The Right Stuff
Confused with
the direction of the market? I’m not surprised, since it appears
the market doesn’t exactly know which way it is headed, either. Last week, we
saw blatant distribution, and we have yet to see anything really stand up to
that. Yesterday’s rally after the negative news was a start, but volume did
not come in very heavy to state that buyers are going to step forward.
I admit that I would like to see nice,
solid “up” days (1% or more) on heavier trade than the previous day in
the major indices. On the other hand, if I see any more distribution days (day
where one of the major indices, Dow
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$INDU.X |
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Nasdaq
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$COMP.X |
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S&P 500
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day) I would recommend the sidelines.
Leading stocks have yet to make an
impact on the market. Last week, NVR
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NVR |
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punched out of a four-week base. This is a short base and usually prone to
failure, but NVR has defied all odds and the market since its run began in early
December.
Yesterday, several other homebuilders
broke out of their recent, five-week consolidations. Meritage
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MTH |
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HOV |
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and Ryland Group
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RYL |
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these stocks.
MTH was unable to produce much volume
to back the move in its already-light float; although it has been able to rally
higher this morning.
RYL broke out on volume that was about
65% above normal and has pushed through the century mark.
HOV was the day’s best performer as
it managed to close over 6% above its pivot point on volume that was almost
twice its average daily volume.
Meanwhile, the most positive light for
the intermediate-term trader looking for a sign that gains are going to
eventually extend themselves past a one-day breakout lies within Christopher
Banks
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CHBS |
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post solid follow-thru gains for the next several days. As I write this, the
stock is struggling to stay positive and it will be interesting to see how it
acts when it has its first pullback.
As I created my weekly watchlist this
past weekend, a few other names that appeared were Oxford
Health Plans
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OHP |
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PNRA |
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RMCI |
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and Coventry Health
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CVH |
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PowerRating).
PNRA has been setting up the right
side of its 10-week base. Thus far, it has not been able to push through the
pivot of 66.23. Additionally, the company had losses in 1998 and 1999 and that
is weighing in on its ROE. In the current, choppy market of growth stocks, this
slight factor coupled with a high P/E of 72 could work against the stock in the
event of a breakout.
OHP is forging its way to
the top of a base that extends to December 2000. The high of the handle is also
the high of the base at 42.75. Needless to say, getting through 42.75 on heavy
volume would leave resistance behind.
RMCI came out and said they were going
to beat Wall Street estimates on March 25. Following the initial reaction, the
stock has continued to set up in its base that extends back to mid-November.
Moving forward, keep a close eye on the
breakouts that have all the right ingredients. If a company’s fundamentals are
all there along with a solid base, then its success or failure will tell us
something. CHBS and RYL are going to be good “tells” of the state of
growth. Both stocks have taken leadership roles and continue to hold up. As
always, I will be watching the price and volume action of the market and I will
be keeping a close eye on whether leading stocks rise on heavy volume and stay
flat or decline on lighter trade.
Until Thursday,