Tuesday, January 25, 2011

Week Ruled by Sellers: If you're holding the classic frothy high-P/E stock, you had one of the worst weeks of your trading lives.

!! Jack Steiman, On More Selling To Come (www.SwingTradeOnline.com) !!
If you're holding the classic frothy high-P/E stock, you had one of
the worst weeks of your trading lives. Slaughter everywhere. If you're
holding lower P/E stocks then you had a nothing-from-nothing week even
though the averages sold off decently. Those high-beta monsters
destroyed the masses as usual, and are the cause of this correction
off the S&P 500 1296 highs. The Nasdaq took the biggest hit and is
down nearly 4% already off the top. With many of the froth stocks
putting in topping sticks for weeks or months to come, the market will
likely struggle along, but it should not get crushed. Just play stocks
that have less risk, and deal with the selling if you need to be

The list of stocks that have snapped is very long, but to name just a
few big time favorites, you need look no further than Apple Inc.
(AAPL). Beyond that we have such favorites as Walter Energy Inc.
(WLT), Alpha Natural Resources, Inc. (ANR), Netflix, Inc. (NFLX),
Priceline.com Incorporated (PCLN), Freeport-McMoRan Copper & Gold Inc.
(FCX), SPDR Gold Shares (GLD), iShares Silver Trust (SLV), and a list
ten fold of that. These stocks are in mini bear markets and should
basically be avoided for now. They'll always bounce, but for now the
down trend is in for these puppies.

Some had true sell signals such as SPDR Gold Shares (GLD), which had
massive volume distribution at recent tops. Others simply got too full
as those 50 to 100 or more P/E's needed a breather. Many had negative
divergences. Lots of excuses and reasons to fall and now that process
is under way for the short-term. Even beasts such as Amazon.com Inc.
(AMZN) now have gaps below their 20-day exponential moving average
which is putting in a top as it back tests.

I do not believe the longer-term bull market is over. We can talk
about how inappropriate that may be from a fundamental perspective,
and I for one would not argue with you. However, you have to play this
game the way it's set up to move, and from what I see from a technical
perspective this is a market that will want to go higher over the
months ahead once this froth correction has completed itself. There
are no sell signals for the longer term in play for the overall
market. There is no distribution volume at the top except for gold's
recent highs. Good news is still being rewarded in the lower P/E
plays. Nothing is out there suggesting the party is over; thus, when
this correction is over there will be some great opportunities out
there on the long side, but patience is key until that time arrives.
The S&P 500 has great support at 1271, or its 20-day exponential
moving average, but that should go away in time during this
correction. 1262 down to 1257 is great gap support, and then 1243 is
the key 50-day exponential moving average. I don't think we'll lose
that 50-day test during this correction, as long as we take it a day
at a time as things unfold. Unwinding has begun, especially on the
Nasdaq. There is more selling to come, folks, so be prepared for that.
It won't be terrible, but more is coming.

!! Mel Hickerson, On Week Ruled By Sellers ( @mels_info) !!
The S&P 500 lost 9.89 points during the week. The range for the week
was 24.80 points, 1.92%. We have now gone 98 sessions since the last
2% range day. Since 1990, the average is one 2% range session every
5.25 days. The last similar such extended period without a 2% range
session occurred in 2007 leading up to the all-time market top.
A key indicator as we watch for a pullback is the four-week RSI of the
four indices (SPX, Dow, NASDAQ, and Russell 2000), which is 67.
Pullbacks often occur as this RSI reaches 80 and bounces near 20.
The holiday-shortened week was ruled by sellers as the extreme ticks
were doubled on the negative side (135 positive and 272 negative) and
the ultimate extreme ticks (greater than 1000) were 12 negative, 0 for
the bulls. Total tick for the week was -116,000. On the NYSE, the
advance/decline line decreased during the week by 2,000 and the 10 day
average of Net Advancing decreased from 239 to -24. There were 613 New
Highs and 105 New Lows.

Looking ahead to next week, it is difficult to not expect more
selling. The weaknesses in the technology sector as well as the small
caps almost always lead to general weakness in the market. The
put/call ratio 10 day average remains low, suggesting that traders
have not hedged their bets; this makes forced selling more likely if
the downside gets moving.

Key levels to watch are 1285, 1293, and 1300 on the upside and 1280,
1276, 1273 on the downside (and 1262 if we should get that far.) It is
important for the bears to contain any intraday highs this coming week
below 1291 and to close no higher than 1285.

!! Sinisa Persich, On Our Free Stock Pick: NBL (www.TraderHR.com) !!
Noble Energy, Inc. (NBL), a Houston-based oil and gas company, has
been up nearly 50% since June, mostly due to rising energy prices.
In the last three months the stock has consolidated in the 80-87
range, which now looks ready to be broken.

Noble Energy finished Friday at the highest closing level in more than
two years, thus showing strength that could continue in the next
couple of trading days and, possibly, weeks. Momentum could move stock
toward the 90-92 area. Preferred entry (buy stop) price is at 87.60,
with a stop loss at 85.60.

!! Harry Boxer, On 4 Boxer Shorts To Watch (www.TheTechTrader.com) !!
The market is in a precarious position here, and we're going to review
some of our Boxer Shorts in order to be prepared for expected

American International Group (AIG) had a difficult week, plunging from
the high 50s to low 40s, with a huge gap on Thursday morning, dropping
about 8 points. The stock has broken its platform of support, rolled
over and cracked hard. Having dropped from 63 to 42 in a very short
period of time, it could easily see a snapback. But watch for a
shorting opportunity on a low-volume snapback.

Cree Inc. (CREE) was a favorite of ours in the last couple years. A
key break occurred when the line of support around 65 was taken out
earlier in the week and then the stock plunged from 65 to 51 with a
huge gap down on Wednesday on big volume. There is support in this
zone, and we could expect a bounce, but not too much, perhaps to 55-55
1/2. If we do get that on low volume it could be a shorting
opportunity. But if market does go down hard early in the week, the
stock could quickly test the 47 1/2 double-bottom range from October.
Ultimately, though, the bottom of this range and lateral price support
in the mid-to-high 30s may be tested.

Juniper Networks (JNPR) rolled over on Thursday and cracked with a gap
in a bearish inside day with heavy volume to the downside. Now with
two consecutive days where the entire trading range was below the 50
dma, and that 50 dma now flattening out, it looks like a rollover may
be underway that could take JNPR down to test 32 zone. If that's taken
out we could see 29-29 1/2.

Skechers (SKX) continues to look like it wants to go lower, finally
forming a very distinct bear flog. If it rolls over here, it may roll
over hard for a quick hit down to test 19. If that's broken, expect
something down around 16, my secondary target, perhaps even as low as
14, the bottom of the channel. We'll see what happens, but the stock
definitely is in disarray as the June high was over 45 and here we are
at 21 and still looking ugly.
Source: Fxstreet.com

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