Momentum Slows Down on Monday

DJIA - 9.72, -0.12% SP500 + 1.29, +0.15% NASDAQ Comp. - 0.15, -0.01% Russell 2000 - 2.76, -0.59% Exchange NYSE NASD Advancing 2,051 1,221 Declining 1,701 1,526 Oil $39.56 -$0.61 Gold $892.40 -$21.50 SOX 227.81 -1.37 VIX 43.64 +0.27 The VIX moved up slightly failing to confirm the move up in the SPX on Tuesday. Strongest Sectors: XLI +1.89%...XLF +1.12%...XLE +0.36% Weakest Sectors: XLP -0.98%...XLU -0.56%...XLB -0.35% Sector Watch Up Trending: Sideways: XLE, XLP, XLU, XLY, XLV, XLI, XLB, XLK Down Trending: XLF Upward momentum in stocks paused on Monday as traders took some profits on last weeks rise in prices. Traders awaiting the final structure on the Stimulus Bill may have also been a factor. Some of biggest examples of momentum reversal on Monday were the Ag-related stock which started strong and ended weak. Check out the charts on AGU, CF, MOS and POT. Early white candles turned into black spinning tops by the end of trading. SOHU gained 7.78% on earnings that beat expectations by 19 cents. BIDU which reports earnings on Wednesday rose 12.81% in sympathy. Index Commentary The DJIA, SPX, Nasdaq and RUT all formed small spinning tops suggesting that upward momentum has weakened. Monday’s pullback and rally stayed above Friday’s S1 level. Watch for a break below the high of the low day on Tuesday or a break of Friday’s S1 level. This could be an exit signal from bullish trades for some short-term traders. Stock Commentary Most of the stocks listed below formed potential short-term bearish patterns on Monday. Upward momentum clearly slowed. These bearish patterns are unconfirmed at this point. Tuesday may give bearish confirmation or these stocks could resume their short-term up trends. Just be mindful as you plan your trading for Tuesday. Rail stocks BNI, UNP and NSC formed hanging man doji inside day patterns, CSX formed a cross like doji. Short-term traders watch for potential reversal here Steel stocks STLD, NUE and SCHN formed potential short-term bearish reversal patterns as price moved slightly lower. X was up and formed a doji which could be the second candle in a potential evening star pattern. Semiconductor stocks XLNX, ALTR, NSM, MRVL LLTC, TXN, NVLS all moved down slightly forming doji, bearish harami and other bearish patterns indicating a potential Coal stocks KOL, BTU, JRCC, CNX, MEE and WLT moved higher and FCL was down 11 cents. The candle patterns on these stocks also indicate slowing momentum and possible short-term reversal. Check these charts as most formed a spinning top or doji. Earnings Monday, Feb 9 Symbol Earnings Estimate BZH -2.08 below -1.83 CNA -0.15 below +0.30 ENER +0.33 beat +0.31 HAS +0.62 below +0.75 SOHU +1.35 beat +1.16 WHR +0.60 below +0.78 LNCR +0.79 beat +0.77 LNC -0.48 below +0.10 PFG +0.69 beat +0.66 VRTX -0.96 below -0.93 Numbers exclude non-recurring items Tues Feb 10 BMO – CVH, DTV, ICE, MDC, OMC, PBG, Q, TRA AMC – AMX, AMAT, CERN, CF, CSC, EXPD, MVSN, NVDA, SWIR, SIAL, VFC Wed Feb 11 BMO – AGU, AYE, CCE, GENZ, MMC, MICC, NICE, SKYW AMC – ATVI, CMG, CLB, RE, INSP, LVS, LOOP, MOH, NTAP, STR, RNR, TCO, TEX, TQNT Thur Feb 12 BMO - AET, CPLA, KO, ECA, GCL, CLI, MAR, MLM, NXY, NRG, NWN, ZEUS, PTEN, RSH, REV, STRA, TASR, ULBI, WMI AMC – ACAP, AGII, BIDU, COG, CEPH, CAKE, DRYS, ENH, GDI, MFE, NTGR, PNRA, RNWK, TK, WCLK, WYNN Fri Feb 13 BMO – ANF, ALE, BAM, CTSH, ENB, PEP, WYN Learn the Discipline We entered positions on CAM, EBAY, HLF and NIHD on Monday. AMED was stopped out on a trailing stop when the stock pulled back early Monday. We originally put a trailing stop 3% the 30 DMA to keep the risk constant so as the stock rose the stop followed. Saturday’s post showed the stop at 44.95. The stop filled at 44.91, AMED fell to 44.85 and then reversed and closed at 46.81. We choose the trailing stop on this stock since the ERD (Earnings Release Date) was Feb 17. We wanted to avoid the potential of having too few stocks being held over earnings and one bad earnings report having an undue negative influence as we build the portfolio. In this case, using the original stop amount proved to be too tight of a trailing stop to stay in the trade. The trade did produce a profit of $1.20 or 2.74% in 6 days. Of the original $152,000 in the model portfolio, approximately $18,000 is invested. Stocks to Watch on Tuesday Deletions: CSCO, PRGO, SPTN, WMS Additions: ACN, AMZN, GR, MON, NIHD, SNA, SNHY, SPWRA, EBAY, JOYG Stocks to Watch on Tuesday Leading Stocks: Holding Above 30 DMA NFLX, BDX, ESI, JW.A, MYGN, MON, RIMM, SYNA, BLUD, APEI, HANS, STRA, WRC, GMCR, PCP, GES, GME, MHS, SWN, MOS, PWR, TDG, AAPL, BIIB, GPRO, GXDX, JCOM, WCG, VAR, BIDU, GILD, RCI, VPRT, FLS, ESRX, SLGN, ATW, CPLA, CTSH, FSLR, PCLN, RBN, AMED, CHL, DLB, ORCL, PCR, PSYS, CAM, DV, EBAY, JOYG, NIHD, PPD, Moving Above 30 DMA = 2 BYI, MUR Moving Below 30 DMA = 2 CLB, HLF Staying Below 30 DMA DLTR, K, BKC, JOSB, JEC, PETS, NTLS, BAP, HDB, CBST, DECK, SNA, AFAM, EZPW, WAB, ALGT, ICE, AXYS Monday’s Action Moving Up: SOHU, FSLR, SINA, IPI, KMT, ANR, GS, ADM, STRA, MS, FWLT Moving Down: AEM, POT, NDAQ, CF, GDX, ONXX, COH Intermediate Term Market Trend: Neutral – DJIA, SPX, Nasdaq, RUT Short Term Market Trend: Up