Sunday, January 1, 2012

Tuesday Game Plan

Markets closed out 2011 with a whimper on Friday, as it did for a large majority of the year. The benchmarks finished the year slightly bifurcated with the Dow rising 5.5% and the Nasdaq retreating 1.8%. The S&P 500 finished UNCH. The Dow's strength can most likely be attributed to the dividends that were coveted this year, as the markets dipped into bear territory in October. The lack of leading stocks breaking out continues to put a drag on market sentiment. There have been a few exceptions as V CELG registered legitimate breakouts. Most however came from defensive groups such as PM ED WMT and was not backed up with strong volume. Many set ups are brewing, but until leaders step up and explode higher a cautious view must be adhered to. The indexes themselves continue to dance with their respective MAs. The Nasdaq has had recent trouble with its 50 day MA, and hit resistance there Friday. The S&P 500 has been frolicking with its 40 week MA. The S&P 500 song has become redundant, as its courting process with the 40 week has been much publicized. There have been some positive developments budding. The emergence of the transports and machinery sectors (both groups are now in the top 3 industry groups) gives some hope. Industries such as these and the fact that steel companies are able to put through some significant metal price increases, suggests economic activity may be sprouting. But as we all know hope is not a viable trading strategy. The IYT is cuddling with its own 40 week MA. UNP, the largest component of the IYT at 12%, has carved a 106.09 cup with handle, and FDX, the second largest component at 9%, had strong earnings and healthy guidance. FDX has been repelled buy its 40 week. In the machinery group AME is perking up and is sporting a 43.83 cup with handle trigger, and PLL has traded tightly and is consolidating its own recent earnings beat. Banks and home builders are showing some muscle as well. Banks modern strength (XLF above 10 week now along with JPM, and WFC above its 40 week) in the face on tough regulations, from Dodd Frank, the Durbin amendment and Basel III has to be respected. Retail sales, manufacturing activity, auto sales, consumer confidence are all on the improve. Lets not kid ourselves however. We still have the Europe overhang, persistently high unemployment, and uncertainty concerning the upcoming November election. Should make for another exciting year. Stocks to put on a watch list as they build potential handles on their right sides are RTN AET KO. CBS is carving out its right side. Short candidates I am following are PRGO DPZ SWI. PRGO has had a bad reversal 12/22 after hitting an all time high and has traded loosely. DPZ has had some big volume down days as it approaches its 10 week MA. A breach of that line should be sold. SWI a recent tech leader has been wounded and is starting to enjoy life below the 10 week MA. A move back to that line should be sold.

Stocks near specific buy points include cup with handles JBHT 46.69, UNP 106.09, UPS 73.76, AME 43.83, PLL 58.30, TMK 44.11, BA 74.84, RAX 45.55, LOW 26.14, SNPS 28.15, SLE 19.36. Cup bases are VAL 40.70, RATE 22.04, FMC 93.10, ADP 55.12, CELG 68.35, SCSS 22.29, NUAN 27.07. Flat bases are CNI 80.54, CPO 53.13. 4 week tight patterns are ABV 36.75, DLTR 84.09 and RS 51.02 in a double bottom with handle pattern.

Stocks that can be bought as they reclaim their 40 week MAs and their buy stop spots are DOV 59.55, JEC 41.30, GD 67.50, BLL 36.25, PPG 84.75, EOG 99.45, OXY 95.15, ARMH 27.95, ASNA 30.45.
OMC retook its 40 week Friday.

Stocks that can be bought at 40 week support are TRN 29.95, SWK 66.10, SPR 19.95, HON 53.45, SAPE 12.35, BBT 24.35, WFC 26.95, CXO 92, APC 75.90, COP 71.40, RRC 60.25, TROW 56.60, MYL 21.10, BBBY 56.75, KMX 29.75, AVT 30.50, QCOM 54. Stocks that found 40 week support Friday were TAP NUE BP GPN TROW NEM.

Stocks that can be shorted at 40 week resistance are KMT 38, UA 72.30, HLF 53.20. GD BLL ARMH all met 40 week resistance Friday.

Stocks that can be shorted as they lose 40 week support and their sell stop spots are RL 134.50, PII 53.75.

Stocks that can be bought at 10 week support are R 51, CFX 27.95, CBE 53.45, FLS 97, JEC 40, RAX 42.05, TYC 46, ATI 46.40, STLD 12.85, JPM 32.45, CLR 65.50, NBL 92.10, OI 44.85, SGY 25.75, KLAC 46.45, NKE 94.60, ALGN 22.70, LKQX 29.10, ORLY 77.10, CL 90, EL 110, DE 75.95. Stocks that received 10 week support Friday were CBI HXL FFIV X CPX INTC LTD. WLL can be bought with a buy top of 47.25, as it reclaims its 10 week MA.

Stocks that can be shorted at 10 week resistance are FDX 84.50, CAT 92.50, PH 80, SWI 29.55, IBM 185.55, COG 79, TXN 30, COH 61.90, ANN 25.10, TSCO 72.25, WYNN 115. Stocks that met 10 week resistance Friday were ANN MELI DHR ETN IBM NOV WLL COH.

Stocks tht can be shorted as they lose their 10 week MAs and their sell stop spots are QCOR 41.20, LTD 39.90, M 31.05. FE COST both lost 10 week support Friday.

Good luck.

The author is long NUE KEG IYT. NUE was purchased right here as it becomes comfortable with life over the 40 week. KEG was bought at 15.30, as it too now has spent at least 4 days closing abve the 40 week MA, and the IYT was bought just below 90, and this trade has been a grinder, as it flirts with support and resistance at that MA.

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