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We have some homework to do regarding the biotechnology sector. The IBB (sector ETF) is coiled and so are a few individual names at first glance, such as BIIB and PCYC. I will be unlocking a whole host of screens inside The PPT to isolate the very best setups in this sector. Also note on the monthly of IBB how the uptrend has clearly persisted since 2009, leaving no doubt of higher highs and higher lows, unlike other sectors that breached their 2010 lows.

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Should the market continue to melt higher in a V-shaped manner, I acknowledge that I will not reap the full benefits by not being aggressively long. I have yet to see a plethora of the types of high probability swing trading setups on the long side from which I typically make my biggest profits. I also acknowledge that there are many ways different styles and systems in the market that can be profitable if executed properly. So, you are going to have to decide what style works best for you and to which principles you are most likely to adhere. That said, commingling styles is the easiest way to lose money, such as the infamous gambit of “turning a (losing) trade into a long-term investment.”

Currently, I have a few select longs on, such as NILE inside 12631, with a continued heavy cash position. Because I was in very heavy cash for much of the market’s ride down this summer and early-autumn, I am in no rush to chase stocks anywhere. I am content to wait for proper entry points to present themselves, so long as the market holds above (on a weekly closing basis) that key 1120 zone on the S&P 500.

In the cloud-computing space, looking at much of those technology stocks with exposure to this niche it is obvious that they have endured some serious carnage in 2011. Even compared to other areas of the tech sector, the cloud bloodbath is breathtaking. However, now the daily charts of EMC FFIV NTAP RAX VMW all indicate potentially massive, two-month bases/bottoming formations. Again, I am in no rush to be a hero down here, but they do merit close attention.

In addition, the four charts below of stocks with cloud exposure impress me even more than the aforementioned stocks. I suggest keeping them high up on your watchlist. What you are looking to see, in order to buy these, is a benign broad market pullback or sideways period of consolidation, so that the promising patterns in the charts below remain intact.
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It is worth noting that Mattel is clearly the best performing toymaker, and it is not even close. While Hasbro and Jakks Pacific lag, Mattel’s weekly chart is ready to make fresh highs as it clears a tight, multi-month consolidation. Note how quickly it snapped back from the broad market summer swoon, and then subsequently consolidated in an orderly manner. This is the type of action that I am looking for to become ubiquitous if the market is truly going to give long swing traders an excellent chance as big-time profits in the fourth quarter.

Also note that earnings are this Friday, so I would look for an opportunity to enter the stock on weakness as long as the breakout holds above the $27 area.

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It is often convenient to dismiss any constructive price action in the more defensive areas of the market with the blanket statement of it being simply “investors chasing yield,” or “fleeing to safety.” In reality, though, not all high yielding, traditional safe havens of the market perform in unison. Recently, the utilities have been more impressive than the general consumer staple ETF, XLP. Actually, to drive a point home, even in the tobacco space stock picker’s who selected LO MO and RAI have seen a much better performance than those who picked PM. So, brushing aside all high yielding defensives as being in the same boat usually just illuminates a lack of effort and focus.

Currently, the utes are running and threatening a major breakout on the weekly chart. You are talking about a possible perfect trifecta of tailwinds, in terms of consolidation in the industry, favorable valuation, and attractive, relatively safe yields. Note the ascending triangle on the weekly chart below of the XLU, as well as D and ED as some of the best performing utes.

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While I eventually need to see some consolidation before becoming aggressive on the long side, there is no sense in fighting this tape as it squeezes higher. A name like AAPL had come down quite hard in the past few weeks, and bears got caught trying to push the envelope too much, too soon. A vicious short squeeze, though, does not automatically equal an excellent entry point for high probability trades. So, timeframes should still be kept rather tight here. With the way this market has either gapped up or down at the open over the past few months, one thing is for certain: If you try to catch every single move you will find your account chopped to pieces.

One short idea that I like because of its broad base that has potential to move much higher is MED. No position yet for me here, but I am stalking it. Note the potential inverse head and shoulders bottom with a neckline at $17.85.

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While I am being a bit facetious with my title, the serious issue presented here is whether a “screaming buy” is found in Wal-Mart’s current stock price. If you look at Wal-Mart over the past decade or so, you can see that the stock has gone literally nowhere. Value players like Karen Finerman have had their patience tested with the non-performance of the stock to the point where we do not hear much from them about WMT anymore. Old Man Buffett still owns Wal-Mart, but even he does not discuss the global retail mega-store famous for low prices. We also know that there is considerable competition with Wal-Mart’s prices from other online retailers nowadays.

As will always be the case with fundamental arguments, you are going to have to ask yourself at what point the market has baked it into the cake. The aggravating factors against owning Wal-Mart have highly likely contributed to the fact that the stock has been the epitome of dead money since 2000. With the monthly Bollinger Bands pressed tightly together, along with most of those monthly moving averages converging to a point, Sam Walton’s pride and joy is ready for a big move. Of course, we all want to know in which direction that big move will be. To be sure, the tight price action tends to favor the bulls, as opposed to loose and sloppy patterns and heavy selling volume which favor a bearish outcome.

If you believe that Wal-Mart will be a continued American icon and thriving global business as the 21st century progresses, then we are probably near or at an excellent long-term buy point.

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