The housing sector, which seems to have been saddled with the responsibility for the entire economic recovery, may be about to let it down.  #-ad_banner-#Last week, when homebuilding supplier Lumber Liquidators (NYSE: LL) collapsed after projecting second-quarter earnings would be well below analyst estimates, shares of homebuilders stumbled too. It did not look like much, but it signaled a change in fortunes for the group as a whole. One of the larger and better-performing stocks in the group, D.R. Horton (NYSE: DHI), now looks like a sell.  Shares hit a price ceiling, and unlike many of its peers,… Read More

The housing sector, which seems to have been saddled with the responsibility for the entire economic recovery, may be about to let it down.  #-ad_banner-#Last week, when homebuilding supplier Lumber Liquidators (NYSE: LL) collapsed after projecting second-quarter earnings would be well below analyst estimates, shares of homebuilders stumbled too. It did not look like much, but it signaled a change in fortunes for the group as a whole. One of the larger and better-performing stocks in the group, D.R. Horton (NYSE: DHI), now looks like a sell.  Shares hit a price ceiling, and unlike many of its peers, DHI has room to fall before we have to worry about a long-term breakdown.    DHI sold off between February and March, along with the rest of the sector, but managed to stabilize shortly thereafter. In May, it began its march back to previous highs and got there on July 1. That day, it closed at a new high for the year in what seemed to be a technical breakout. Unfortunately, that was not the case. The next day it scored an outside-day reversal to the downside by notching a new intraday high but closing… Read More

With crude oil plummeting $7 since June and trading under $100 a barrel this week, it seems to be a bad time to look at energy stocks. However, when everyone was running away, the sector lost only 3%, and various indices landed on respective rising trendlines.  #-ad_banner-#In other words, energy stocks were relatively resilient, and that is a bullish sign. It now appears that United States Oil (NYSE: USO) is in the midst of a powerful upside reversal pattern called an island reversal. USO gapped down Tuesday, but closed near its highs for the day. Read More

With crude oil plummeting $7 since June and trading under $100 a barrel this week, it seems to be a bad time to look at energy stocks. However, when everyone was running away, the sector lost only 3%, and various indices landed on respective rising trendlines.  #-ad_banner-#In other words, energy stocks were relatively resilient, and that is a bullish sign. It now appears that United States Oil (NYSE: USO) is in the midst of a powerful upside reversal pattern called an island reversal. USO gapped down Tuesday, but closed near its highs for the day. On Wednesday, it gapped back up, leaving Tuesday’s trading isolated from the rest of the pattern, similar to an island surrounded by water. Of the stocks in this sector, I like the bullish prospects of integrated oil and gas company Chevron (NYSE: CVX). Not only does it offer a technical reversal of its own, but it also has a cushion of safety provided by a 3.3% dividend yield.   The stock peaked in mid-June at $133.57, and in the next few weeks, eased lower to $128.03. Considering its price level, that decline was rather modest, and CVX respected… Read More

If there is anything I like to see in a stock, it is resilience.  #-ad_banner-#For the past four months, Juniper Networks (NYSE: JNPR) has lagged well behind the market, but it just refused to drop below the $24 level. This maker of network infrastructure was rocked by a negative analyst opinion in May and a downgrade in June, but support held firm. And while JNPR has gone nowhere since April, money continued to flow in. The on-balance volume indicator, which measures volume traded on up days versus down days, began to rise in early April.  Theoretically, if the bulls are… Read More

If there is anything I like to see in a stock, it is resilience.  #-ad_banner-#For the past four months, Juniper Networks (NYSE: JNPR) has lagged well behind the market, but it just refused to drop below the $24 level. This maker of network infrastructure was rocked by a negative analyst opinion in May and a downgrade in June, but support held firm. And while JNPR has gone nowhere since April, money continued to flow in. The on-balance volume indicator, which measures volume traded on up days versus down days, began to rise in early April.  Theoretically, if the bulls are more aggressive, more shares change hands on rally days than on declining days. That tells us there is demand for the stock, even if the trend is flat. Sooner or later, there will not be enough supply to offset it, and prices are very likely to rise. The $24 level, which is short-term support, falls in the middle of a longer-term zone of support between $23 and $25.50. The top of the range runs through the big July 2011 gap down, as well as several other important highs in 2011 and 2012. The bottom of the range hits… Read More

It wasn’t long ago that SINA Corp. (Nasdaq: SINA) was trading near $90 per share, but it has been a brutal 2014 to date for this big Chinese Internet stock. SINA bottomed in May just under $43 for a nasty 50%-plus drop in just over six months. This stock was left for dead and long forgotten. But SINA has seen hard times like these before; its fall between 2011 and 2012 was much worse. The good news for shareholders today is that the stock bottomed not far from its 2014 low, and that tells us that there are buyers at… Read More

It wasn’t long ago that SINA Corp. (Nasdaq: SINA) was trading near $90 per share, but it has been a brutal 2014 to date for this big Chinese Internet stock. SINA bottomed in May just under $43 for a nasty 50%-plus drop in just over six months. This stock was left for dead and long forgotten. But SINA has seen hard times like these before; its fall between 2011 and 2012 was much worse. The good news for shareholders today is that the stock bottomed not far from its 2014 low, and that tells us that there are buyers at this level. No matter how high the stock flies and how hard it falls, there seems to be a floor underneath. #-ad_banner-#The stock’s May 22 dip appeared to be a selling climax, coming on heavy volume. The next day, SINA scored a big move to the upside, also on exceptionally heavy volume. I liken this to the tide rushing out and then rushing back in again. The water was at an unsustainably low level and, for a stock, extreme panic left a vacuum of demand that “had” to be filled. The worst is now over, and I think… Read More

Many traders know the old saw “overbought can become more overbought.” Strongly trending markets may look ready to crack on paper but keep going longer than anyone expects. The other side of that coin is that steep rallies can have equally steep corrections, and they, too, can last longer than anyone expects. #-ad_banner-#Right now, the energy sector seems to be at a crossroads between these two possibilities. After a sharp run up this year, the Energy Select Sector SPDR ETF (NYSE: XLE) became very extended to the upside by numerous metrics. Momentum indicators such as the… Read More

Many traders know the old saw “overbought can become more overbought.” Strongly trending markets may look ready to crack on paper but keep going longer than anyone expects. The other side of that coin is that steep rallies can have equally steep corrections, and they, too, can last longer than anyone expects. #-ad_banner-#Right now, the energy sector seems to be at a crossroads between these two possibilities. After a sharp run up this year, the Energy Select Sector SPDR ETF (NYSE: XLE) became very extended to the upside by numerous metrics. Momentum indicators such as the Relative Strength Index (RSI), the spread to key moving averages, lopsided bullish sentiment and an uncharacteristically high price/earnings (P/E) ratio all suggest it is time for a correction. The question now is how to play it. Do we buy this dip or do we wait for a pullback to a lower-risk entry point?   For me, after the energy sector has racked up 20%-plus gains since February, the latter is far more palatable. I may miss the next leg higher, but given that the market is still overbought, controlling risk is paramount. On the daily chart, we can… Read More

Even in a bull market, strong stocks need to rest from time to time.  #-ad_banner-#Aerospace giant and Dow 30 member United Technologies (NYSE: UTX) gained more than 60% from November 2012 — when the market’s current bull leg began — through April of this year before taking its breather. Since that peak, the blue-chip stock moved up and down in a trading range, or rectangle pattern. As the range developed, it ran into that long-term trendline. I have found that this is not unusual, and it often does not signal the end of the… Read More

Even in a bull market, strong stocks need to rest from time to time.  #-ad_banner-#Aerospace giant and Dow 30 member United Technologies (NYSE: UTX) gained more than 60% from November 2012 — when the market’s current bull leg began — through April of this year before taking its breather. Since that peak, the blue-chip stock moved up and down in a trading range, or rectangle pattern. As the range developed, it ran into that long-term trendline. I have found that this is not unusual, and it often does not signal the end of the rally. We have to give the larger feature — the trendline, in this case — the benefit of the doubt even if it was only broken due to the passage of time. A strong, sustained vertical move below the line would be a different story. In May, shares attempted a breakdown below the trendline, but it was reversed immediately. Bears could not keep the selling pressure on as demand swelled to soak up all shares offered for sale. And the trading range continued. After kissing the top of its range again, the stock’s next decline returned it to… Read More

They say, the bigger the ship, the longer it takes to turn it around. When it comes to stocks, the deeper the bear market, the longer it takes to right the ship. #-ad_banner-#One area where conditions appear to be slowly improving after getting mauled by the bears is the gold mining sector. After peaking in 2011, gold and gold stocks have been in a tailspin. Following a failed rally attempt in 2012, the pace of the decline accelerated. By late last year, the Market Vectors Gold Miners ETF (NYSE: GDX) was down roughly 70%. The best part about… Read More

They say, the bigger the ship, the longer it takes to turn it around. When it comes to stocks, the deeper the bear market, the longer it takes to right the ship. #-ad_banner-#One area where conditions appear to be slowly improving after getting mauled by the bears is the gold mining sector. After peaking in 2011, gold and gold stocks have been in a tailspin. Following a failed rally attempt in 2012, the pace of the decline accelerated. By late last year, the Market Vectors Gold Miners ETF (NYSE: GDX) was down roughly 70%. The best part about trading is that we can pick the timeframe in which we operate. Therefore, we can make some money in the short term while we wait for the major change in trend to develop. Yamana Gold (NYSE: AUY) presents such an opportunity. Over the past two months, it has developed a pattern that looks to be the end of the most recent phase of its decline and could send prices high enough to challenge their bear market trendline. From April through this week, AUY has traded in a sideways pattern, and we can see an inverted head-and-shoulders formation. Momentum… Read More

One of the predominant strategies traders use is to simply find stocks in rising trends and hop on until they stop. I like to temper that a bit with a condition that the stock’s sector should also be strong. #-ad_banner-#Although the basic materials sector contains the damaged gold mining group, it has still been able to outpace the S&P 500 as the latter moved into record high territory. That means components within the sector are taking up the slack of the miners, and one of them — chemicals — is doing the lion’s share. The S&P Chemicals Index (CEX) is… Read More

One of the predominant strategies traders use is to simply find stocks in rising trends and hop on until they stop. I like to temper that a bit with a condition that the stock’s sector should also be strong. #-ad_banner-#Although the basic materials sector contains the damaged gold mining group, it has still been able to outpace the S&P 500 as the latter moved into record high territory. That means components within the sector are taking up the slack of the miners, and one of them — chemicals — is doing the lion’s share. The S&P Chemicals Index (CEX) is trading at its own all-time highs and beating the S&P 500, as well. Within the group, Celanese (NYSE: CE) is now breaking out through resistance to new highs. And even a technical analyst like me can appreciate a 12-month trailing price/earnings (P/E) ratio of 8.6 and a forward P/E of less than 12. Most of its peers sport P/E ratios closer to 16, while the S&P 500 itself is trading at 19 times earnings. Looking at the charts, we can see that long-term trends from both major lows in 2009 and 2012 remain unbroken to the upside. And the trend… Read More

The dominant theme in the market this month has been the outperformance of big stocks and underperformance of small-cap stocks. While the S&P 500 Index, representing highly capitalized companies, refuses to stray far from its all-time highs, the Russell 2000 index of small caps remains in a downtrend.  #-ad_banner-#This condition is not likely to last much longer, and one or the other will have to adjust. On an individual stock level, however, some have already started to make their moves — and not necessarily in the same direction as the major indices.  IRobot… Read More

The dominant theme in the market this month has been the outperformance of big stocks and underperformance of small-cap stocks. While the S&P 500 Index, representing highly capitalized companies, refuses to stray far from its all-time highs, the Russell 2000 index of small caps remains in a downtrend.  #-ad_banner-#This condition is not likely to last much longer, and one or the other will have to adjust. On an individual stock level, however, some have already started to make their moves — and not necessarily in the same direction as the major indices.  IRobot (Nasdaq: IRBT) is one such stock. The company is best known by consumers for its Roomba vacuum cleaner, but it also manufactures robots for defense and security, telemedicine and video collaboration. As was the case with many small-cap stocks, IRBT peaked in early March. After touching a high of $48.36 on March 6, it started a painful slide to a low of $30.11 last Tuesday — a 38% loss in just 11 weeks. But technically, conditions have changed for the better.  The first step to reversing a long slide is simply to stop… Read More

We all naturally gravitate toward stocks that can make us money by moving higher in price. However, there are always stocks available to make us money when they move lower, and right now credit card purveyor Visa (NYSE: V) is one of them. Visa, as well as its peers, had a rough go of it in March, losing more than 15% from its March high to its low on April 11. (Even Discover (NYSE: DFS), which my colleague David Sterman profiled last week, wasn’t immune.) On the way down, Visa sliced through chart support at roughly… Read More

We all naturally gravitate toward stocks that can make us money by moving higher in price. However, there are always stocks available to make us money when they move lower, and right now credit card purveyor Visa (NYSE: V) is one of them. Visa, as well as its peers, had a rough go of it in March, losing more than 15% from its March high to its low on April 11. (Even Discover (NYSE: DFS), which my colleague David Sterman profiled last week, wasn’t immune.) On the way down, Visa sliced through chart support at roughly $212 and left its 50-day moving average in the rearview mirror. It also moved below its 200-day average before rebounding with the broader market.   #-ad_banner-#Financials as a sector continue to lag, so V is fighting an uphill battle that it is likely to lose. It is currently trading just below its former support level, which is now acting as resistance. Normally, we’d have to give the bulls the benefit of the doubt here because the stock did not fall soon after reaching this plateau. The reason we can’t is that volume during the rebound rally declined each… Read More