Monday, March 31, 2014

NYSE A/D Line and Volume Confirm Market Rally Leading Growth Stocks Breaking Out

After shuffling sideways over the last two weeks, the market moved within striking distance of all time highs, surging around one percent in higher volume, closing near the highs of the day. Confirming the move was the the NYSE advance decline line leading into new highs and falling volatility. Throwing some cold water on the rally attempt, value is outperforming growth. While value can lead rallies, they tend to be choppier, shorter in length, and an indication of a nearing top, but can be profitable and cannot be ignored.

Leading growth stocks held up well during the recent distribution. While many broke below their fifty day moving averages, in above average volume, none did so in volume that signaled a run for the exits. Most of the action has been orderly, within expected correction levels, and recently tightening. Many still need another week or two to firm up, but some are starting to breakout and bounce off moving averages, in above average volume. US Silica Holdings (SLCA), Smith and Wesson Holdings (SWHC), and ARM Holdings (ARMH) broke out of cup and handle bases, and Hollysys Automation Tech (HOLI) and Chicago Bridge and Iron (CBI) broke out to new highs after bouncing off their fifty and twenty day moving averages, respectively. Now they need to hold and follow through.

Short idea setups turned out to be bear traps, leading to losses. Most breakdowns are failing, and the few managing to follow through, have not followed through enough to make up for the failing breakdowns. This type of action is generally indicative of a potential trend change or consolidation. A few are still setup and should be watched in case the correction resumes.

The combination of developing setups in leading growth stocks, markets inability to sell off in increased volume, and a leading NYSE advance/decline line, has increased the probability of successful short term rally attempt. Traders should be protecting profits and limiting losses on short positions, while initiating new long positions. If this rally attempt is real, recent breakouts must hold while new breakouts join the party, especially through shake outs over the next week or two, with each shakeout presenting a new group of trading opportunities. 

The markets have changed trends quickly over the last 15 months, making the hardest things a trader has to do, be patient and flexible, at the same time, much harder.


Air Lease (AL) continues to consolidate along the twenty day moving average and recent three week tight pattern after a February breakout out of a flat base on top of a cup and handle base, in above average volume. A breakout above recent highs around thirty eight, could propel the stock for at least another ten to twenty percent. The relative strength line is already leading into new highs, a positive sign.

New Oriental Education and Tech (EDU) is still in the process of forming a double bottom base. Last weeks shakeout near the bottom, should have shaken out the remaining weak holders. A breakout above the recent consolidation around thirty dollars or mid point around thirty four dollars, should launch the stock into all time highs, and above an almost three year consolidation. The current double bottom base is the tightest, best positioned to breakout, and the relative strength line has manged to rise while the stock has consolidated the last two weeks.

Sunday, March 30, 2014

Trading Idea: Lithia Motors (LAD) Double Bottom and Handle

Lithia Motors (LAD) has just about tripled since the end of 2011. The stock has spent the last six months building a double bottom base, and the last three weeks pulling back in lighter volume, forming a handle. A breakout above the handle high of $68.56, should launch the stock on another run into fifty two week highs. The consolidation is a late stage base, so traders should treat the stock as a trading position.

Wednesday, March 26, 2014

Market Distributed Correction Deepens Leading Growth Stocks Pummeled But Not Dead

Don't want to sound like a broken record, but the market opened strongly higher only to roll over shortly there after and trade significantly lower, except, no late day rally materialized to soften the blow. Volume was higher across the board, continuing the recent pattern of lower volume rallies followed by higher volume distribution. The Nasdaq closed below the fifty day moving average for the first time since the market bottomed on February fifth.

Despite all the intra day volatility, the VIX, a measure of day to day volatility, has barely budged. In fact, it has trended lower. During pullbacks and/or corrections, the VIX generally rises, not falls, throwing suspicion on the sell off.

Leading growth stocks got pummeled for a second time in three trading days, but remained within normal correction levels and mainly inside existing consolidations, suffering little long term damage. Short term, they'll need a few days, in some cases a couple of weeks, to setup again. A few leading growth stocks have manged to hold tight despite the pullback in the market, but none have been able to breakout and hold fifty two weeks highs.

Few short ideas have been able to follow through on breakdowns without shaking out back into their consolidations. The few that have, have done so in heavy volume, the rest continue to hold tight with all the intent of breaking down. But, the longer they sit without breaking down, the more they become laggards and potential bear traps on break downs. Chart Industries (GTLS), International Game Technology (IGT), and Aeropostale (ARO) followed through to new fifty two week lows in heavy volume.

The overall action continues to shake out the longs and trap the shorts. It has been extremely difficult to make any progress trading beyond a few hours. While setups have formed in both directions, none have been able to follow through much beyond a day or two. Traders remain safer in cash, trying a position or two in both directions, until a few are able to follow through and hold.


Lithia Motors (LAD) has just about tripled since the end of 2011. The stock has spent the last six months building a double bottom base, and the last three weeks pulling back in lighter volume, forming a handle. A breakout above the handle high of $68.56, should launch the stock on another run into fifty two week highs. The consolidation is a late stage base, so traders should treat the stock as a trading position.

Tuesday, March 25, 2014

Market Within Striking Distance of All Time Highs Leading Growth Stocks Tighten

The market opened significantly higher, but following a recent pattern, reversed not to long after the open and gave back all the gains. But, in typical fashion, a late day rally closed the market higher, near opening levels and in lower volume. The market's inability to make any downside progress, despite every opportunity to do so, should be viewed as a positive sign.

Leading growth stocks finally led the market higher. After being pummeled yesterday, most held tight and refused to sell off with the market during the early morning reversal into negative territory. Setups are tightening and positioning to break out. If a few setups manage to breakout and hold the first shake out, a trade able rally would be confirmed.

Despite all the bad news over the last few weeks, underneath the surface, positive signs are growing: the market is within two percent of fifty two week highs, leading growth stocks are tightening within consolidations and few have broken down beyond repair, short setups squeezing and unable able to follow through to the downside, and the NYSE advance/decline line is leading into new highs. Any remaining short positions should be on a short leash (no pun intended) and traders need to be prepared to add long positions as the market shakes out, even for a few hours. For now, cash, and/or a position long and/or short, best allocation.


Starwood Property Trust (STWD) is a recent spin off. The stock has been pulling back to it fifty day moving average, in a tight range and  lower volume. With an 8% dividend yield and strong earnings and sales growth, a breakout above it recent downtrend or recent consolidation, could launch another strong move into fifty two week highs.

Jabil Circuit (JBL) has stalled at the fifty day moving average three times, in heavy volume, over the last three months. The stock has held tight in a tight range over the last few days with a downward bias. A breakdown below last weeks low, could see the stock test fifty two week lows.

Monday, March 24, 2014

Nasdaq Crushed -- Leading Growth Stocks Pummeled -- Shorts & VIX Fail to Follow Through

The market continued Friday's sell off. In similar fashion, the market opened higher, only to be met with immediate selling. The Nasdaq traded down over two percent by noon, but an afternoon rally cut those losses in half. Volume was heavy, above average, but not as heavy as Friday's quadruple witching, but still heavier then any other day during the the previous week, in which the market attempted to rally. Interestingly enough, the VIX, a measure of market volatility, did not spike as would have been expected, considering the two high volume reversals the last two days. Indicating little fear.

Leading growth stocks were pummeled in above average volume. Short term, a few are damaged and need time to setup again, but many are continuing through their consolidations, in a somewhat orderly fashion, looking to tighten. Few are damaged beyond repair, keeping expectations for a full blown bear market low.

Short setups tried to break down and follow through, but to no avail. Continuing their pattern of frustrating shorts, despite heavy selling in the indices over the last two weeks. While setups continue to hold moving averages and appear ready to rollover, traders need to keep stops tight with leading growth stocks failing to break down completely.

It is difficult to make profitable trades in either direction for more then a day. But a lack of follow through by short setups, and few complete breakdowns in leading growth stocks, indicates the pullback could be under accumulation for another profitable rally attempt, rather then distribution headed for a bear market. Stay alert, the market has had a bad habit of turning really quickly and leaving traders behind chasing performance.


US Silica Holdings (SLCA), after doubling in price over the last year, is in the process of forming a cup and handle base. The stock has run up over forty percent the last two months to move up the right side of the base, and has recently pulled back to the twenty day moving average in lower volume to form the the handle. A breakout above the handle high of  $37.25, sets the stock up for another run into fifty two week highs.

Dean Foods (DF) has pulled back to its fifty day moving average on low volume for the second time since breaking down from a head and shoulder pattern in December. The stock is in the process of rolling over in higher volume and could test recent fifty two week lows if the market pullback deepens.

Friday, March 21, 2014

Market Suffers Another Major Distribution Day NYSE A/D Line Near New Highs

The S&P 500 opened higher and rallied to new fifty week highs on its way to a confirmed rally. Unfortunately, as quickly as the market opened, it reversed and sold off in heavy volume to mark another major distribution day, continuing the correction that began March 7th and closing at the lows of the day.

Leading growth stocks continued to under perform the general market and sold off in heavy volume as value stocks have taken the lead. This is not the first time over the past year this has occurred, and in each case a few leading growth stocks did manage to put on big gains. But, in each case, the rallies were short lived until growth stocks were able to resume leadership a few weeks later. Overall, trading in leading growth stocks tended to be erratic during these periods.

The NYSE advance/decline line continues to make new highs. Bear markets do not generally begin when the advance/decline line is making new highs, but major pullbacks and corrections do.

Today's erratic trading and high volume were due to option's expiration. Expect some follow through into Monday, but we should start getting a better sense of direction later next week. Even if the market falls into a major correction, a rising advance/decline line and still intact and consolidating leading growth stocks indicate that another major trade able rally could develop once the pullback/correction runs its course. Traders should be on the lookout for further tightening among leading growth stocks as an indication of a developing trade able rally, or, a lack of tightening as an indication of further downside.

Thursday, March 20, 2014

Market Rallies But Volume and Leaders Lag Again

The market opened relatively unchanged and surged around ten o'clock on stronger then expected economic reports, closing near the highs of the day, but in well below average volume, continuing its recent pattern of low volume rally attempts after higher volume selling. Volume was once again at the lowest levels since the beginning the of year. Not exactly encouraging action.

Leading growth stocks continued their brutal pattern of lagging the market, but managed to maintain their consolidations without any serious damage. So while few stocks are able to make any progress, the chances of another trade able rally remains alive. Chipotle Mexican Grill (CMG) broke out to new fifty week highs, in above average volume, after bouncing off the twenty day moving average, while Chinese internet stocks SolarFun (SFUN), E-House Holdings (EJ), and Vipshop Holdings (VIPS) sold off in heavy volume.

Stocks on the short ideas list also continued to lag the market, but maintained their moving averages, setting up for another possible downward move. Coal stocks, Walter Energy (WLT), Alpha Natural Resources (ANR), and Peabody Energy (BTU), followed through to the downside off their respective ten day moving averages after Bank of America/Merril Lynch put out a cautious note on the group. Traders should review the short ideas list for stocks tightening into moving average readying to roll over. The shorter term trend favors a downside continuation.

The trading environment remains difficult. Considering the low volume rally attempt and stocks inability to make progress in either direction, traders should be close to cash with tight protective stops, especially on new positions. The odds favor the shorter term trend, which is down. Of course, odds are odds, and the market loves to defy the odds. With little damage among leading growth stocks, the market may just surprise us. Stay nimble and prepared over the next few days.


Taser International (TASR) is pulling back in an orderly fashion to its fifty day moving average and flat base breakout pivot point in light volume, despite choppy market action. A breakout above the recent trend line, could set the stock up for another run into new fifty two week highs.

Wednesday, March 19, 2014

Market Distributed Leading Growth Stock Lag But Not All Is Bad

After rallying for two days on anemic volume, the market opened around unchanged and shuffled sideways into the 2 pm Fed announcement. On the announcement, the market sold off and accelerated to the downside in heavier volume (distribution day) as Janet Yellen's first press conference progressed, closing significantly lower. A late bout of buying kept the market from closing at the the lows of the day.

Leading growth stocks resumed their lagging ways right from the open and sold off further after the Fed announcement. Short term setups continue to be bull traps leading to losses. The good news, leading growth stocks continue to consolidate in an orderly fashion despite recent intra-day wildness. Traders should stay alert for potential entries developing over the next few days.

Short ideas also lagged the market and failed to follow through to the downside despite the heavier volume selling in the indices. Traders should tighten stops to protect profits and prevent major losses on new short positions.

In general, the market and leading growth stocks are acting the way they have for the past year, short rallies followed by short shallow pullbacks with leading growth stocks consolidating and not breaking down. So what appeared to be a major correction in the making last week, may now turn out to be nothing more then a shallow pullback followed by another multi-week rally. Stay alert. Traders who do not identify the turns quickly, have been left behind to try and catch up when the market begins to stall and distribute.


New Oriental Education (EDU) has doubled over the past year. The stock is currently forming a second stage double bottom base, with volume accelerating as the stock climbs the right side. A breakout, in above average volume, through the mid point around $34, could set the stock up for another run higher.

Air Lease Corporation (AL) has moved up over 50% since its first stage cup and handle breakout at the beginning of 2013. In February, the stock broke out of a third stage flat base in heavy volume, and has now formed a three week tight pullback into the twenty day moving average in low volume despite some ugly trading action in the market. A breakout above $38, should set the stock up to move higher.

Tuesday, March 18, 2014

Market Surges Leading Stocks Lead Volume Mixed

The market surged over one percent for a second straight day on not so bad news out of Russia. Two hours before the open, Vladimir Putin expressed that Russia is not looking to split up Ukraine. Futures markets surged and rallied higher for the remainder of the day, closing near the highs. Volume was slightly higher, but at its lowest levels since the beginning of the year. Throwing further suspicion on the two day rally attempt ahead of the Fed announcement tomorrow at 2 PM.

Leading growth stocks finally led. Unfortunately volume was mixed and few stocks managed to follow through to new highs or break out of new bases. The few that did, were stocks already on the move and extended from proper buy points. Under Armor (UA) followed through on yesterday's move on an announcement of a two for one stock split, Horizon Pharma (HZNP) bounced off the ten day moving average, but is well extended from a low risk entry point, and Chicago Bridge and Iron (CBI) either broke out from a pullback to the twenty day moving average or a cup with high handle base.

Short ideas continued squeezing into moving averages in below average volume, potentially setting up additional entry points if the market rolls over again. The squeeze was not unexpected, especially after a strong follow through to the downside the previous week.

A two day rally, early in the week, in anemic volume, historically tends to be a bull trap. It is not unusual for rallies to start on low volume, but they tend to be accompanied by at least a few new strong breakouts. Just in case, traders should tighten profit protection stops and stop losses on new short positions and review the leading stocks analysis and short ideas lists for new entries.


Resmed (RMD) has been forming a head and shoulder pattern since the middle of 2013. Recently, the stock has spent the previous few weeks trading below the fifty day moving average and has tested it three time on below average volume. A breakdown below the recent trend line, could send the stock to its next support level below $40.

Oceaneering International (OII) broke down from a head and shoulder pattern at the beginning of the year on heavy, above average volume. The stock has spent the past seven weeks digesting the breakdown and testing the fifty day moving average. The first test stalled on heavy volume and the current test has been in lower volume. A breakdown below the recent trend line could see the stock test below $60.

Monday, March 17, 2014

Market Surges Volume and Leading Growth Stocks Lag

The market surged over one percent at the open, only to flat line within the first half hour and trade sideways for the remainder of the day. Lagging volume, one of the lowest since the beginning of the year, and a bout of late day selling in heavier volume, made the rally attempt suspicious.

Leading growth stocks as a group, lagged the market. The few names that managed to outperform, did so on below average volume, and none managed to breakout to new highs. Several short term setups, once again, ended up being bull traps and reversed below pivot points by the close. Not the type of action traders would expect on a strong market day.

Short idea stocks, naturally squeezed along with the market after following through over the past week, but on below average volume. Most finished the day well of their highs and look poised to go lower over the next week or two. LKQ (LKQ), Sinclair Broadcasting Group (SBGI), and Petroleo Brasileiro (PBR) followed through on recent breakdowns. Exactly the type of action expected during a correction.

There is nothing positive in the market to warrant initiating anything but a day trade on the long side. But, given a few days and some resolution to the Ukrainian Russian Crisis and FED tapering concerns, it is not out of the question that a trade able rally could develop. In general, the market and leading growth stocks remain intact. In the meantime, cash or short still remain the best positions.


Cree Inc (CREE) has been working on a double top with a right shoulder since August 2013. The stock has recently lagged the market significantly and has been consolidation below the fifty day moving average on below average volume. A breakdown below the recent range, could see the stock test its neckline around $53.

Thursday, March 13, 2014

Second Major Distribution Day Confirms Market Correction

Wednesday, the market put on an uninspiring performance, selling off early in heavy volume, only to rally back in very low volume. Leading growth stocks lagged all day even as the market pushed higher to close around unchanged. Making the action suspicious.

Thursday's action confirmed that suspicion. The market rallied early in low volume, only to roll over in increasing volume and close significantly lower, down over 1% in heavier volume, despite strong economic news. Marking another major distribution day for the week and confirming the correction.

There is no positive, short term news for leading growth stocks. They sold off in heavier volume, few longer term setups exist, the few short term setups that materialized have been bull traps leading to losses, none are following through to new highs, and they lag almost daily except for a few speculative names.

On the other hand, short setups continue to follow through and break down, but keep a tight leash on stop losses and profits. The gains will be made very quickly, but the squeezes can take them away even quicker, especially this close to recent highs.

The news is not all grim. If recent history is any guide, this correction could be short lived. The NYSE A/D line led this rally into new highs, and bear markets do not typically start with the A/D line leading into new highs. The line will typically lag for several months before a top. But that does not mean a major correction, that feels like the beginning of a bear market is not a strong possibility.

The market and leading growth stocks are still in tack, technically and fundamentally, and could withstand a major correction, which lasts on average, two to three months, and can correct over 20% in a rumor or news driven panic.

There are plenty of flash points, the Russian Ukrainian Crisis, the Syrian Middle East Crisis, and the FED's decision and statement next week on March 19th. Do they stay the course or continue to hint at possible pausing? How much does an escalation of the Russian Ukrainian Crisis factor in?

Even if things worsen, there are few signs that a full blown bear is upon us, but a major correction, is highly probable. If the Russian Ukrainian Crisis boils over and/or the FED tightens their language, the market's initial reaction will be extremely bearish. But the market could fall in love with the idea that the FED might just pause the tapering, and even reverse course to stem economic damage if the Russian Ukrainian Crisis escalates, especially militarily. But that is just speculation. In any case, there is little to do on the long side. For now, cash or short are the best positions in this environment. Good Luck!!

Recently discussed, Dean Foods (DF) and Cirrus Logic (CRUS) continue their short setups and are within range of breaking down.

Tuesday, March 11, 2014

Indices Suffer Major Distribution Day Leading Growth Sell Off In Above Average Volume

An early low volume rally attempt rolled over mid morning to close significantly lower as volume accelerated throughout the day. The Nasdaq chalked up its fifth distribution day, while the S&P 500 chalked up its seventh. Market distribution has grown to worrisome levels.

Leading growth stocks have failed to followed through to fifty two week highs during any recent rally attempt. Except for a few speculative names, the majority have lagged from open to close.

On the short side, several stocks bounced off important moving averages and followed through to the downside in above average trading. CommVault Systems (CVLT) tacked on losses for its fifth consecutive down day, Conn's (CONN) bounced off the ten day moving average after consolidating a major gap down on February 20th in low volume, and NU Skin Enterprises (NUS) and LKQ (LKQ) are rolling over at their twenty day moving averages.

With the Crimean independence vote Sunday, tensions with Russia continuing to simmer, leading growth stocks lagging and failing to follow through, high levels of market distribution, and short setups following through to the downside, traders need to be short or in cash. Few long trading positions are worth holding through pullbacks.


Lululemon (LULU) broke down from a head and shoulder pattern on December 12th in heavy volume following a poor earning's report. The stock has consolidated into its fifty day moving average on low volume. A break down below recent lows and downtrend line should be shorted. Be aware, earnings are expected March 27th.

Energy XXI (EXXI) has been trying to breakdown from a three year head and should pattern. The recent consolidation in to the fifty day moving average came in low volume. Today the stock suffered a major stalling day in higher volume. A break below the two day low, could see the stock follow through under $20.

Monday, March 10, 2014

Low Volume Reversal Lagging Leading Growth Stocks Do Little To Change Negative Sentiment

The Indices opened and promptly sold off, but managed to rally for the remainder of the day to close little changed. A few weeks ago, a morning sell off, followed by a rally into the close, would've produced big gains for traders. But today's action came in low, well below average volume, with no breakouts or additional follow through.

Leading growth stocks lagged from the open to the close, significantly under-performing the major averages. Solar and Internet stocks, Solar City (SCTY), Canadian Solar (CSIQ), YY (YY), Yelp (YELP), NQ Mobile (NQ), and SolarFun (SFUN) took the hardest hits in above average volume.

On several occasions over the last fourteen months, the market managed to move higher while leading growth stocks consolidated. In each case, traders would've been better off day trading or in cash, with a few core long and trading short positions, until the market finally pulled back and setup the next round of breakouts.


Cooper Tire and Rubber (CTB) is in the process of testing its 50 day moving average and head and shoulder neckline on low volume. The stock has under-performed the general market since the middle of 2013 and looks poised to move lower on a breakdown below the 50 day moving average.

Conn's Inc (CONN) was a big market winner from the end of 2011 into 2013, rising over 1,000%. The stock topped toward the end of 2013 and has lagged even since. On February 20th, the stock gapped down on poor revenue and earning's guidance in heavy volume. The recent consolidation into the 10 day moving average in low volume is an indication of lower prices ahead. A break down below the recent consolidation could see the stock sell off an additional 10 - 20% over the near term.

Friday, March 07, 2014

Stalling Distribution Breakdowns Not A Good Sign

The market is getting worse by the day. For every good day we get, two bad seem to follow. More and more leading growth stocks are starting to lag and breakdown, and the market's distribution and stalling count is growing to worrisome levels. Long traders should be clearly out of over extended or newly acquired positions. Several stocks are still outperforming and resisting any selling pressure, and could still be held.

Short setups are slowly starting to work and follow through. Further upside with lack of follow through by leading growth stocks, should be shorted. The DOW seems intent on setting fifty two week and all time highs. Trader's should use this opportunity to add or initiate new short positions if conditions do not improve. Pullbacks have been short and shallow over the last year, so keep tight stops.

Otherwise, day trading or cash is the best position until the market sets up leading growth stocks again. That could take a few weeks.

Look for a weekend update of the Leading Growth Stocks Analysis and Short Setups.

Thursday, March 06, 2014

Stalling Indices Becoming a Very Bad Habit

The market is making a bad habit out of stalling and stalling like action over the last two weeks (volume higher, but very little progress is made). The indices started off fairly strong but stalled around noon, and selling accelerated around one o'clock to close mixed and near the lows of the day, a standard pattern recently. There was no clear news to account for the sudden bout of selling, but statements from President Obama on Ukraine and Fed's Lockhart that the bar should be set high for the Fed to change tapering course, contributed to an already jittery market.

Leading growth stocks lagged significantly for a second straight day. While a few like Baidu (BIDU), which broke out of a faulty v-shaped cup and handle, and Chipotle Mexican Grill (CMG) and VipShops (VIPS) added to recent gains, the remainder have started to stall and show signs of weakness and breaking down.

Valeant Pharmaceutical (VRX) and Gilead Sciences (GILD) which were holding fairly tight, sliced through their 20 day moving averages on higher, above average volume. Actavis (ACT) has started to trade a lot wider and looser, and is reversing off fifty two week highs, on heavy volume, after going on a potential climax run on a buyout of Forest Labs (FRX) and a strong earning's report. Jazz Pharmaceuticals (JAZZ), a leader and big winner since the middle of 2013, reversed off fifty two week highs on the heaviest volume since its initial breakout, and is now threatening to slice through its fifty day moving average.

Markets can top on the way up and this market is basically grinding higher at this point. While some stocks will manage to keep moving higher, many will stall and start selling off, well before the market. Long traders have very little to do except to day trade and wait for a pull back. Short traders should be prepared to start accumulating positions as leading growth stocks participate less and short idea stocks start to break down.


CommVault Systems (CVLT) ran up over 500% since the bull market began in 2009. But for the past year, the stock has been forming a head should pattern. In January the stock gapped down below its neck line in heavy volume on a poor reaction to an earning's report. Since then, the stock has spent the last five weeks pulling up to the 50 day moving average and its neck line on lower volume. Look for a breakdown below the recent trend line to carry the stock under $60.

Wednesday, March 05, 2014

Leading Growth Stocks Cracking While Indices Flat Line on Lower Volume

Indices opened and closed at basically unchanged. They spent the entire day in a tight range threatening to breakout into either direction but to no avail. Volume was lower and quiet.

The bulls couldn't have asked for a better day after a thrust to new highs Tuesday on significantly higher volume. The market is closing in on resistance at a solid upper trend line and over extended levels that have acted as short term tops over the last ten months.

Leading growth stocks are becoming mixed by the day. From the opening to the closing bell they lagged significantly, even during rally attempts. A few still managed to breakout or follow through to new highs, but many others appear exhausted and starting to move higher on lower volume, getting extended over their moving averages and trend lines, and for every new setup that works, at least two to three fail. Not the type of action that supports much more upside.

Solar stocks, SolarCity (SCTY) and Canadian Solar (CSIQ), both recent breakouts, sold off significantly on heavy, above average volume, and have or on the verge of failing. YY (YY) after being up over 10% in after hours trading, reversed and closed lower on the heaviest daily volume in its history. NPS Pharmaceuticals (NPSP), a recent cup and handle breakout, failed, slicing through its 50 day moving average on higher, above average volume. Hovnanian (HOV) was working up the right side of its base, but gapped down and sold off over 10% to close below its 200 day moving average, in the heaviest volume in the last year, on a weak earning's report. This is the first time since the market bottomed on February 5th, that so many leading growth stocks are starting to send major sell signals, especially in one day.

On the bright side, Pheonix New Media (FENG) broke out of cup and handle, SolarFun (SFUN) was breaking out from pullback to the fifty day moving average, DryShips (DRYS), US Silca Holdings (SLCA), and E-HOUSE (CHINA) (EJ) are strongly moving up the right side of their bases in higher volume.

The market is sending enough warning signals to be cautious, but not enough to be completely in cash. There is good chance the rally could last into the FED decision on March 19th, at 2 PM, even if the reaction to tomorrow's Monthly Job's Report is poor. Barring some unforeseen news event, and there is a high likelihood the event will be unforeseen, the market is hoping for a slow down in tapering at the next meeting and a continuing deescalation of the Russian Ukrainian crisis. Anything short could be negative on the market, especially if leading growth stocks aren't tight and setup, which they are not, right now.


Lannett Co (LCI) has run up over 800% in the last year. The recent gap up on a strong earning's report provided a great entry point for a 20 - 25% gain. Currently, the stock is in a much shorter consolidation off the ten day moving average and could appreciate another 10 - 15% if the market cooperates a little longer.


Cirrus Logic (CRUS) has trended lower since the current major leg of the bull market started at the end of 2012. The stock has formed a head and shoulder pattern and is currently testing the neckline, on low volume, that it broke down thru by gapping down on significantly higher volume after Apple's (AAPL) and its own earning's reports. A break below the 50 day moving average could resume the stock's down trend to under $16.

Tuesday, March 04, 2014

Market Closes At New Highs Volume Significantly Higher

After selling off the past two days, the market rallied strongly back to new highs on higher, above average volume. News that Russia test fired an ICBM missile spooked the market around two o'clock, but the selling was short lived as the U.S. confirmed it received proper notice to test fire the missile and the market closed at the day's high.

Leading growth stocks continued to breakout to new fifty two week highs and bounce off moving averages, on strong volume, after selling off on Monday, on lower volume. Most of these breakout came from shorter consolidations.

Oil and gas stocks, Kodiak Oil and Gas (KOG) and Oasis Petroleum (OAS) are rounding up the right side of their cup shaped bases, Chipotle Mexican Gill (CMG) rose 5% and added to its recent breakout out of a double bottom with high handle, NVR (NVR) continued its bounce off the twenty day moving average, Taser International (TASR), YY (YY), and Netflix (NFLX) bounced off their ten day moving averages, and VipShops (VIPS) and Insys Therapeutics (INSY) exploded on strong earning's reports. After hours YY was up over 10% on a strong earning's report.

The market seems intent on rallying until the DOW reaches new highs and the Nasdaq tests above 4,400 around the upper trendline. Traders should continue to hold strong positions that survived the two day sell off and tighten stops on over extended positions to recent lows. Short setups continue but need more time and few low risk long setups remain, so keep stops tight even though it may mean being shaken out.


Gastor Exploration (GST) has formed a double bottom with high handle base after running up over 400% in the last year. The stock has pulled back over the last two weeks on light volume. A breakout above the current down trend line or handle high could see the stock appreciate an additional 20%.

Sunday, March 02, 2014

Indices Stall Again Friday Leading Growth Stock Reverse On Heavy Volume

Over the last two weeks, early week strength has faded by Friday and the indices have suffered five distribution days, mostly in the form of stalling. On many days, the market has opened strong only to fade around noon and sell off to new lows of the days. The complete opposite of the previous two week in which the indices sold off early, but rallied strongly into the close.

On Friday the market continued its bearish action, opening strong only to fade around noon and sell off to the lows of the day. Stalling on news Russia was mobilizing troops on the Ukrainian border. Late day buying masked the overall underlying weakness.

Leading growth stocks lagged from the open on Friday and suffered their worst selling since the market bottomed on February 5th on heavy volume. Many stocks are now too extended to consider for more then a day trade. Recent breakouts are on the verge of failing or have failed to follow through and new setups are scarce and have lagging relative strength lines.

The action in recent days is similar to the action the market and leading growth stocks experienced during December and January which led to the last minor pullback, and should have forced traders closer to cash but still holding a few positions.

Considering the recent cluster of distribution and poor action in leading growth stocks, traders should consider tightening stops further and allow the market and leading growth stocks to pull back and re tighten before getting aggressive on the long side. Short traders should be on the lookout for potential entries on attempted rallies.