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.

SHORT IDEAS - THE SETUPS

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.



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