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Top Stocks With Helene Meisler

 Top Stocks

One Nervous Market

BY Helene Meisler | 08/28/14 - 06:42 PM EDT
Stocks in Focus: OIH, HAL, MRO, NMBL, ECA, ESV

The Market

I do not know what to make of the day except to note that at least the market pulled back!

Let me begin with sentiment. The American Association of Individual Investors' weekly survey showed a jump in bulls to 52%. That is the highest reading since Christmas week. One week later, we saw a market peak and down we went. I should note that typically, unless we see a "confirmation" from the Investors Intelligence readings, I tend to consider the AAII readings rather lightly since they tend to jump around like day traders. That said, this indicator now moves to the bearish side of the ledger.

If you would prefer to offset all that bullishness (in a poll that closes on Tuesday evening, released on Thursday morning) then let's just explore the explosion in put-buying that occurred today. The put/call ratio for ETFs was an eye- popping 390% -- I will wait while you get up off the floor.

I did look back at other previous extraordinary put/call ratios for this category and there were five in the last five years. Three were lows in the market and two were not as we fell farther. Upon closer inspection, the two instances that were not lows were not accompanied by a total put/call ratio that was super high.

You see, the total put/call ratio today was 130%, so it was accompanied by a high total put/call ratio. To put that in perspective, the last time we had such a high reading was Oct. 9, 2013. So none of the declines this year got folks as eager to buy puts as today did. Prior to that we saw a reading this high in the total put/call ratio (of 139%) on June 20, 2013, also a low in the market.

I will tell you my conclusion: This is one nervous market.

The market continues to be overbought. It continues to have fewer stocks making new highs and now, due to this incredibly high put/call ratio, the 10-day moving average of the put/call ratio has turned back up (bearish). The chart is below.

We also continue to have the intermediate-term indicators pointing upward. So, for now, I will sound like the broken record I have been for a week: Expect a pullback and then another rally sometime after Labor Day.

The one question that has started to litter my inbox I will try and address this weekend: Do I expect the intermediate- term indicators to make higher highs before they turn down? The preview answer is no, I do not; they are simply too far away.

Have a great Labor Day weekend!

New Ideas

I was asked to look at the Market Vectors Oil Services ETF (OIH) since as you may recall I have not been a fan of the oil or oil-services names since June. Notice that some of the oil stocks are improving. Last week I showed Continental Resources (CLR), which actually had a terrific week, and below you will see some other energy names. But the chart of Halliburton (HAL) is not good. A break from here sets up a next target near $64 and maybe even near $61.

Today's Indicator

The put/call ratio is discussed in full above.

Q&A

Helene welcomes your questions about Top Stocksand her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice.

Email Helene here.

Marathon Oil (MRO) hasn't done anything wrong and the uptrend is still intact. I can calculate a measured target around $41 to $42, so I'm not sure how much more oomph it has left without a proper correction, so I'd call it a hold unless and until it breaks that uptrend line.

If I were playing something in the oil patch, I would probably go back to Ensco (ESV), which we looked at when it was $48 a few weeks ago and we liked it. It has since had a nice rally and a nice pullback (this is what a pullback should look like). The next serious resistance is up in the $53 area. I would not want to see it break back below $49.

Nimble Storage (NMBL) has not had a good few days but it hasn't broken anything. I look at the chart and see it's in a trading range between $25 and $31. Very little seems actionable except that tomorrow would be the third day down, so if it doesn't break $25 before then, it ought to have a rally attempt next week.

EnCana (ECA) has had a nice little breakout in the last week from a small head-and-shoulders bottom. It measures to $23.50, which isn't that far away. My inclination is to believe it is getting overbought, so I would prefer to buy a dip or a consolidation, especially if it dips back to the line around $22. I think it works its way higher over time.

Regards, Helene Meisler

Charting a Chop Fest
Stocks in Focus: XRT, TSN, MCD, WFM, UNG, ATHN, BOBE

A string of positive-volume days on Nasdaq tells the story.

08/27/14 - 07:06 PM EDT
Like Running in Place
Stocks in Focus: XLU, XME, DATA, FDX, EMR, DE

If the market would just pull back, it probably sets up the charts for upside.

08/26/14 - 06:55 PM EDT

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