Today's Overview - TheStreet

[Pages:10]Friday, March 19, 2010

Today's Overview

(Special Note: I'm headed to Europe on Wednesday to speak in Paris and to promote my second book, which will be released on April 20. I'll publish Watch List updates at the end of the first and second weekends of my trip.)

The major indices poked higher at Friday's open, and then sold off in a vertical decline that carried into the lunch hour. The market then went dead as a doornail and chopped sideways near the intraday lows until the last half-hour, when another selloff wave hit the tape. Despite the weak close, this Sunday's market-moving event -rather than the short-term technicals -- should dictate Monday's price action.

The broad commodity complex took a beating after the U.S. dollar surged higher in a strong recovery wave. The Euro-Dollar (EUR/USD) currency pair sold off hard and is once again testing four-week support at $1.35. Taken together with the equity reversal, it's another sign that Wednesday's small-scale downturn might have been a harbinger for the start of a topping pattern or an intermediate decline.

For the second time in three months, a classic options-expiration week shakeout has taken place right in the middle of Friday's finale. While this might seem logical, it hasn't happened that often in the last 10 years, because options "pin" prices are usually established by Thursday afternoon. I guess it's just another way that program algorithms have deconstructed seasonal patterns in order to fool the majority.

Despite today's expiration- and news-driven downswing, convergence of the major indices at rally highs is still in force. It will take selloffs through 1150 on the S&P 500 and through 1900 on the Nasdaq 100 to trigger the first stages of failed breakouts, so those are the levels to watch early next week. Until that happens, view this decline as a buying opportunity and act accordingly.

I don't know how this weekend's health care vote will affect the market early next week but I suspect that, no matter what happens, the world will stay firmly planted on its axis. However, uncertainty equals risk so light exposure makes sense, especially with overbought technicals in place. Personally I'm hoping for another down day on Monday, because that might set up better pullback trades.

(Continued on the next page)

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Friday, March 19, 2010

I dipped into small shares of Visa (V) when it broke $90 and doubled up in the afternoon. I'm holding that stock over the weekend, along with Pentair (PNR) and MCG Capital (MCGC), which I bought near the close. As you can tell from the tonight's note, my travel plans have changed once again. I'm now leaving Wednesday and bypassing merry old England entirely due to the airline strike in that country. As a result, the Monday and Tuesday newsletters will be published on their regular schedules.

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Friday, March 19, 2010

Random Notes: Bullet Points on the Market

? Oil-services stocks continued to sell off, with the Oil Services HOLDRs Trust (OIH) dropping another 2.7%. ? Recent leadership got hit harder than recent laggards on Friday. ? 4:1 and 5:1 down:up volume pointed to strong selling pressure. ? The semiconductor ETF and indices closed in bearish-looking weekly bars. ? Volume spiked sharply, with the index ETFs posting their highest March participation levels. ? Best Buy (BBY) shot up to a three-month high after a Goldman Sachs upgrade. ? Google (GOOG) could break 50-day EMA support. ? The Russell 2000 Index saw its biggest selloff day since Feb 4. ? Coal stocks finished the week at their lows despite two rally days. ? Transportation stocks gave up Thursday's rally.

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Friday, March 19, 2010

Daily Spotlight

Stillwater Mining (SWC) sold off from $23 to $2 and bottomed out in November 2008. The subsequent recovery reached $14.30 in January of this year and gave way to a pullback that found support near "round number" $10. The stock bounced back to the high about two weeks ago and dropped into a diamond-shaped sideways pattern that's still in place.

Support near $13 has held three times, including in today's session. This could encourage buyers to lift the price through resistance. However, it's hard to tell exactly where the price might surge higher, given the slightly higher highs since the first week of March. For now, I'd just watch the recent high at $14.52 and see if the price takes off when that level is finally mounted.

* * * (Spotlight presents updated index analysis, quick takes on reader favorites and fresh views of active picks. The section belongs to our subscribers, so let Alan know what charts you would like to see by sending him your requests. Please note that Alan can't answer all of your requests due to time and space restrictions. Spotlight stocks are not recommendations to buy or sell, and will not be placed on the Watch List.)

(See Watch List on the next page)

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Friday, March 19, 2010

Watch List

? Eastman Kodak (EK) dropped to two-week support. (long ? 3/18/10) ? Nektar Therapeutics (NKTR) pulled back and could hit 20-day SMA support, currently at $14.25. (long ? 3/17/10) ? Deere (DE) moved sideways at resistance. (long ? 3/16/10) ? Cognizant Technology (CTSH) pulled back to support. (long ? 3/12/10) ? Nu Skin Enterprises (NUS) dropped into support near $28, but the complex pullback pattern doesn't favor a fast bounce. (long ? 3/9/10) ? Pinnacle West Capital (PNW) moved sideways at resistance. (long ? 3/8/10) ? Pentair (PNR) sold off to the triangle apex, which marks support. (long ? 3/5/10) ? Joy Global (JOYG) sold off to gap support and the $55 strike price level. (long ? 3/4/10) ? Goldman Sachs (GS) is testing January resistance. (long ? 3/2/10) ? Visa (V) pulled back to breakout and 20-day SMA support. (long ? 3/1/10) ? Plexus (PLXS) moved sideways at the high. (long ? 03/1/10) ? MCG Capital (MCGC) broke channel support and dropped into the $5 strike level and 50-day EMA support. (long ? 2/26/10) ? Cliffs Natural Resources (CLF) sold off and closed in a bull hammer. (long ? 2/25/10) ? Finish Line (FINL) is testing the rally high. (long ? 2/18/10) ? Cepheid (CPHD) bounced at 20-day SMA support. (long ? 2/17/10) ? The Children's Place (PLCE) rallied to another high. (long ? 2/17/10) ? Tempur Pedic (TPX) is pulling back in a five-month rising channel, with support around $27. (long ? 2/5/10) ? Solutia (SOA) is testing the rally high. (long ? 2/1/10) ? Valassis Communications (VCI) sold off at channel resistance. Channel support is currently located near $27. (long ? 1/26/10) ? Removing Rent-A-Center (RCII) and Manitowoc (MTW).

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Friday, March 19, 2010

Amaye'sriCsloosuer: c24e.B00e[rUgpe.8n6](ABC)

Today's Close: $28.68 up $0.11 AmerisourceBergen (ABC) posted an all-time high at $28.28 in 2007 and entered a long downtrend that found support in the lower teens. It nosed above the old high in early February and dropped into a shallow sideways pattern. The stock surged above that level when the market opened today, and then sold off, closing in a spinning top candle. This is a drug manufacturer. Options expiration and this weekend's health care vote might have undermined today's rally attempt. However, a renewed uptick that exceeds the high at $29.11 should negate any negative signals and yield a breakout to new highs that has substantial upside. Buy the breakout. I don't recommend early positions, because today's failure could portend a larger-scale reversal.

(See second chart on the next page)

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Friday, March 19, 2010

AmerisourceBergen

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Friday, March 19, 2010

The Daily Swing Trade is intended to provide technical analysis and opinions about stocks and markets. Alan welcomes your questions about The Daily Swing Trade and his swing trading strategy and techniques. Please email Alan with your questions at trader@. However, please remember that The Daily Swing Trade is not intended to provide personalized investment advice. DO NOT EMAIL ALAN SEEKING PERSONALIZED INVESTMENT ADVICE, WHICH HE CANNOT PROVIDE.

Question: Can you elucidate the difference between a channel and a flag pattern? Alan Farley: It's a matter of context. Think of it in Elliott Wave terms, where there are primary waves and corrective waves. A flag pattern in either direction must be correcting a primary trend of the same proportion, but in the other direction. If it isn't, then it's just a simple rising or falling channel. Realistically, there will be relative trends you don't care about for the trade you're making at the time. For example, a stock can be rising in a bear flag that lasts for several years after a major decline such as the 2000-to-2002 bear market. In that case, you'd be trading a bull move even though it could be a corrective wave in a broader downtrend. Question: I've been trading for six months and always miss the big moves. Do traders support themselves by accumulation of small profits, or do they depend on large moves? Alan Farley: My big gainers make up for many small losses and stupid mistakes. I do have a number of these big winners each month, on average, and I do my best to keep losers small. In fact, I'm almost obsessive about positions moving against me unless I know exactly why they're doing it. In that case, I'll often give the stocks a lot of wiggle room. Six months is not enough time to establish a track record or a trading style. Over time -- say, two to four years -- you'll develop a better instinct for how aggressive or defensive you need to be on a given day. This intuition will reflect the danger or opportunity in the market at that time. I call this collaring, which I cover in detail in my upcoming new book, The Master Swing Trader Toolkit. Until you develop that instinct, you'll need all sorts of filters and rules to keep you out of trouble.

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