My “12631 RELATIVE STRENGTH” saved screen inside The PPT algorithm seeks to identify stocks which have seen a surge in their respective PPT Daily Hybrid Scores (combination of technicals and fundamentals) while suffering a negative Weekly Hybrid Score from the past several days of trading. In essence, this amounts to a positive divergence which, when cross-checked with the 12631 way of filtering stocks through human technical analysis, yields a focused and cogent list of issues emerging from consolidation or turning back higher after a recent pullback. To put the icing on the cake, I filtered the screen to make sure all stocks had a very strong Relative Strength Score (according to The PPT algorithm).

Here are tonight’s top fifteen results, with some quality charts there to have in mind, should the market’s bullish theme continue.

Members of The PPT and 12631 can click here for the screen.

(Click on image to enlarge)

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Virtually the entire casino and gaming sector, including the slot-machne makers (BYI IGT WMS) I discussed late last week, are now showing signs of life. We know that the major players like LVS MGM WYNN will always be on everyone’s radar, in addition to other trader favorites like BYD and even MPEL in Macau.

Beyond those names, with New Jersey Governor Chris Christie saying he’d be willing to allow online gambling if certain conditions were met, I am seeing plenty of regional casino operators perhaps out in front of even more legislation across the country.

As examples, consider the following three weekly charts.

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The following long ideas with explanations are all rather heavily-shorted stocks. Technically, the charts are working against the numerous bears in these names. While the market could be topping here, we also could easily grind sideways once again before pushing higher yet, as has been the character of the tape in 2013.

Until I see actual evidence of a character change, I am going to at least prepare for the continued case of further bullish action, which means punishing out of position shorts as much as possible. If they trigger to the upside, then that is the time to consider acting. If they do not, then you take a pass.

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The market has turned into a nightmare for shorts in 2013, with bear trap after bear trap. We know that will not last forever. But as long as it does it is worth putting in the work to identify those heavily-shorted stocks where bears are seemingly caught out of position. As an example, it would take the shorts in MEG, in theory, 52 days to cover.

Here are two short squeeze ideas I like on further strength. See my notes on the charts.

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The entire agricultural space has consolidated fairly well over the past week or two, working off stretched conditions generally by pulling back to a respective rising 20-day moving average, such as MON MOS. AGU and CF have also been basing “high and tight.” Now, however, comes the real test as we wait for buyers to step in to support another leg higher.

In addition to those names, consider the following ides on strength in machinery and equipment segment of the ag industry.  Note they have also consolidated recent stretched conditions well.

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The first thing bears wanted to see after yesterday’s sell-off was some immediate downside follow-through to set a price correction in motion. Obviously, that did not happen with this morning’s gap higher. However, a midday or late-day fade may very well accomplish a similar goal for bears. As I write this, the consumer staples in the XLP ETF and healthcare stocks are actually leading, though the small caps in the Russell are acting well. The Nasdaq is trying to stage a bounce off its rising 20-day moving average, too. And that is definitely a reference point I would be observing.

As for the S&P 500, we are back up to 1509, a level which marked short-term resistance in mid-January. Above there, and the bear case for a correction likely gets put on hold, yet again.

Two small caps to watch in the health food space on the long side if they can get some more volume coming in: BDBD BNNY.

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