate that I may very
well see many of you there, and I am looking forward to it!
Have a great weekend,