Tentative, But Still OK

May 15, 2001
Tim Truebenbach

The
stock market made a substantial move off the lows of early April
accelerating into the end of the month. Towards the second half of the month,
stocks in growth industries started hitting 52-week price highs out of sound
trading ranges that these same stocks had been in for the past several months.
This second point is one extremely strong reason the current rally may continue.

Last week, stocks
continued to act well. New names posted 52-week highs. Other companies that had
been moving higher pulled back on lighter volume, a sign that people were not
rushing to take profits. The S&P 500 did show slight signs of selling as it
has posted four non-consecutive down days in volume heavier than the day before.
These days occurred on May 8 & 9, May 2 and April 30. Since the overall market
usually carries 75% of the stocks with it, this slight selling warrants caution
and a reason to either be alert or take a piece of profitable positions off the
table.

Daily
chart of S&P 500
(
SPX |
Quote |
Chart |
News |
PowerRating) with NYSE volume.

Moving forward, it
will be important to look for two things: 1) the market pulling back on lighter
trade and seeing the selling subside, or watching rallies come on heavier trade
as the buying intensifies and 2) stocks breaking out or continuing to hit new
highs. Monday’s trading saw 245 new highs vs. 47 new lows; a favorable
statistic.

New stocks continue to
break out of well-formed ranges and successfully move higher. As long as these
stocks have been heavily scrutinized and qualify for the portfolio, they should
be bought, playing it close to the belt as usual. A maximum of 8% losses on
stock purchases that do not work are very important to keeping a portfolio in
tact should things fall apart.

Recent names are
coming out of the Oil and Gas, retail and building sectors. These industries
have provided the leadership of the market. Most people have been looking for
technology to be the strong sector to move things higher, but most tech stocks
remain well off their highs. Whatever is ‘popular’ or obvious seldom works in
the stock market.

Recent breakouts I
have been following are two of the names mentioned last week and come from the
Oil and Gas sector. Evergreen Resources
(
EVG |
Quote |
Chart |
News |
PowerRating) moved above its breakout level
and has marched on to an 11% gain. Evergreen is fundamentally strong and has
been rallying on steady, above-average trade. Pioneer Natural Resource
(
PXD |
Quote |
Chart |
News |
PowerRating)
is breaking out of a solid 19-week base as I complete this article. Volume is
only 230% above average!

An alert just reminded
me of one more stock that may move through its pivot point of 35.30 in the near
future: Retailer, Coach Inc.
(
COH |
Quote |
Chart |
News |
PowerRating). This is one to study sales on closely
because they are behind most of the other retailers in when speaking of sales
growth, (and coincidentally not the first one to break out.) The last name I
will throw out there is everyone’s favorite doughnut Krispy Kreme
(
KREM |
Quote |
Chart |
News |
PowerRating).
If you haven’t tried on of these, you’re missing out! The stock is good too as
it works on a handle.

As of this writing,
the fed has just decreased interest rates 1/2 point, which should have much less
a bearing on decision-making than the market’s attitude surrounding the event.
In the meanwhile, it will be important to watch the overall averages and leading
issues for further success of signs of trouble.

Good luck trading!

Tim

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Kaltbaum on TradingMarketsWorld! Gary Kaltbaum will be appearing on the
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Tentative, But Still OK

BUY THE FEAR, SELL THE GREED

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