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Top Stocks With Helene Meisler

There Was Finally Some Selling

By Helene Meisler | 04/27/15 - 06:34 PM EDT
Stocks in Focus: IWM, BWA, HD, UNH, SAVE, NUE, DXGE, VGK

The Market

This was quite an interesting day. We had some real selling going on and some sporadic buying, but mostly we did get some selling for the first time. How can I tell? Volume increased in the sell-side names.

Obviously, the Russell was the worst of the indexes, with its decline breaking under an uptrend line. We have already discussed the lack of participation in the Russell as well as the 1275 target area, so I was not surprised to see it back off, but I was surprised at the violence with which it occurred. However, it did manage to hold at the previous lows (thin line).

If iShares Russell 2000 ETF (IWM) breaks $124-ish (this thin line), that will be a divergence from the playbook that has been in place since February. As you can see, despite breaking the uptrend line today the selloffs have all made higher lows, so a break of the previous would signal a change in the market. And my guess would also herald in a lot of chatter about "sell in May."

Now, I realize everyone will focus on the Russell move and tomorrow the Apple (AAPL) action, but please note that despite AAPL being up today, Nasdaq also had an outside reversal day. There was nothing broken on this chart (no lines broken, no support broken), but recall the upper trend line I've drawn in for the past few days that came in around 5120 and note today's high was about 17 cents shy of that figure. In other words, the line worked again.

If there is any follow-through in this selling, it will be a change. I did not detect any panic in the options numbers; the total put/call ratio was 88%, which is actually quite low for a down day lately. The only potential positive in these readings was that the put/call ratio for the VIX was 22%. A reading under 20% has been positive in the past, so this came close.

Tomorrow is the day before the Fed meeting on Wednesday, which has typically been a green day. Again, let's see if that pattern changes. Right now the breakout on the S&P chart has the potential for it to be a fake- out, but we would need to see follow-through selling to change that pattern.

New Ideas

While I obviously don't love the market much up here, my eye keeps catching on the chart of BorgWarner (BWA) because this does seem to be a flag or consolidation after that February run-up. It would need to clear that $62-$63 area to take on another leg, but as long as it stays over $60 I think it has a chance. Heck, if they can run the Cummins Engine (CMI) that we looked at last week on a day like today, maybe they can rotate into these cyclicals.

The flip side is Home Depot (HD). This might be the third time I am harping on this name, but no one seems concerned over the retailers yet. It continues to test this $111-$112 area, and any break of it, I think, sends the longs running since it would break the uptrend line and the flat support line at the same time. I also think it is over-owned. I'd use a tight stop at $112.50- $113.

Everyone is focused on biotech today, but I have my eye on UnitedHealth (UNH). There is no break here yet and it's hard for me to imagine it will crack under $115 unless the market cracks, too, but like so many of these DJIA stocks, I think this shows the beginning signs of distribution.

Today's Indicator

The 30-day moving average of the a/d line is still in the middle of nowhere but leans toward overbought.


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 Top Stocks is not intended to provide personalized investment advice. Email Helene here.

Having not been a fan of the airlines in quite some time, my initial thought was that I was going to hate the chart of Spirit Airlines (SAVE), but in fact there is nothing to like, nor is there anything to hate. It is smack in the middle of a triangle. However, if the stock can hold this $77 area for a few more days -- in other words, if today's reversal has no follow-through -- then I might find I actually like the chart for a rally. If it breaks under that general area, I'd be more likely to say it remains in the range.

Because the steel stocks have been so good and ArcelorMittal (MT) from last week is up almost 10% since we looked at the chart, I was asked about Nucor (NUE). NUE has been a favorite of mine for quite some time -- and it's been a terrible call to have since the stock cannot seem to get up and over $49 no matter how much I will it up there. It is going to need to clear $50 if it is ever going to get any traction. A stop is quite far away at $46. I'm a bit lukewarm on it right now (which is probably good for the bulls!).

WisdomTree Germany Hedged Equity Fund (DXGE) is an ETF with a currency hedge to own the German DAX. Over the last few months, we have looked at WisdomTree Trust (HEDJ), which had an upside measured target of $67 to $68, but I preferred Vanguard European Stock Index Fund (VGK) since it doesn't have the currency hedge. In other words, if the euro is uninvolved, the chart now looks much better, thus I prefer VGK, but even there the target is around $60.

For DXGE, I keep eyeing this (and the DAX) for the sign this is a head-and-shoulders top. As long as this stays under $32, that is how I will view it.

Regards, Helene Meisler

I See Languishing, Rather Than Collapse
Stocks in Focus: SOHU, SPLK, FE, FXY

The selling actually remains subdued.

04/26/15 - 02:38 PM EDT
With No Breakout, There's a Letdown
Stocks in Focus: EWO, BABA, MT, LCI

Is the chop finally over? We still don't know.

04/23/15 - 06:43 PM EDT

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