Yearly Archives: 2011
Get a Degree in Communications
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As I have been discussing in my recent video market recaps, if the market is going to emerge from this choppy period and commence a fresh leg higher, it is bound to be much more of a stock picker’s market. As the bull matures, capital tends to rotate out of the previously obvious winners towards sectors that may have lagged heretofore. The coal sector is one area that I have been watching closely, as money may come out of some of the frothier oil services names.
Another group of stocks that are rather blatantly under accumulation (heavy buying by institutions) are communications equipment firms. Even during last week’s broad market volatility, especially on Friday, this sector displayed unbelievable relative strength. Below, I am going to present the leaders of the group first, followed by other firms setting up behind them.
See my notes on the charts.
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Video Market Recap 03/04/11
Cross-Dressing Over to Some Dips with Rips
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The essence of a newfound volatile market full of indecision is that one day victorious bulls are lecturing you in patronizing tones about how Wall Street involves risk and that you have to be in the game to win. The next day, as the market craters, bears are on television dressed in their Sunday’s best and offering up sobering pragmatism as to why we are in need of a healthy capitalist cleansing.
The reality is that we remain in a very choppy market that is, by definition, designed to frustrate and make fools out of both stubborn bulls and bears. Those traders who can hold out in heavy cash and exude discipline will ultimately be in the best position to strike when the time is right. To my eye, the correct time to strike is when the trading range we are in, illustrated below, resolves one way or the other. Until then, nimbly buying the dips and selling the rips is working for aggressive traders with a very short-term timeframe.
The increasing size of recent daily price candles and heavy selling volume on down days are friends of the bears, not bulls, especially in light of the steep uptrend we have seen over the past few months. Nonetheless, as the market has demonstrated countless times, preemptively shorting has been a huge money loser. Thus, the best strategy continues to be cash, until the range breaks one way or the other, without any emotion as to whether the bulls or bears ultimately emerge victorious from this chop.
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One Word: Plastic
[youtube:http://www.youtube.com/watch?v=PSxihhBzCjk 550 412] ____________
Once known as reliable momentum names, notably Mastercard, the credit card players have recently become a much-maligned group, in the face if menacing regulatory risk out of Washington. However, a look at their charts of late is telling me to keep them on watch.
The weekly chart of Mastercard shows a textbook, multi-year symmetrical triangle near its apex. Note how all weekly moving averages are relatively compressed and are all below price, offering support. I am looking for a break and hold above $260 to validate the bullish move out of the triangle. In a similar vein, Visa’s daily chart shows price breaking out above all moving averages today, out of a descending triangle. Once again, all of those moving averages are now compressed and firmly below price, which usually portends a big move higher.
Both names can run much higher before they even come close to approaching multi-year highs.
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