Markets rose slightly for the week with both major benchmarks, the Nasdaq and S&P 500, recording bullish outside weeks in the process. Volume was soft Friday, but above average on a weekly basis. While the S&P 500 has dealt with its big round number of 1500 smartly, it remains to be been how the Nasdaq will deal with it own large round number of 3200. Some solid breakouts occurred, solidifying the markets benign stance. NCR took out a 3 week tight trigger of 28.44, and TWI took out a cup with handle pivot of 25.11. NTI SLM both took out flat base triggers of 27.37 and 18.09 respectively. IMAX closed two pennies below a cup with handle trigger of 25.06 on huge trade. CPB had volume confirmation today, to validate Thursday’s 37.26 flat base trigger breakout. I admit to being a cautious bull, and will not discount any of the dangers lurking out there, but I will try to point out some market positives here. We know the transports, are holding their own, but another important group is quietly climbing the sector rankings. Energy. HAL is holding its bullish gap up nicely, ATW had a bullish outside week, and APC was up 4% on the week, adding to gains since taking out a 79.03 cup with handle trigger on 1/22. Refiners are making their own noise, and will absolutely be in the sweet spot should America become energy independent in the next decade. HES PSX WNR are all digesting gains very well. Quoting the late John Templeton, “bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.” I certainly am not feeling the frenzied jubilation, so count me as one who thinks this market still has some legs.
Stocks that can be bought as they take out the following specific triggers on firm trade are cup with handles OIS 79.14, IPI 24.15.
3 week tight triggers are K 59.48, CNH 48.86.
Other cup with handles are NRGY 20.54, GPN 50.83, LVLT 25.02, MTB 105.02, SWK 78.49, JAZZ 58.09, IRM 34.75, BHP 80.40, SPLK 35.08, G 17.10. Other 4 week tight patterns are DHR 61.59, MDCO 30.97, PH 94.91. Other flat bases are VR 37.73, CBD 49.18, KORS 58.72, CFR 60.31, HMC 39.45.
Stocks that can be bought as they retest prior breakout triggers are ESV STMC TMK. ESV took out a 61.58 flat base trigger to start the year off on 1/2. The energy ETF XLE took out its own flat base trigger of 77.45 on 1/29, and has traded tightly since then. It is quickly approaching resistance near the 80-81 level it encountered on in the beginning of March 2011, and again in mid July 2011. RIG in the group has acted well ever since taking out its own 49.60 double bottom trigger, and keep and eye on RDC too, as it has carved out a decent looking cup with handle pattern with a pivot of 35.48.
SMTC took out a cup with handle trigger of 30.22 back on 2/1, which was part of a year long pattern. Longer patterns tend to be more prone to success. The semiconductor ETF SMH has now risen 10 of the last 11 weeks. Recent breakouts in the group have come from QCOM which took out a 65.63 cup with handle pivot on 1/31, and the pivot was tested just two days later and has traded in a nice, narrow range since. Blast from the past TXN took out its own cup with handle trigger on 2/1, and is vastly outperforming its former rival INTC. Although INTC is resting at 50 day SMA support, it is more than 28% off its 52 week high, while TXN is right at its 52 week high.
TMK hails from the insurance industry and took out its most recent 3 week tight trigger of 54.13 on 1/22, with volume confirmation coming a couple days later on 1/24. Of course we know CB took out a 81.90 flat base trigger on 2/1, and others to watch in the group are PRI UNM. PRI took out a 30.39 flat base trigger on 1/2, and UNM is working on an almost year long base, with a pivot that has not yet been determined. It could be a long flat base, or could decide to put on a handle. Either way, put it on your watch list.
Stocks we are looking to buy as they test 50 day SMA support after recent breakouts, where most stronger charts will find support are PFE ENB. PFE took out a 26.19 flat base trigger on 1/9, and a 50 day test at 26, looks like a good spot for the stock to find support. Keep an eye on its recent spinoff ZTS, which rose more than 6.5% last week.
ENB, hailing from the pipeline industry transporting energy, a theme we very much like, took out a 41.58 double bottom trigger on 12/7/12. Look for the stock to find bids if and when its 50 day SMA is tested at 43.20.
Stocks that can be bought as they reclaim their 50 day SMAs and their buy stop spots are MKC 64.30, CCI 71.45.
TSU can be bought with a buy stop of 21.95, as it attempts to reclaim its 200 day SMA. Others that can be bought as they reclaim their 200 days are CMG 327, WBMD 17.30, SWKS 25.
Stocks we are viewing as shorting opportunities are TS. TS which fell 7% this week also lost its 50 day SMA in the process. It had been carving out a nice looking 43.06 cup with handle pivot until this rough week. Lets look to short this one on a move back toward 50 day resistance which was formerly support at 40.95. If that holds, a retest of its 200 day looks like a logical destination near 38.30.
SU lost 7% of its value, in double average weekly trade this week. Its 50 day SMA also was surrendered. We can look at this in a couple of ways. We can short this on a move back toward 50 day resistance at 33.40, or on a pierce of its 200 day to the downside with a sell stop of 31.30.
BG lost 7% of its value this week, the vast majority coming on Thursday on an ill received earnings report. The ag group itself has been holding up pretty well with the likes of CF MON AGU all acting well, so this was a surprise for sure given the negative reaction. Lets look to short this one on a move back to 50 day SMA resistance at 74.80.
Cup with handle OIS 79.14.
Cup with handle IPI 24.15.
3 week tight K 59.48.
3 week tight CNH 48.86.
Prior breakout pivot retest ESV 61.58.
Prior breakout pivot retest SMTC 30.22.
Prior breakout pivot retest TMK 54.13.
Purchase at 50 day SMA PFE 26.00
Purchase at 50 day SMA ENB 43.20.
Buy stop above 50 day SMA MKC 64.30.
Buy stop above 50 day SMA CCI 71.45.
Buy stop above 200 day TSU 21.95.
Short at 50 day SMA resistance TS 40.95.
Short at 50 day SMA resistance SU 33.40.
Short at 50 day SMA resistance BG 74.90.
The author owns NRG DNKN ADBE. We bought ADBE at 39. 16 as it took out a 38.88 5 week tight trigger. Our stop their will be 38.05. DNKN closed right at its intraweek high for the week ending 6/22/12. We would like to see the stock push north of this area of resistance next week. Our stop will remain breakeven from where we purchased it at 35.35. NRG continues to trade in a bullish, tight fashion, and we are comfortable with the cushion we have since our 12/6 purchase as it reclaimed its 50 day SMA AT 21.95.