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I profiled mega cap energy firm Exxon Mobil yesterday as being a solid long setup on a weekly chart timeframe. In addition, other large cap oil firms are setting up on their respective weekly charts as well. Now, the key here is patience, as we are stalking major, multi-month or even multi-year breakouts. What intrigues me about all these large cap oil setups is that they have had plenty of time to consolidate prior gains, and have done so in a relatively benign manner. What you are looking to see is that next burst of strength for a breakout in the form of institutional players allocating large sums of capital into these stocks. Also note the well-defined levels of resistance on these charts, making it easier to define risk.

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To drive home a point that I have been discussing recently, the bifurcation in the market is coming to a head. Consider the risk/reward profile for allocating fresh capital on the long side to a stock like that of fast food giant Yum! Brands (home of Colonel Sanders’ KFC brand), which has not so much as closed below its 20 day simple moving average since November 2011. Even if the rubber band is not going to snap here in the form of a major, multi-quarter top, if you are a swing trader then you have to consider the ramifications of going long right here, right now over the next few weeks. Indeed, a violent shakeout down to the 50 day moving average or so should be entirely expected at this point, despite how unrealistic it seems given the perpetually drifting higher market. At the very least, the reward of short-term upside does not substantially outweigh the risk of a downside correction.

When you place a stock like YUM next to, say, chicken producing firms like PPC and SAFM, you can see which charts present higher quality setups over the next few days and weeks. Again, timeframe matters, as YUM has just seen an explosive breakout to fresh highs this year, and there is no reason to call for a generational top. With respect to swing trading, though, the safety, or lack thereof, of an entry point within the context of a given intermediate-term chart is an important factor to consider. PPC and SAFM have both consolidated their recent breakouts exceptionally well, and are much better setups to stalk on strength.

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Walking into the new quarter, there is a bifurcation in the market with some stocks and sectors very extended, while others are searching for a bottom. Faced with that backdrop, I am inclined to look for an increasingly selective stock picker’s market in the short-term. Many issues in the Nasdaq Composite saw potent moves in the first quarter, climbing a rather steep wall of worry. As the growing acceptance of the bull has started to materialize, though, momentum has shown signs of slowing. Indeed, the market is usually going to do that which frustrates the majority. Just as the uptrend became too obvious to ignore (and fight), the price action has become increasingly devious, with false breakouts each of the past two Mondays.

Large cap technology, retail, and consumer discretionary plays are by and large extended here. Some are more extended than others, but I am still on watch for a “lock and roll” rotation down to the real estate sector, materials, and energy plays. Even within a given sector or index, there is room for rotation. As an example, contrast the weekly charts below of Apple to Amgen. The latter has been consolidating its initial 2012 thrust for several months now, while Apple is ripe for a short-term shakeout after running over bears and doubters for the past two hundred points.

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Here is a freebie from The PPT Seasonality feature, which offers jaw-dropping statistics at times. I found a stock that has been up 100% of the time in the month of April, with 14 data points to boot. Beyond that, the average return for this stock in the month of April is north of 18%.

Do I have your attention now? Good.

Included in The PPT is not only a seasonal breakdown of how each ticker symbol performs in each month of the year, but also a detailed month-by-month breakdown. As an example, the stock which I referred to above is the biotechnology firm, Medivation. Of course, no trend lasts forever. However, we know biotechs have been hot this year, and even though MDVN has seen a strong run, the seasonality has been too strong to ignore.

Here is MDVN‘s seasonal breakdown. Current members of The PPT and 12631 should click here to see an even more detailed breakdown of Medivation’s performance over every prior April. Sorry, guys. That one is for closers only.

If this type of analysis interests you, in addition to countless other features, please click here to learn more about becoming a member of The PPT.

April

Stats for the month:

Avg Return	18.03
# months TOTAL	14.00
# months UP	14.00
# months DOWN	0.00
months UP (%)	100.00
months DOWN (%)	0.00

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