Tuesday, February 25, 2014

Calm Tuesday Trading Firms Case for More Upside

The indices closed slightly down on quiet volume. Digesting yesterday's strong gains and giving bears little ammunition to work with, and bulls nothing to complain about. The market mimicked last Wednesday's action, selling off early, trying to rally into the close, as has been the case every other day since the rally bottom on February 5th, but a mid day wave of selling carried the market lower.

Leading growth stocks did not suffer any damage, consolidating on quieter volume. A few stocks did manage to break out to new highs and add to already big gains on above average volume. Giving traders little reason to sell them.

YY (YY) broke out of a flat base pullback to the fifty day moving average, Solarcity (SCTY) broke out of a flat base pullback to the twenty day moving average, and Carrizo Oil and Gas (CRZO) broke out of a cup and handle.

Tesla Motors (TSLA),  Priceline.com (PCLN), Jazz Pharmaceuticals (JAZZ), Netflix (NFLX), and Springleaf Holdings (LEAF) added to recent gains.

With few worrisome signs, traders have to use pullbacks to add to or initiate new trading positions. Each shakeout/pullback may trigger tighter stop losses on extended and new trading positions, reducing some exposure just in case. Otherwise, stay patient with existing positions.


NVR (NVR) is currently the leading stock in the strong home building group. The stock broke out of a cup and handle base in January, on volume 135% greater then the fifty day moving average, advancing as much as 15% in under two weeks. It is currently pulling back to the twenty day moving average in a three weeks tight pattern on quieter volume. A breakout above the $1,200 range could carry the stock higher by another 10 - 20% over the near term.

Fellow home builder Hovnanian (HOV) has been trying to consolidate at the bottom of a potential cup shaped base since the beginning of January 2014. This recent consolidation can also be viewed as the handle of a year long cup and handle base forming since January 2013. A breakout above the recent range around $6.00, could trigger a breakout move above the handle high of $6.60.

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