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Top Stocks With Helene Meisler

 Top Stocks

New Highs Decrease Daily

BY Helene Meisler | 11/24/14 - 06:52 PM EST
Stocks in Focus: DOX, MSD, SNY, FXI

The Market

Here is today's trading pattern. If it was down on Friday or traded poorly (I'm looking at you, IWM and Nasdaq), then it was up today. If it was up on Friday, then it was down today (I'm looking at you, cyclical stocks).

That is one reason I highlighted that chart of the iShares Russell 2000 ETF (IWM) on Monday morning. There had been a time, years ago, that such a reversal had follow-through to the downside, but now, all it seems to do is gather shorts who then must cover the shorts.

Once again, the question for the IWM is, can it get up and over these recent highs? Seasonality says it should, because the market typically has an upward bias this week. But I'll say this: there has been little follow- through, up or down, in IWM for most of November. If it gets above $118 with any oomph, the key will be if the makret can finally expand the number of stocks making new highs.

The number of stocks making new highs contracts on a daily basis. Nasdaq's glorious new high today had 111 new highs. There were 134 new highs on Friday; there were 245 new highs on Oct. 31. Sure, some people will note that on Nasdaq, it is all about Apple (AAPL). As long as that giant keeps on chugging upward, so will the index. So far, that has been the case, because it's hard to find another stock that has been so dominant in the Nasdaq index, and we certainly aren't seeing the number of stocks making new highs keeping pace with the index.

I want to discuss the Utilities, because it seems no one else is discussing it. For the longest time, I had liked the sector. We have looked at this group several times, using the Utilities Select Sector SPDR Fund (XLU), an ETF to be long the Utilities. That head-and-shoulders bottom measured to $46-to-$47. It got there in early November. Up until that last surge upward, folks were mostly ignoring this defensive group. They finally took notice in early November, when the fund hit our target.

No one is discussing the decline, the subsequent rally, and what might be another push-down. This chart looks to me as if it wants to head lower. It would only measure to $43.50 on the downside, but pay attention on how this group has been a leader. It peaked in early July and fell apart into early August. Stocks? it took them until mid to late July to peak, before they followed the Utilities down, in early August.

Notice that the Utilities could not make a higher high in September, and instead headed down. The S&P 500 followed suit not long after. Notice that the October decline in the Utilities was minor, while the S&P plunged. The higher low in the Utilities, once again, led the way. Sure, maybe year-end seasonality will make this leader mean nothing, but I think it means it can correct in December.

New Ideas

Perhaps I need my head examined, but I think Las Vegas Sands (LVS) is improving. I also think Wynn Resorts (WYNN) is improving as well (the chart is not shown). If LVS can get up and out of this $64-to-$66 area, we'd aww an eventual measured target near $70. I will not like it as much if it pushes back below $62.

I had been asked about Gilead Sciences (GILD), which cannot get out of its own way. I am not a fan of the chart, mostly because it can't get out of its own way. As long as it held $106, it was okay, but breaking $106 signaled weakness. However, I will note that there is some support in this upper $90s area, so if it can hold this uptrend line, maybe it improves itself. I see a break of that line, and I would not want to be long it.

What I think will happen is that the stock will try to hold and even rally, but in the end, it will come down one more time, probably when no one is paying attention.

Today's Indicator

The 30-day moving average of the advance/decline line was maximum overbought this coming Friday, but it did make a higher high, so after a correction we should rally again.

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.

Amdocs (DOX) is attempting to break out of a six-month consolidation. It's got to get through that June resistance around $49, but as you can see from the math on the chart, it now measures into the $53 area.

Morgan Stanley Emerging Markets Debt Fund (MSD) is another Emerging Market Debt ETF, similar to the Morgan Stanley Emerging Markets Domestic Debt Fund (EDD) chart we looked at last week. I would say the same thing about MSD as I had about EDD: it is trying to bottom. As long as it stays above $9.50, it gets the benefit of the doubt. I am just uncertain if it can get above $9.70 easily. It is more likely to trade between the lows and $9.70-to-$9.80, for the time being.

Sanofi (SNY) has been an awful stock in the healthcare arena since September. The best news I can offer is that the top measured to $45, so at least some base-building can begin now. Base-building typically means several months of trading between $45 and $51, support and resistance. With the stock at $47, it's in the middle of nowhere at the moment.

We looked at iShares China Large-Cap ETF (FXI), an ETF to be long the Chinese market, during the final days of October. At the time, I thought it should pull back and rally again, and it actually (shockingly) did just that. What concerns me now is that there was no higher high on Friday, with the news of a rate cut in China. I am willing to give it a few more days to get above $40.50, but if it fails to do so, I will be cautious on it.

Regards, Helene Meisler

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With such extreme overbought readings, it will likely chop about, at the very least.

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