TradingMarkets.com
If The Generals Play Mark-Up, Here Are Some Names To Watch
Friday June 27, 9:32 am ET
By Kevin Haggerty
What Thursday's Market Action Tells You
We got the better upside trade yesterday, as both the SPX (CBOE:^SPX - News) and Dow (CBOT:^DJI - News) took out Wednesday's lows of 974.86 and 9000.68, then reversed them to the upside for a trend up day. The SPX intraday low yesterday was just 973.80, while the Dow low was 8987.16. Net net, the "no reason" decline on the Fed rate cut provided minimal carryover weakness, but enough for traders to enter a trend up day at the lowest common denominator. That was our trading plan yesterday, wasn't it? (See June 26 commentary.)
Increased group volume was only evident in the biotechs on Wednesday, so you were ready for that to carry over on Thursday, and it did, as the Biotech HOLDRs (AMEX:BBH - News) gained +2.1%. Technology was the leadership yesterday, led by the semiconductors. The Semiconductor HOLDRs (AMEX:SMH - News) was +3.3%, Microchip Technologies (NasdaqNM:MCHP - News) +3.7%, Applied Materials (NasdaqNM:AMAT - News) +3.3%, Novellus (NasdaqNM:NVLS - News) +2.6% and KLA-Tencor (NasdaqNM:KLAC - News) +1.9%. Two other semis not on our list had big days, and they were Texas Instruments (NYSE:TXN - News) +3.7% and (NasdaqNM:INTC - News) +3.0%. No surprise that we have gotten a good SMH reflex from the retracement to between the 50-day EMA of 27.95 and the 200-day EMA, now 27.10. In fact, the SMHs have had two days of higher highs and lows since Tuesday's low of 27.49.
Neither the SMH nor the QQQs (AMEX:QQQ - News) took out Wednesday's lows yesterday, which was a positive divergence, and they, in turn, had the best gains yesterday by a wide margin. Often when you see that, you can play the QQQ and/or SMH long, and then short either the SPDRs (AMEX:SPY - News) or Diamonds (AMEX:DIA - News) for a conservative daytrade.
On the day, the SPX was +1.1%, closing at 985.80 and above the 20-day EMA at 981.75, which is now the first downside pivot to be aware of. The QQQs closed at 30.20, +2.3%, and above the 20-day EMA of 29.93. NYSE volume was on the lighter side at 1.2 billion, but was enough to keep the ball rolling into the end of the second quarter. That should not surprise you, and the trading plan reflected that probability. All of the other major sectors finished green, except for the OIH, which was -1.8%.
Most of the momentum stocks from the scrolling list had excellent moves yesterday, and many different intraday entries. There are two more trading days until quarter's end, and the last day could be just a neutral to quiet day because the regulators frown on any unusual marking up of stocks on that last trading day.
Today's Plan Of Attack
The plan of attack today is to simply be ready to get on board if the Generals play mark-up because it's not the retail jumping on board in droves by any stretch of the imagination. The semis, biotechs and those momentum stocks mentioned over the past several days are the best place to focus for the daytrade today. The ones that set up best on the daily chart are: ICOS, GILD, GENZ, AMGN, MEDI, TEVA, ADRX and CHIR.
Some momentum stocks that also set up are PCAR, AVID, ZBRA, EBAY, ERTS, MERQ, APOL, AGN, SNPS, KRON, SIAL and EXPE.
In the semis, you have MRVL, KLAC, NVLS, AMAT, and of course, the SMH.
The momentum stocks are well above the lines after big moves, and they might push them up a bit more these last few days. Most of the momentum stocks are on the recent scrolling list not because of their so-called fundamentals, but because they are being "gamed" well beyond their current worth and have been pushed higher as the quarter comes to an end. Many of these stocks are already up as three- or four-baggers since the October lows. Who's kidding who? And many of the empty suits are debating whether or not this is a bull market. Don't tell that to the gang that has been riding on MERQ, for instance, from 15 to 44, or USAI from 15 to 40, etc., and many others like it. It's about the moves and where the game is being played, not just whether or not an Alcoa (NYSE:AA - News) or a Dupont (NYSE:DD - News), which are classic smokestacks, are in motion depicting an economic recovery. Perception makes the market move.
In addition to regular institutional buyers, you have the hedge funds running them up, fronting the institutions. Then you have those players who know the current fundamentals aren't even close to the prices these stocks are trading at, so they jump on the short side, and that fuels higher prices if the buyers remain dominant. The result is a spiral up as we have seen since the October and March lows. Many of these very same stocks can easily become short setups if the market cycles down after the first few days of July through August. They all have big air pockets below current prices, and it could get crowded at the exits trying to cash in some of the funny money profits that these stocks have built in to current prices.
Have a good trading day.
Kevin Haggerty |
