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Inside the 12631 Trading Service, we have been looking at the development of the confirmed inverse head and shoulders bottoming formation printed several months back on the IYR, ETF for the real estate sector. With homebuilders perking up late this week, keep an eye on the IYR next week. The measured move target from the massive inverse head and shoulders is roughly $68, which has not yet been acquired.

A much more aggressive play would be DRN, the triple-levered ETF for the IYR. Of course, this carries much greater downside risk. Either way, if the idea is to press the bears when they have been caught out of position after Tuesday, then I believe IYR is definitely one of the places to look next week.

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I profiled the technical damage sustained by Green Mountain Coffee Roaster’s stock several times last year, so the argument could be made that the market was starting to move (in addition to the corporate governance issues) well before Starbucks’ announcement to make a serious venture into the single-cup coffee market via the “Verismo.” Either way, shares of Green Mountain are down roughly 15% this evening, while Starbucks is seeing an initial pop to the announcement.

From my vantage point, the more interesting play here is Dunkin’ Donuts. First and foremost, we have an excellent technical setup, with the stock breaking out Thursday from a tight consolidation on strong buy volume. I am now looking for $30 to hold as support. If so, I expect Dunkin’ to commence a fresh, potent leg higher, making new highs since its IPO last summer.

Starbucks has a market capitalization over ten times that of Dunkin’. Moreover, SBUX CEO Howard Schultz has big plans to sell beer and wine in his stores soon, so perhaps Starbucks buys out Dunkin’ down the road and the latter takes over the role as the “fast food” coffee end of the business, while alcohol-serving Starbucks seeks to become the new neighborhood bar/lounge? Just a thought. Feel free to chime in below.

Regardless of all that speculation, Dunkin’ looks like the play that has the most explosive upside, even as Starbucks and Green Mountain dominate the headlines.

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A few nights ago I discussed the lodging sector for members inside the 12631 Trading Service. It is often an overlooked industry by many traders, for whatever reason. However, the weekly charts of stocks like H HOT MAR WYN have all given similar looks, breaking out on strong buy volume over the past few months, and then consolidating in a very tight manner without much selling recently. What impresses me most about their weekly charts is how clean they are, in that regard.

Today, Marriott looks to be taking on a  leadership role in the group with its outperformance. The weekly chart below indicates that the stock might just be getting started on a secondary breakout higher, if this initial pop holds.

MAR is not HOT, but it sure is pretty.

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Last year, I profiled the three-headed monster in the electronic medical records space many times due to their impressive performance. It is hard to argue with the secular shift taking place in the medical field, in terms of how records are being kept. The three-headed monster being: CERN MRGE (Large Marge!) QSII, with CERN being the leader. Of course, even during the most potent and lasting of secular trends, you see corrective periods. Indeed, the three-headed monster endured a sharp one recently, taking a backseat to some of the hotter areas of the market, such as other industries in the technology sector and the retail/consumer discretionary complex.

However, CERN looks to have come back with great vigor, as you can see on the weekly chart below. I want us to take a look at the weekly charts for the big three tonight, so as to capture the overall essence of the large trend higher. Note the head and shoulders continuation pattern on CERN, as the topping thesis has clearly been negated with the high volume breakout to fresh levels. This is a secular trend that may very well be commencing another major leg higher.

As such, I would keep all three stocks on your watchlist for strength. Oh, and be sure and tell ’em large Marge sent ya!

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Deckers is getting crushed today, and may be headed toward the low-$60’s/upper-$50’s to test some longer-term levels. However, do not let that distract you from the overall retail picture. The XRT, ETF for retail, is acting relatively and absolutely strong. While many stock and and sectors are struggling to stabilizing at their 50-day moving averages, retail is still above all its moving averages. The recent pullback has been a decidedly orderly one. Keep in mind, the XRT has seen this outperformance with the struggling NFLX being its second largest weighting holding, which makes the ETF’s performance all the more impressive.

Eventually, we should see a rotation down the materials if this bull is going to march higher. Until then, though, keep an eye on all things retail. TFM had a good reaction to its earnings this morning and has s solid chart setup. DKS CAB CHS HIBB are other names to watch.

 

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My bread and butter is charting high probability breakout plays in healthy markets. However, broadly trending markets also offer enticing “support buys,” for traders who can buy a stock on a pullback with a disciplined exit strategy in case the bid fails to materialize. I prefer to wait for signs of strength and at least stabilization, rather than trying to catch the proverbial falling knife.

With a low float and a heavy short position, as well as earnings out of the way, BJ’s Restaurants has recently come down its 200 day moving average in a virtual straight line. The daily chart printed a hammer-like candle with heavy selling volume on Friday, followed by an impressive intraday reversal higher on Monday. This tends to be a sign of selling exhaustion. BJ’s looks to be stabilizing on a key reference point and I think it is a good idea for a support buy. I would add, though, that a clear stop-loss is crucial here, as failed support can get ugly in a hurry. A stop no lower than $47 makes sense.

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