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.

THE SETUPS

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.




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