Over the last two weeks, the Nasdaq staged two positive reversals in heavy volume at or around the two hundred day moving average, the NYSE advance/decline line made new highs, the Dow and NYSE closed at all time highs in heavy volume, confirming the rally. Except for a few hours of heavy selling and shakeouts, here and there, the market has defied mixed economic and geopolitical news breaking out of the Ukrainian-Russian Crisis, and has traded orderly with no distribution in the last two weeks. Friday’s Monthly Unemployment report will be the next test for the market.
Leading growth stocks significantly outperformed the market for a second straight day, following through on recent breakouts and bounces off moving averages in heavy volume, and consolidated sideways as the market drifted lower in the afternoon. The morning uncertainty, and afternoon selling, presented potential low risk entries into new and recent breakouts. US Silica Holdings (SLCA), Smith and Wesson (SWHC), Micron Technology (MU), and Western Refining (WNR) added to recent gains.
Interestingly enough, short trading ideas also added gains to recent breakdowns and others continued to hold bearish consolidations. Avon Products (AVP), Walter Investment Management (WAC), and Ocwen Financial (OCN) added to recent gains in heavy, above average volume. This continues to be the rallies main weakness besides the low number of new highs.
On Monday, the US Stock Market Update and Trading Ideas warned investors not to go fishing jut yet, and on Tuesday, the US Stock Market Update and Trading Ideas suggested traders should have been accumulating a long position or two, and add to positions with each shake out as long as initial positions do not get stopped out. The market has presented two opportunities the last two mornings and afternoons to enter long positions on shakeouts without initial positions being stopped out. Most positions should be bounces off moving averages not stocks breaking out to new highs. Review the leading growth stocks analysis for additional trading ideas.
Don’t expect this rally to last too long, most likely a few weeks…tops, or be easy to handle with intra-day pullbacks feeling worse then they are. Expect most stocks to stall near fifty two week highs and others to climax, short term and/or permanently. Bounces and breakout should continue to follow through in strong volume, or stops should be tightened quickly to protect profits and avoid major losses.
Intercontinental Exchange (ICE) is in the process of forming a second stage double bottom base after advancing sixty percent in just under a year. Sales are expected to accelerate to 178% over the next four quarters and earnings to 50%. The stocks pe expansion price target range, at its breakout in January 2013, was $345 – $395, another 60 – 90% from here. A breakout above the recent range or double bottom mid point at $219.83, could launch the stock toward the PE Expansion target. Earnings are expected May 8th before the opening bell.
Krispy Kreme Doughnuts (KKD) more then tripled out of a cup and handle breakout at the end of 2012 while formingind and breaking out of three bases along the way. The stock topped in low volume (institutions lost interest) and gapped down in the heaviest volume of its advance, on poor earning’s guidance in December 2013. The stock has spent most of the last year forming a bearish head and shoulder’s pattern, stalling at the two hundred day moving average, and recently consolidating into the fifty day moving average in lower volume, with several above average volume sell offs. A breakdown below the recent lows could accelerate the selling to the next support area between $12 – $15. Don’t cheat, the stock could just try and retest the two hundred moving average above before selling resumes if the market rally holds, so be patient.