Thursday Game Plan

Markets digested a bit Wednesday after a nice run to start 2012 yesterday. Both the Nasdaq and S&P 500 closed basically UNCH. You can say the markets are climbing that proverbial wall of worry. The acted stubbornly today refusing to give back any recent gains. The S&P 500 has now closed above the 40 week MA 4 of the 6 past days. The Nasdaq is still hovering between 10 and 40 MAs. No breakouts occurred today but as we have been mentioning plenty, sets up are there. Today LOW broke out of its 26.14 cup with handle base but volume was inconsequential. On the bright side the transports which had bad intraday reversals yesterday, recaptured some of their mojo today. UNP KSU hit all time highs, and the IYT reversed higher after finding solid 40 week support. XLE met 40 week resistance today, but that did not hinder any of the stocks in the sector. COG CXO CLR were all up greater than 5%. You can put in a buy stop on the XLE, which has met 40 week resistance 4 times now since mid October, at 71.75. The more defensive groups were lower again today which bodes well. Alcohol stocks like BUD ABV were hit today. ABV reversed badly after attempting to surpass a 4 week tight buy point Tuesday. Utilities were soft too today. FE is now down 5% in 2012, which we are obviously only two days into, but that is a big 2 day move for a utility. LULU was added to Conviction buy list at GS today and it rallied 9%, which felt a lot like a short covering move. It was stopped right at 40 week resistance, which we like to say is where stock euphoria ends after events like earnings, upgrades, etc. At the expense of sounding like a broken record, I remain cautiously bullish. Stocks breaking out would add to the optimism. Patience is rewarded.

Stocks near specific buy points include cup with handles JBT 46.69, AME 43.83, NBL 99.27, AET 43.99, ALGN 25.68, SLE 19.36. Cup bases are VAL 40.70, ADP 55.12, UNH 53.60, WFM 74.55, AAPL 426.80, CBS 27.98, NUAN 27.07. DG 42.20 in a 3 week tight pattern.

Stocks that can be bought as they retake their 40 week MAs and their buy stop spots are CAT 96.45, ETN 46.45, MMM 86.30, STLD 14.70, TD 78.50, DHR 49.15, AGCO 46. FLS KMT ASNA DE all retook their 40 week MAs today.

Stocks that can be bought at 40 week support are GD 67.05, PPG 84, OXY 94.75, SGY 27.45, GPN 47.10, TROW 56.60, MYL 21.05, KMX 29.75, CPO 50.40, AVT 30.55, NEM 60. Stocks that found 40 week support today were FDX TRN JEC BLL CE OMC NOV RRC SGY TROW ARMH MCHP UA MELI WSM.

Stocks that can be shorted at 40 week resistance are FE 43, TIBX 26, HLF 53.40, TGT 50.45. STLD LULU both met 40 week resistance today.

Stocks that can be shorted as they lose 40 week support and their sell stop spots are SNPS 25.80, PII 53.60. Stocks that lost 40 week support today were DOV TAP AMP XLNX TGT.

Stocks that can be bought at 10 week support are CNI 77, TMK 42, CBI 38, KBR 27.40, BUD 58, RAI 39.75, ATI 47, VRSK 37.75, NTRS 39, APC 78, CPX 33.50, ASML 40.40, ENDP 33.25, BIIB 112, SO 44, ED 59.05, EL 110, NUAN 25. Stocks that found 10 week support today were CBE HXL RAX BK APC ORLY AMT BHP MON. COH can be bought with a buy stop of 62.30, as it reclaims 10 week MA. COG VFC retook their 10 week MAs today.

Stocks that can be shorted as they lose 10 week support and their sell stop spots are CFX 27.80, KLAC 46.45, PRGO 96.70, COST 83.70, ORLY 77.55, SBH 19.85, CL 89.75, NUS 47.90. MA lost 10 week support today after a bearish outside day Tuesday.

Stocks that can be shorted at 10 week resistance are PH 80, TXN 30, RL 147, QCOR 42, ANN 25, BBBY 60.60, LTD 40.15, TSCO 72, ULTA 69, SNPS 27.10, TPX 58.40, POT 44. IBM met 10 week resistance today.

Good luck.

The author owns IYT NUE KEG BLL. Short DPZ. We added BLL today as it continues to garner 40 week support. We shorted DPZ at 33.80. Stop will be the recent high a little more than a dollar higher from here.