Some good earnings today propelled the market upward for almost a 3% overall gain. Looking at SPY, it bounced off the downtrend line well, confirming it to be at least temporary support. I’ve drawn in falling resistance, parallel to this downtrend support line, and I’ll be looking for SPY to break this channel trend, whether upward or downward. It bounced well off the 50 DMA today, which is another good sign, but yet again, volume was missing. If the market retraces back big within the next few days, we’ll see how good of support the 50 DMA offers; otherwise the next strong support level is that downtrend line. If that line is ever broken on medium to high volume, we’re going back down to January and March lows, and that will be the market bottom. If SPY can break out of that channeling resistance today, particularly if it can finally do so on high volume, the 138.00 resistance level is in sight and can be taken out. Breaking out of the 138.00 level on medium to high volume confirms a bullish trend, and that the market bottomed back in March. It’s earnings season, and as financials start to report their write-offs and losses, prepare for high volatility days. This type of market isn’t very conducive to technical trading, but if you watch overall trends, you should do fine.
I am looking at quite a few stocks to buy in the next few days, if the market doesn’t show too much weakness. One such stock is Diodes (DIOD). It is channeling upwards well, from its March 17 bottom that correlated with the Bear Stearns (BSC) crash. There is heavy accumulation occuring as the price trends upward, and yesterday’s big move up was on high volume. The 50 DMA is starting to point back upward now, and if DIOD can break its channel resistance line on high volume, this would be a great play. I am considering buying right now, before any confirmation. Cut your losses at the 24.00 support level.
BJS Wholesale (BJ) is another great long candidate. It is caught in a rising wedge, and moved upward big yesterday. All it needs is a breakout from resistance on high volume and this stock can rake in big gains. It has to happen soon, as the wedge is almost at a point. My only concern is the lack of volume, and thought volume is one of my biggest indicators of price movement confirmation, the overall lack of volume pervading the market the last few weeks has left me turning a blind eye to a few instances. Also, its 50 DMA crossed its 200 DMA on the bullish side, which is a fantastic signal for break outs coming soon. Cut your losses at the wedge support line.
NX Quanex (NX) has been trading horizontally since its big move up last November. Yesterday, it finally broke that important resistance on high volume, so I’m looking for a nice uptrend for this stock to develop. There is lots of accumulation occurring and the price bounced off of the 50 DMA brilliantly. Cut your losses just under the resistance level it broke.
John Hancock Private Equity Fund (HPI) is caught in a rising wedge and bouncing off of the 50 DMA. Volume is low, but there has been ridiculous accumulation in the last few weeks, and it’s really pushing me to buy this stock. Cut your losses under the 50 DMA.
Taiwan Fund Inc (TWN), my favorite long stock right now, broke out of a wedge pattern yesterday on high volume and closed at its high. It has been forming bases very well and volume is following the trend, an extreme rarity in this market. It is a fund that invests in Chinese and Taiwanese equities, so look for Baidu (BIDU)’s resurgence as a possible fundamental aid to this great technical chart. Cut your losses at the 200 DMA, but don’t worry you won’t have to, CMF is at ridiculous levels around 0.4.
Exide Technologies (XIDE) is channeling upward and moved up on high volume yesterday. Great accumulation occurring and a great base has formed to trend off of for a few weeks. Also broke resistance today. Great play.
Enernoc (ENOC) went up 35% yesterday on very high volume and if it can break through its channel resistance at around 14.00 on high volume, it should be in for even more gains. Accumulation is rising, as well. This is a stock, like a lot of the others I’ve mentioned, that isn’t ready for purchase quite yet, but might be a good play to throw on your watch list.
American Superconductor (AMSC) is trending well in a rising wedge and just had a big up day on strong volume. If it can break out of that resistance, this is a great looking intermediate term stock play. Lack of accumulation troubles me, but price action is most important, so we’ll see if it is able to break out. Its 50 DMA crossed its 200 DMA on the bullish side, which is a great break out signal. Watch this stock for the next couple days.
I’ve been daytrading a lot, and I obviously can’t post those plays, because they’re in and out within 20-30 minutes, but once the market calms down a bit, I should be looking at more intermediate and long term plays. Feel free to ask any questions and dood luck trading.