Monday, February 24, 2014

Indexes Set New Highs Monday Leading Growth Stocks Strong

After consolidating most of last week, working off its over extended condition and digesting recent gains, the market resumed its rally. The S&P  500 and NASDAQ broke out and closed up at all time and fifty two week highs, respectively. Volume was mixed, but above average, confirming the strong move.

Leading growth stocks have not revealed any major cracks and continue breaking out and rising on  above average volume. The Blackstone Group (BX) broke out from a flat base pullback to the fifty day moving average, YELP (YELP) and Netflix (NFLX) broke out from pullbacks to the ten day moving averages, and Springleaf Holdings (LEAF) and Matador Resources (MTDR) broke out of cup shaped bases.

The few cracks in leading growth stocks have been in Chinese internet stock, E-House Holdngs (EJ), YY Inc (YY), Youku Tudou (YOKU) and SouFun (SFUN), which have lagged and acted poorly since the market bottomed on February 5th, and leading growth stocks breaking out of late stage consolidations on potential climax runs, Lannett (LCI) and Under Armor (UA). Any other weakness in leading growth has been quickly overcome.

There is a high probability the rally will last until, at least, the DOW Jones Industrial Average ($INDU) reaches into fifty two week highs, but with some warning signs creeping in; two to three days of distribution over the last week, leading growth stocks potentially climaxing, new breakouts coming out of shorter, more failure prone consolidations, traders must be selective and tighter on new positions, but more patient with existing positions except for those out of late stage consolidations. The trend is still our friend, but prepare for the shakeouts.

Canadian Solar (CSIQ) is part of the hot solar stocks group and has risen over 600% in the last year. The stock is forming a pullback to the fifty day moving average flat base. A breakout above the recent consolidation and down trend line could see another 10 - 20% appreciation. The stocks is in a late stage consolidation and prone to quick failure. So keep the stop loss tight and take profits quickly over next week or two.

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