Flaunting the Wide Open Gap

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Not only are we holding the huge gaps on the daily charts of the leading indices and sectors that were created yesterday, but we are also seeing some modest follow-through this morning. I am seeing plenty of traders who are anxious to put on hedges to play for a rollover, but there exists little evidence that a gap fill is imminent. On my video market recap last evening, I discussed the difference between common gaps, which always get filled, versus runaway/breakaway gaps, which do not.

In addition to the gap concept, continue to keep an eye on that 1332 level on the S&P 500, which we know represents the outer limits of our multi-month trading range. We have previously close above it, but now there is a distinct possibility that it will turn into support.

Top Ideas: ORCL SRCL WTW

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[youtube:http://www.youtube.com/watch?v=hWeXsHjNFwo 550 412] _______________

After leading the charge higher last September, we know that the semiconductors have been notable laggards over the past few months. With the market’s incredibly bullish reaction to Intel’s earnings on Wednesday, many semis gapped higher in sympathy. For swing traders, it can be a bit of a dilemma in deciding whether to put on positions for largely damaged charts that see gaps. In all probability, your best bet is to wait for them to firm up a bit after the initial pop, and look for signs that the move higher has staying power before entering.

Indeed, if the rain has already fallen for semis and they have bottomed for the year, then by definition we will have ample time to get in on them. After surveying the technical landscape of many of the semiconductors this evening, I am seeing numerous spikes higher today. However, they are in danger of gapping directly into overhead supply. Hence, I wanted to provide you with a few of the semis that have relatively clean charts out there. Also, note that UTEK reports earnings tomorrow.

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Direct Link Click Here

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Out of all 202 industries, the third-ranked today by The PPT algorithm is Wholesale Drugs. Click on image below for full-size view.

To my eye, the best charts on the screen are: ABC ESRX MCK OCR

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Yes, I am aware of AIXG and a few others, but when I think of the LED plays, I can only think of the drama queens known as CREE RBCN and VECO. All three have given us more than our fair share of “just the tip” false breakouts over the past few quarters. After being a star of 2009 and early 2010, CREE has turned into a laughingstock. After its latest earnings disappointment, the hated stock finally looks a bit overdone here. Even if it is not, RBCN and VECO are looking good in their own right. They both have earnings coming up in the next few weeks, so be cognizant of the calendar. However, on strength (especially RBCN), these drama queens may finally be ready to put out.

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As we move through the New York lunch hour, the bulls have done an admirable job in holding this morning’s gains. The price action is impressive, and breakout plays appear to be working. Moreover, oversold names are seeing solid bounces, namely FCX. With that said, there are two important points to remember:

1. We are still in the midst of earnings season.
2. We remain in the 1300-1332 trading range on the S&P 500.

With AAPL reporting this evening, it remains to be seen just how much of a pull that stock has on the rest of the market. Beyond Apple, many of the names that I have been charting for you, especially the retail stocks, report earnings next week. It will be interesting to see if they run ahead of earnings, setting a possible “buy the rumor, sell the news,” scenario. AMZN reports earnings on 04/26, and is sporting an enticing chart as well, seen below.

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