Tuesday, February 18, 2014

Leading Growth Stocks Choking Bears But S&P 500 Stalls


The market continued its recent pattern of selling off first thing in the morning on weak economic data, only to regain its footing quickly and rally for the remainder of the day. All three economic report's, Empire Manufacturing, Net Long-Long Term Tic Flows, and NAHB Housing Market Index disappointed.

The NASDAQ rose into new fifty week high territory on  barely higher, but below average volume, while the S&P 500 Index made little progress on higher volume producing a stalling day. Each index now has one stall day in the last two weeks which is nothing to worry about just yet.

With the market now over extended for the fourth straight day and few setups remaining in leading growth stocks, traders should tighten parameters and keep stops tight on new positions until the next shakeout/pullback. Traders should also consider taking profits on existing positions that have made strong moves in the last two weeks out of late stage consolidations to reduce risk and prepare for a potential shakeout/pullback.


Leading growth stocks have barely blinked in the last two weeks powering higher on heavy volume. Medical stocks, Jazz Pharmaceuticals (JAZZ), Questcor Pharmaceuticals (QCOR), INSYS Pharmaceuticals (INSY), Horizon Pharma (HZNP), and Valeant Pharmaceuticals International (VRX) led the way after Actavis (ACT) agreed to buy out Forest Laboratories (FRX) for twenty five billion dollars.

Taser International (TASR) and 58.com (WUBA) bounced off their fifty day moving averages, while SolarCity (SCTY) and Qihoo 360 Technology (QIHU) broke out to new fifty two week highs after bouncing off their twenty day moving averages.


Chipotle Mexican Grill (CMG) has formed a three weeks tight pattern, tightening into the ten day moving average after gapping out of a double bottom base on a strong earning's report. The current tightness can be considered a high handle to the double bottom base. Look for a breakout above the trend lines at around $562 or 569 for a further rise in the stock price.

Under Armour (UA), discussed last week, continues to tighten around its ten day moving average despite the shakeout on news out of the Sochi Olympics that its speed skating suits contributed to slower race times for the US Olympic team. A breakout above $110 could produce a quick trade into the $120 - 130 range.

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