Select Stocks Still Strong Despite Teetering Market

Posted: 10 Jan 2011 11:05 PM

The first week of the trading year kept our “right place, right time” thesis intact. Gold, silver and some oil names came off. The financials gave us some nice upside follow through in the beginning of the week before getting hit on Thursday and Friday. High beta tech extended in certain areas (AAPL, VMW, PCLN), while the agricultural names (led by POT) began to break out, and the casinos finally paid those staying with the trade.

This is the type of trading I expect moving forward over the next few weeks. I will continue to lean long, but my size and holding time will differ from week to week based on market complexion. Friday I sent out a note to suggesting its time to clean up some positions as I see this rising channel is showing some signs it might get breached. The 1260-1262 area held but is coming into play again today. If we break and close below that level the market can easily come down to the 1255 area and then the a big support area that should hold first time out is around 1248-1250.

TECH

Apple Inc. (AAPL) opened higher this morning and went through $340 before pulling back in. I would take small profits and stay with this one long. We will re-evaluate Apple around earnings, but they generally provide conservative estimates and beat handily so there shouldn’t be anything to worry about.

Google Inc. (GOOG) I expect a move to over $700 this year, but I will continue to time in and out like I do. Google was weak off the open, so I will wait for a break through $618 for a move back to $625+.

Amazon.com, Inc. (AMZN) I see a rising channel that could be set to break to the downside. I would be cautious with AMZN here.

Netflix Inc. (NFLX) range has been super tight over the last month and a half, which is rare for this controversial momentum stock. It was Marc’s play of the day today through $180, and is acting well this morning trading around $184. As Marc said, this one can see $190 very quick, I’d stay with it.

F5 Networks Inc. (FFIV) has been a very sloppy stock, but patience in this cloud leader has been rewarded in the past. The stock is acting strong this morning and should be breaking through previous highs above $144 in no time.

Baidu.com, Inc. (BIDU) was a great buy out of its nearly month long consolidation around $100. Now that its back above the 50-day and has erased the losses from that December 15th potent red bar, it could use a rest before perhaps testing highs once again. Long-term I still think this is a buy.

Cisco Systems, Inc. (CSCO) we mentioned in December as one of our January effect stocks around $19.75. Since then it has acted well, touching $21. This morning Cisco is acting weak, but I consider it a minor bump in the road. Short term it could use some rest, but long term it has a might nig gap that will be entered above $21.

The BANKS perked up early last week then sold off on Thursday and Friday. I do think you can buy dip on these, but I’m in no rush.

Goldman Sachs Group Inc. (GS) watch Friday’s low to trade against, around $169. If it breaks below and then holds the $167 level, I will look to be an aggressive buyer of the cream of the crop financial stock.

JPMorgan Chase & Co. (JPM) has been very strong since December. It got hit Friday and bounced off lows. As I said, I will look to buy the dip in the banks, but the area I will be aggressiv with JPM is closer to $42.50.

Bank of America Corp. (BAC) also bounced back very well from the $11 to about $14.60 in a little over a month. With BAC, I’d like to buy back around $13.50-13.75

The CASINOS had a big move last week, and I expect their strength to continue. The two I have focused on are LVS (leader) and MGM (laggard).

Las Vegas Sands Corp (LVS) hit $1.38 at the depths of the crisis, and is now trading near $50! Hard to believe, but I’m focusing on the considerably bright future for this stock. I bought around $46-48 after the consolidation it put in place, and I fully expect it to get back to highs despite some selling this morning. I will trade around my core long today, looking for a cash flow negative to positive move. It seems to be playing out with a bounce off $49.

MGM Resorts International (MGM) was another of my catch-up January effect plays from below $14. I expect MGM will make new highs before running into some resistance around $16.50-16.70. Fifty-two week highs are only a matter of time, IMO.

The AGRICTULTURAL GROUP remains a strong investing theme for the year and beyond.

Potash Corp./Saskatchewan (USA) (POT) is the best of the bunch, controlling 20% of the world’s potash supply. Back in August the stock jumped more than 25% after a hostile takeover bid from BHP Billiton (BHP) was rebuffed, and then trended basically sideways for the better part of six months. During that time, the other ags played catch up and POT actually underperformed the group. Buying through the $145 area was a no brainer but you had to be quick as it traded more than 5% higher on December 29 and never looked back. The stock touched $170 before pulling back in slightly, and I would be looking to aggressively buy pull backs on this thing all year.

GOLD took a hit last week and rewarded technical shorts. We now have a three day pivot area to trade against around $133.10 in the GLD. If it were to break to the downside, it could get down to a major area around $129.50-$130.50.

RARE EARTH STOCKS got hit midweek and were great shorts, continuing to provide two-way action. Friday there was a nice negative to positive opportunity in Molycorp, Inc. (MCP) and Rare Element Resources Ltd. (REE). This is a great group of stocks for active traders looking to speculate on short term price fluctuations.

The SOLAR GROUP got some attention late last week, and it’s best to take a few of these guys because its often hard to tell which one is going to go. This morning they are up after LDK Solar Co, Ltd. (LDK) raised guidance after the close Friday. LDK is up nearly 20% and dragging some others in the group, such as ReneSola Ltd. (SOL) up around 10%. SOL, a Chinese company, also appeared on Jordan Kimmel’s Magnet Investing list this week, so I like that as one to play in the solar sector. First Solar, Inc. (FSLR) is the leader of the group and I expect it to get back to highs above $150. Others in the group to watch are JASO, SOLF, SPWRA, STP, and TSL.

The Euro is still under pressure and looks like a big head and shoulders pattern with a target back to the old lows of $118. My focus is not forex though.

Earnings season kicks off this week, which will be important to watch. Earnings have buoyed the rally to this point, but now with some rising expectations it will be interesting to see if we can continue to see companies beating. Employment and housing remain the drag, and we need earnings to be something we can continue to point to as evidence the recovery is taking hold.

Typically first two weeks of January are stronger then second two weeks. I will be on the lookout for complexion changes over the next week and a half.

As a final word, my heart goes out to those affected by the shootings in Arizona. This is tragic and horrible for America and humanity. Let’s hope we never see something like this again.

*DISCLOSURE: Long C, SOLF, JASO, LDK, NFLX, SOL, BAC, MGM, CSCO, LVS; Short SPY.

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About abwehra group

The Art&Science of Trading Gold
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