With several weeks of rally under the market’s belt, it was susceptible to the disappointment doled out this week by central banks.  To take advantage of the decline, I’m looking for sectors that lagged on the way up, as they tend to lead on the way down as well. While the S&P 500 rallied from its September lows nearly all the way back up to its 52-week highs, the chemicals group only recovered about two-thirds of its summertime losses. And it now looks ready to roll over. Within that group, PPG Industries (NYSE: PPG), a maker of protective… Read More

With several weeks of rally under the market’s belt, it was susceptible to the disappointment doled out this week by central banks.  To take advantage of the decline, I’m looking for sectors that lagged on the way up, as they tend to lead on the way down as well. While the S&P 500 rallied from its September lows nearly all the way back up to its 52-week highs, the chemicals group only recovered about two-thirds of its summertime losses. And it now looks ready to roll over. Within that group, PPG Industries (NYSE: PPG), a maker of protective and decorative coatings and glass products, sports a rather clear chart with all the hallmarks of a stock ready to break down.  First, there was declining volume and, therefore, declining investor interest on the price rally.  Second, the chart shows a bearish divergence in the Relative Strength Index (RSI). Even though price made a higher high in November versus October, this momentum indicator made a lower high. This suggests waning momentum, and such divergences are usually resolved in the direction of the indicator — down in this case.  But there is more. Cumulative or on-balance volume also… Read More

Although I think the bears’ case for a stock market decline is getting stronger, there has yet to be a trigger to get them fired up. Until that happens, we can miss a lot of opportunity sitting on the sidelines.  That’s why I’m currently looking for short-term bullish opportunities. And right now I like workforce staffing company ManpowerGroup (NYSE: MAN). This week, the stock, along with many of its peers, broke out from a month-long consolidation pattern.  Manpower sports a good technical configuration, trading above all of its long- and short-term moving averages. When a stock… Read More

Although I think the bears’ case for a stock market decline is getting stronger, there has yet to be a trigger to get them fired up. Until that happens, we can miss a lot of opportunity sitting on the sidelines.  That’s why I’m currently looking for short-term bullish opportunities. And right now I like workforce staffing company ManpowerGroup (NYSE: MAN). This week, the stock, along with many of its peers, broke out from a month-long consolidation pattern.  Manpower sports a good technical configuration, trading above all of its long- and short-term moving averages. When a stock trades above all relevant moving averages, we know the trend is up regardless of your trading time frame. #-ad_banner-# MAN’s November dip bottomed out in the vicinity of the key 50-day and 200-day averages. And throughout late November, it found support at shorter-term averages from the 30-day to the 10-day.  Therefore, we have to conclude that the rising trend from the September low remains intact despite what looked to be excessive volatility last month. With that in mind, Tuesday’s upside breakout from a one-month countertrend decline looks buyable. And, as mentioned, many of Manpower’s peers are… Read More

If there is one sector that demonstrates how big stocks can overshadow the performance of the masses, it is retail. With behemoths such as Home Depot (NYSE: HD) and Amazon.com (NASDAQ: AMZN) leading the way higher, retail benchmarks like the Market Vectors Retail ETF (NYSE: RTH) are holding up fairly well.  But a look at somewhat smaller retailers such as Macy’s (NYSE: M) and Best Buy (NYSE: BBY) paints an entirely different picture. The typical retail stock is in serious decline.  While simply following the trend in falling stocks should lead to profits, I scanned the sector for… Read More

If there is one sector that demonstrates how big stocks can overshadow the performance of the masses, it is retail. With behemoths such as Home Depot (NYSE: HD) and Amazon.com (NASDAQ: AMZN) leading the way higher, retail benchmarks like the Market Vectors Retail ETF (NYSE: RTH) are holding up fairly well.  But a look at somewhat smaller retailers such as Macy’s (NYSE: M) and Best Buy (NYSE: BBY) paints an entirely different picture. The typical retail stock is in serious decline.  While simply following the trend in falling stocks should lead to profits, I scanned the sector for stocks that are not quite as far along in their declines. Stocks in weak groups that are just starting to break down have more room to fall.  The one I like best is L Brands (NYSE: LB),  which sells women’s apparel and beauty and personal care products through Victoria’s Secret and Bath & Body Works stores.  LB outperformed the market coming off the late-August lows. In the process, it moved above resistance set by highs from earlier this year. The October breakout was tentative, but on Nov. 2, the company raised its guidance for the third… Read More

The current stock market is throwing a lot of surprises investors’ way, but one piece of market advice still rings true: Buy stocks that are already going up. Even in shaky markets, the leaders still tend to lead. And by simply following the trend, we can avoid having to pick tops and bottoms.  Although it is not one of the glamorous stocks we see in the headlines daily, Lithia Motors (NYSE: LAD) exhibits the same sort of leadership qualities, and that shows an innate demand for its shares. One of the largest automotive retailers in the United States,… Read More

The current stock market is throwing a lot of surprises investors’ way, but one piece of market advice still rings true: Buy stocks that are already going up. Even in shaky markets, the leaders still tend to lead. And by simply following the trend, we can avoid having to pick tops and bottoms.  Although it is not one of the glamorous stocks we see in the headlines daily, Lithia Motors (NYSE: LAD) exhibits the same sort of leadership qualities, and that shows an innate demand for its shares. One of the largest automotive retailers in the United States, Lithia’s stock has handily outperformed the market. While the S&P 500 was trapped in a trading range for the first six months of the year, LAD gained roughly 40%. And now that the market seems to be backing down after six strong weeks, Lithia is holding tight to resistance near its all-time highs. On the chart, the stock has formed a variation of a “W” pattern with two intermediate rallies instead of one between two larger rallies. Normally, such patterns — also called double- or triple-bottoms — appear after declines. However, they can appear after rallies as consolidation… Read More

Even though crude oil is languishing below $50 a barrel, the energy sector has been showing signs of life in the past month. Since rebounding off its late-September low, the sector has outperformed the S&P 500 by more than 7 percentage points. Some oil services stocks have already broken out to the upside, but I spotted one that is just starting to make its move. While the long-term trend is still officially to the downside, every long-term reversal starts with a short-term one.  And that’s what we’re seeing now with oil and gas exploration and production company Murphy… Read More

Even though crude oil is languishing below $50 a barrel, the energy sector has been showing signs of life in the past month. Since rebounding off its late-September low, the sector has outperformed the S&P 500 by more than 7 percentage points. Some oil services stocks have already broken out to the upside, but I spotted one that is just starting to make its move. While the long-term trend is still officially to the downside, every long-term reversal starts with a short-term one.  And that’s what we’re seeing now with oil and gas exploration and production company Murphy Oil (NYSE: MUR). The easiest pattern to spot on the chart is an upside down or inverted head-and-shoulders. It is defined by a central trough (head) surrounded by roughly equal but shallower troughs (shoulders). A line connects the highs between these troughs to define the resistance line known as the neckline.  Because this is a reversal pattern, we expect to see many indicators setting higher lows as the pattern progresses. Indeed, we’re seeing that in momentum readings for Murphy Oil, including the Relative Strength Index (RSI). #-ad_banner-# But that alone is not enough to confirm a bottom. So… Read More

One of my favorite setups in the stock market takes advantage of the tendency for the sector tide to float most boats. Numerous studies have shown that a substantial percentage of a stock’s performance is linked to the performance of its sector or industry group.  In other words, if the group is doing well, then the odds that an individual stock within it will do well go up. Currently, technology, and semiconductors in particular, are doing very well.  Tech has led the market’s comeback in October, gaining 11.5% for the month compared with 8.9% for the S&P 500. Read More

One of my favorite setups in the stock market takes advantage of the tendency for the sector tide to float most boats. Numerous studies have shown that a substantial percentage of a stock’s performance is linked to the performance of its sector or industry group.  In other words, if the group is doing well, then the odds that an individual stock within it will do well go up. Currently, technology, and semiconductors in particular, are doing very well.  Tech has led the market’s comeback in October, gaining 11.5% for the month compared with 8.9% for the S&P 500. Semiconductor’s have done even better, up 12.4%. Talk about your rising tide. #-ad_banner-# The problem is that given the run in the past month, many stocks may have already delivered the majority of their short-term gains. My strategy is to find stocks in the group just starting to make their move, leaving them with plenty of upside potential as they play catch up.  Applied Materials (Nasdaq: AMAT) is one such stock. While the semiconductor equipment maker has been steadily moving higher since late September, it is much closer to its 52-week low than high.  Of course, we know the old… Read More

With the stock market’s rebound from its September lows fueled by some of its previously worst performers, it does not make sense to chase any sector to the downside. However, identifying badly beaten stocks that are about to crack could set you up for fast profits in the near future. Health care, the former market leader, has fallen on hard times since the summer. Unlike the broader market, it set a lower low in September. It then lagged as most sectors rallied in early October following a weaker-than-expected September jobs report that suggested the Federal Reserve would not raise interest… Read More

With the stock market’s rebound from its September lows fueled by some of its previously worst performers, it does not make sense to chase any sector to the downside. However, identifying badly beaten stocks that are about to crack could set you up for fast profits in the near future. Health care, the former market leader, has fallen on hard times since the summer. Unlike the broader market, it set a lower low in September. It then lagged as most sectors rallied in early October following a weaker-than-expected September jobs report that suggested the Federal Reserve would not raise interest rates this year. Within that sector, diagnostic, imaging and surgical supplies maker Hologic (Nasdaq: HOLX) is a prime example of a stock about to crack. When it does, shares could quickly plunge more than 15%. At first glance, the short-term chart seems disjointed, although support at roughly $37 is visible. Momentum indicators are unremarkable, but relative performance versus the broader market is weak, as would be expected in a stock that is still trading near its summertime lows. In contrast, the S&P 500 is about 7% above its lows. It is the long-term chart below that tells the… Read More

Last month, airline stocks seemed to be on the verge of reversing their bearish 2015 trends. In fact, up until then, the entire transportation sector was still trapped in a disastrous decline, so airline strength offered the first ray of hope for the group all year. United Continental Holdings (NYSE: UAL) was a prime example of the attempted bullish reversal as it broke through the declining trendline from its January peak. The day of the breakout, the stock moved up more than 6% on heavy volume in a classic technical move. But just one week later,… Read More

Last month, airline stocks seemed to be on the verge of reversing their bearish 2015 trends. In fact, up until then, the entire transportation sector was still trapped in a disastrous decline, so airline strength offered the first ray of hope for the group all year. United Continental Holdings (NYSE: UAL) was a prime example of the attempted bullish reversal as it broke through the declining trendline from its January peak. The day of the breakout, the stock moved up more than 6% on heavy volume in a classic technical move. But just one week later, UAL was trading back below that trendline in an equally classic technical failure. The bulls seemed to flame out as demand withered. Shares began to fall under their own weight as whatever buyers there were could not absorb the supply offered for sale.   But this was more than a failure to hold a trendline breakout. It was also a failure to hold a breakout through the top of the May-to-September trading range, which is now likely to break to the downside. #-ad_banner-# In technical analysis, the more features that are broken to the upside on a breakout, the stronger… Read More

It seems like nostalgia looking at Nokia (NYSE: NOK) with a favorable outlook. The company is currently known to domestic investors as an also-ran cell phone maker — I am one of the rare few who own a Nokia smartphone and happen to like it very much — even though it operates in network infrastructure and navigation software as well.  But there is more to the story than a false perception by the investing public.  The company has cleared most of its hurdles in its quest to buy rival Alcatel-Lucent (NYSE: ALU), and according to some analysts, that would create… Read More

It seems like nostalgia looking at Nokia (NYSE: NOK) with a favorable outlook. The company is currently known to domestic investors as an also-ran cell phone maker — I am one of the rare few who own a Nokia smartphone and happen to like it very much — even though it operates in network infrastructure and navigation software as well.  But there is more to the story than a false perception by the investing public.  The company has cleared most of its hurdles in its quest to buy rival Alcatel-Lucent (NYSE: ALU), and according to some analysts, that would create quite a competitive company overseas. From a technical perspective, NOK appears to be setting up for an upside move. While the long-term picture is still damaged, there is something intriguing in the short term that could provide a quick profit for traders.  Specifically, the stock has carved out a bullish flag pattern just below a short-term trendline. Said another way, NOK seems to be resting before making its breakout attempt. Any fears and problems brought to light by the merger announcement have had several months to work themselves out, and that shows up on the chart.  #-ad_banner-#… Read More

Note: Stay tuned at the end of this article for a bonus trade that could turn a 19% drop in today’s stock into 133% gains before year end.  It is provided courtesy of options expert Jared Levy who has recommended trades that delivered annualized gains of 220%, 508%,… Read More