Feb

26

Investing Systems Research Lab Blog for Week of February 28th, 2011

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I started last weeks blog with the statement “It would not surprise me to see a pullback next week.” There was no trading on Monday, but Tuesday morning all the indexes gapped down and proceeded to sell off hard. All four major indexes sliced right through their 20-day moving averages like they weren’t even there, before rebounding a bit at the end of the week. All in all it was pretty brutal and a lot of individual stocks got crushed.

However on Friday, many of the stocks in the leading sectors, oil/energy-related and semiconductors had nice rebounds and these are the ones to watch next week.

A ton of stocks have the same “someone bought the dip” pattern, but I am thinking there is still work to be done near the lower end of the range. One of the nice things is that the lows of last week present a great place to set a stop on many stocks.

Actually if that was “the dip” we have been waiting for then there will be a lot of great swing trade opportunities this week. Especially in the energy and oil stocks, which have some of the best looking charts of all.

One thing concerns me and is illustrated by this graphic of a topping pattern.

As I looked through about a thousand charts this weekend I see a lot of them that look to be in the “B” wave. The B wave likes to suck in the dip buyers that have missed the run up to new highs and think a stock is in the pullback represented by the 4.

I’m not a big “wave” guy but this is a good illustration of how many stocks behave when they do indeed top.

There are a lot of strong stocks out there that are probably going to push to new highs, but there will be quite a few that fail and take out last weeks lows, so the key is to place a stop where the A and B waves meet.

Here are some stocks that look good going into next week.

AMGN isn’t exactly the type of pattern I normally like, but it looks to me like it’s a good possibility it has put in a multiple bottom and could start to cycle back up. Any breach of the horizontal line would nullify this of course and that’s where the stop would go.

One thing that makes me nervous is that the “energy trade” seems pretty crowded and the conventional wisdom is that oil is headed higher. However we can’t deny that these are the stocks that look the strongest and we have to go what we see unless it changes. Honestly I could have probably included a dozen more energy stocks in the list above that look good right now with tight stops. I’m certain if the trend continues up we will see a lot of them in the scans like we have recently.

Also next week I will be watching the Uranium stocks closely. Some of them look like they are set for a nice rebound trade.

CCJ URZ DNN URRE UEC URA

With the “unrest” in the Middle East we are still in a news driven market and it could go either way as we saw early last week. When the overall market sells off hard, few stocks are spared.

It would not surprise me to see a rebound early in the week, followed by another sell-off that probes the lower end of last weeks range. If it can hold there and form a base, that will be very constructive. If it takes out the lows, then we are likely in the C wave from the graphic above and it’s best to stand aside or perhaps consider shorting. Beware the Ides of March?

On a positive note going into the week, there are a ton of Pivot Lows. So be sure to run your Pivot software or check out the list in the Research Lab from the NASDAQ 100.

So it’s going to definitely be an interesting week ahead. Lots of news will be moving the market so we will just have to see how it plays out and take it day by day.

As always, we invite you to Join us on the Live broadcast at the market open as we monitor the picks from the scans.

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Feb

19

Investing Systems Research Lab Blog for Week of February 22nd, 2011

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It would not surprise me to see a pullback next week. I looked through over a thousand charts and I see several things. Tons of stocks are in parabolic patterns and many of them had reversal bars Friday. Many of the market leaders are already in pullback mode. A good majority of stocks are extremely extended from their moving averages and it’s unlikely they will continue straight up without a correction. I see quite a few nominal breakouts and many of these are getting turned back rather than following through.

So as ridiculous as it sounds, I think it will be a choppy week ahead. While the averages were up modestly Friday, under the surface there was a lot of weakness in individual stocks and the advancers barely outpaced the decliners. We can’t deny the awesome strength in the semiconductors and oil-related stocks so watch those closely for signs of weakness. Also the solars have been moving up and mining stocks seem to be gaining strength from the effect of new highs in silver and the recent move in gold.

There are still a lot of earnings to be released so the best thing to do is focus on individual stocks and see what happens.

It was really tough to find decent chart patterns this week but I did manage to find these.

So there are some stocks to watch next week. A couple of these might make it into the Trade Plans at some point so be sure to check before the open each day.

The market is closed Monday for President’s Day so we will see you Wednesday morning on the Live broadcast.

Enjoy your long weekend!

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