Welcome. The contents of this blog comprise my personal observations on the stock market from the perspective of using both fundamental and technical analysis by reviewing market data and stock charts based on the methodologies of William O'Neil of Investors Business Daily and his books, from Stan Weinstein's books, and most of all, through lessons learned over the years by listening to Gary Kaltbaum's "Investor's Edge" radio show on Business Talk Radio.

Criteria of stocks include first researching sectors to determine which are strong and which are weak using the ADX indicator (>40 = increased volatility); focusing in on a leading sector and buying leading stocks on a high volume
breakout (minimum 2x average) above a base; stock prices are higher than $25/share with daily average volume higher than 300K; positive and increasing PVT (indicating institutional ownership), positive and increasing RSI (indicating relative strength compared to other stocks in the market).

Please keep in mind that
I am by no means an expert, nor are my posts intended for anything other than to share my opinions of what stocks are doing for the purpose of getting feedback. Thus, please do your own research before taking action on what you read here. I will be adding posts on topics of interest as I learn about them.

Friday, August 8, 2008

Morning Sector Analysis

The DOW ($INDU) is crossing support from early July of around 11,450, and is still below the 50 and 200-day moving averages. This is a bearish sign.

NASDAQ ($COMPQ) is between moving averages. It had a faulty head and shoulders top in May-June followed by a steep decline from June-July. My guess is that this is setting up for a nice short position, but NOT YET. It has just cleared the 50-day line ONCE. According to Gil Morales' book, it must do this 3 MORE TIMES before being considered for a short position. Patience is important here, even for me.

The S&P 500 ($SPX) appears to be basing, and is below the 50 and 200-day moving averages. Nothing to do here except perhaps an aggressive short position if it breaks below 1230, but keep your stops tight because there is resistance all-the-way to 1200.

The Russell 2000 ($RUT) had a follow-through day last week, but has been waning. I'd look for strength above the 200-day moving average (now 724) before considering a bullish position.

GOLD & SILVER ($XAU) is breaking down from a long base between 165-210, and is currently in the 150's. A break below 145 might prompt me to look for another leg down.

HEALTHCARE PAYORS ($HMO) is between 50 and 200-day moving averages. Must break above 1700 before it is a clear buy, although an aggressive entry point can be when/if it clears 1600 with volume.

HEALTHCARE PROVIDERS ($RXH) however has cleared it's moving averages, and should be considered as soon as it breaks above 450. Watch the relative strength though, which is still negative.

BIOTECH ($BTK) -- Nothing to speak above at this point. Although above 50 and 200 day moving averages, if $BTK breaks below 817, short it. Resistance will come in at the 784 level. Consider buying above 868.

DEFENSE ($DFI) -- I'm looking for a breakout from the contracting triangle that began on 8/6.

DISK DRIVE INDEX ($DDX) -- Because of the head and shoulders top in May to June followed by a sell-off, I wouldn't touch this at this point except to look for a short once the stock goes above the 50-MA four (4) times per Gil Morales' shorting book. So far it hasn't even done it once.

OIL ($XOI) looks nasty. Stay away until a better pattern emerges.

PHARMACEUTICALS ($DRG) just broke the 200-day MA. It'll have downside resistance until it breaks at least below 300, and then the 50-day MA. Even then, there's resistance even down until 285. Stay away for now.

SECURITIES BROKER/DEALER ($XBD) looks like it will be a good play to the downside soon. It has just broken the 50-day MA, but is trapped in a contracting traingle with a base around 136.50. Even then, there's that mess from mid-July that makes it worth being cautious until it breaks below 120, but by then, the opportunity might have been missed.


OIL ($OIX) at a minimum needs to clear 847 before even being looked at. Even then, must break above moving averages which currently are hovering between 850-900.

OIL SERVICE ($OSX) is looking bad. Consider a short position (although a risky one) upon breaking below 284.

SEMICONDUCTORS ($SOX) is trying to stage a comeback. I would look at this as soon as it breaks above the 50 and 200-day moving averages (currently at 383).

TELECOM ($XTC) is breaking down, and has broken down from a base in May, and another one in June. This is a bearish signal for this group.

HOUSING ($HGX) looks like it is trying to recover, but it still needs more work. It broke above the 50-day moving average, but it still must break above the 200-day MA (now around 135) before the sector should be considered.

BANKING ($BKX) is also starting to look good, but the relative strength is waning. Further, it is still below the 200-day moving average (now a bit above 80), and I wouldn't trust anything until I see a break above that number. However, an aggressive play would be to watch the stock and probe as soon as it breaks above 72 with high volume, but note that there will be overhead resistance.

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