Tue Feb 7, 2012 3:00pm ESTComments Off on An Edgy Play on Paper
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We are seeing some profit-taking in hot sectors like biotech today, which is entirely to be expected after the group’s recent run. To continue with a main theme of my posts over the past few weeks, I am looking to see if other stocks and sectors are setting up behind the leaders and seeing inflows, which would obviously be bullish. The casual dining space is one area that keeps setting up, as are the paper pays.
Wasau Paper is seeing a highly favorable reaction by the market to earnings, but it is not the only paper-related firm looking good. To begin with, Wasau’s daily chart looks much better than a mere one-day pop, as it is set up well technically, as you can see below. Beyond that, other paper plays, like Boise, look like they are building tight bases here after their recent advances. Here are some other ideas:
Courtesy of The PPT proprietary algorithm, here are the top 20 biotechnology stocks, current as of this moment and ranked according to PPT Technical Score. Biotechs remain hot relative to the broad market (along with energy, today), and there are plenty of enticing setups on this list.
The biotechnology sector continues to impress, as we are riding JAZZ Inside 12631 and have been for quite some time. Dendreon is a huge mover today, attracting many hot money players for the big technical breakout. In addition, keep an eye on HGSI to follow suit, as it may be on the cusp of that secondary breakout from a tight consolidation.
Mon Feb 6, 2012 12:39am ESTComments Off on Delicacies Delivering the Goods
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People sure do love their hot coffee and tea.
While Green Mountain Coffee Roasters and Starbucks get most of the attention in the hot beverage sector, you will note the major, multi-year breakouts on the following weekly charts below. Also note that Dunkin’ Brands Group (Dunkin’ Donuts), while not pictured below, showed impressive strength last Friday. However, they have earnings coming up this week, so I will avoid trading it until after the report.
The recent broad market strength has lent itself to rallies in many stocks. That said, what has impressed me most about this sector is that they many issues in it are at multi-year highs, which has me looking at them as a leadership group. Green Mountain has much work to do to reverse the technical damage it sustained last year, but in the meantime there are other firms with major coffee and tea exposure that are firing on all cylinders.
The dramatic reaction by the market to the upside after Friday’s jobs number, ironically, seems to have brought out even more pessimism on the part of many traders. Indeed, we are seeing quite a few of the hotter stocks of late become extended. As such, we enter next week with many on watch for a dramatic downside reversal.
Instead of embracing the case for a major top, though, my focus continues to be on staying constructive with this much-improved market, without becoming complacent. Inside 12631, I locked in a fair amount of winning trades and profits on Friday into the market’s strength. With those profits, I am putting in the work over the weekend to see if there are stocks setting up behind the leaders that are not yet extended. Hence, the “lock and roll” concept, which I discussed in greater detail in this post last week, could easily be in play next week.
The scenario that I do not see being discussed much is one where the senior indices work off extended conditions through time rather than via abrupt drops, all the while a growing number of individual stocks continue to work well. Here are a few long ideas that fit that description. Members of 12631 should check inside the service’s main blog for even more ideas.
When the market sees a steady overall bid pushing it higher, like it has in recent weeks, the natural tendency for many traders is to acknowledge the progress made by bulls, but to prefer buying into it only after the market corrects. It is very easy to pull up a chart of the S&P 500 Index and magically declare that 1270 is a place where you will allocate your precious capital, because otherwise stocks are for the birds if they keep moving higher from here. The problem with that line of thinking is that the market has a knack for making even the most polished and veteran of technicians look foolish. Understand that we have already corrected from 1333 down to 1300 over the past two weeks. While Friday morning’s jobs data could spark a major sell-off, the bulls have earned the initiative and this market is theirs to lose.
During uptrends and rallies, the hottest stocks will naturally become extended. At that point, we see the bulls’ true test of mettle, in the sense that either capital rotates out of equities as a whole (bearish), or instead rotates out of the extended names and down to stocks setting up behind the leaders (bullish). I refer to the latter, bullish scenario as “lock and roll,” since traders are locking in gains from the extended names, and rolling them back to stocks set up next in line. What the bulls want to see is that continuity between capital rolling back into other stocks as the leaders take a well-deserved rest.
I view the “lock and roll’ test as important not just intra-market (such as the coal, solar, financial names finally starting to sustain moves), but also intra-sector, such as with the biotechnology stocks. Clearly, many biotechs have seen great runs of late. We have successfully been playing quite a few inside 12631, as I have detailed the sector’s new leadership role in many posts over the past few weeks. Of course, quite a few of those stocks are too extended to touch for swings right now. Accordingly, I am looking to see whether we get a lock and roll down to the following biotechs setting up behind the leaders.
