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Top Stocks With Helene Meisler

 Top Stocks

The Gaps Tell the Tale

BY Helene Meisler | 07/24/14 - 06:58 PM EDT
Action: AMZN, FSLR, ULTA, JCP

The Market

Well, this is clearly not much of a breakout over 1985. It’s almost as if we dribbled across the line and then decided we wanted a do-over. In fact, the Dow has been red for four of the last six trading sessions. So much for the big- cap stocks.

So many stocks are gapping up and down on earnings that I truly cannot recall another earnings season with so many gaps. If it were all gaps up, then I’d say, well, that’s because we have so many shorts in the market, but my oh my, we have just as many gaps down. It looks as though tomorrow’s big name in that category will be Amazon.com (AMZN:Nasdaq).

I want to reiterate that the market feels as though it is running on empty in some ways. If I showed you the charts of five or six Dow stocks that have gapped down this week and didn’t tell you what the Dow had done this week, you would have thought for sure there would have been several triple- digit declines.

The inverse is that Apple (AAPL:Nasdaq) did not exactly blow the doors off, and folks are more than willing to give it a pass until next quarter. Facebook (FB:Nasdaq), on the other hand, did blow the doors off and yet managed to close on the lows, albeit up nicely on the day.

And how about the reversal in some of those airlines today? You would have thought for sure the Dow Transportation Index was down hard. But nope, it lost a whole two bucks! The Russell 2000 lagged again today, and in turn so did breadth, and that means here we are one week into the oversold rally, and the McClellan Summation Index is still pointing down. We are swiftly working off that oversold reading from last Thursday evening.

In good news today, the Hi-Lo Indicator is curling back up, although the raw number of stocks at new highs continues to lag significantly. The other good news is that the folks on TV have started to notice the divergences and point them out. That’s good news, because when they ignore them, it shows giddiness; when they don’t, it shows concern.

Let me make a few comments on the put/call ratios. The 30- day moving average of the equity put/call ratio has decidedly turned up. In the past four years, that has been bearish on an intermediate-term basis when it occurs from these levels (chart shown below). The 10-day moving average is heading down, and that implies a short-term oversold condition in the market. The raw data for the put/call ratio today was 91%, which leans somewhat high (bullish). However, on the basis of the numbers, we are dropping off this moving average, and if the readings stay in the 90s for a few more days, the shorter-term moving-average line will turn back up (bearish). The chart is shown below.

It’s hard to say exactly when we will be back to an overbought reading, just because the market has been so choppy in the last two weeks, but at least we know it is no longer oversold.

Read Helene's latest column here.

New Ideas

We may as well look at the chart of Amazon (AMZN:Nasdaq), since everyone will discuss it on Friday. You can see the clear support at $320-$330. I am not a fan of catching falling knives, but should the stock manage to hold this area for three days, I’d be inclined to trade it from the long side with a stop under $320.

Today’s Indicator

The put/call ratio charts are discussed above.

Q&A

Helene welcomes your questions about Top Stocks and 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.

I have been a long-term fan of First Solar (FSLR:Nasdaq) since the beginning of the year, but I must say that the break under the line in early July -- and the inability to recapture it -- is not something I am fond of on the chart. However, in the near term it is trying to make a small bottom. I would like to see a push over $65, and while it would only measure to the underside of that uptrend line, it would put some distance between the recent low and the current price to make me feel better about owning it. If I liked the market more, I’d think it has a teensy weensy head-and-shoulders bottom forming here. Very teensy weensy!

Ulta Salon (ULTA:Nasdaq) really looks as though it is trying to form a base. It clearly needs a breakout over that resistance at $95 to improve it, but right now this action in the past few days looks more like a small flag to me, so I’m inclined to give this the benefit of the doubt. I would not want to see it slip back under today’s low, though.

Also in retail land, J.C. Penney (JCP:NYSE) finds itself in a triangle that would be a breakout over $9.50. I must admit, I cannot possibly imagine how, with most of retail in such a bad way, J.C. Penney can shine so much, but the chart says that over $9.50, we’d have a target near $11. The obvious stop is under $8.50.

Regards, Helene Meisler

Not Everything Is Going Up
Action: WFM, CLX, NBL, NE

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07/23/14 - 06:34 PM EDT
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Action: JNK, TLT, QIHU, DAL, GE, WAGE

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