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Top Stocks With Helene Meisler

Bad Day for the Banks

By Helene Meisler | 02/11/16 - 06:43 PM EST
Stocks in Focus: JPM, GE, SLB, TWTR, DE, DIS

The Market

Let's talk about the banks. They have been an issue in the market since mid-December when the Fed hiked rates. Today they were slammed even more and on massive volume.

I had a downside target for Bank of America (BAC) that didn't even see a pause. The same is true for Citibank (C). The target for the Bank Index was measured to 56. The giant top measures to the 50-52 area on the index. A smaller top measures to 56. The uptrend line comes in around 54, so we are coming into an area that really must hold.

After the close, it was announced that Jamie Dimon, CEO of JPMorgan (JPM), bought about $25 million worth of stock today. That's quite a sizable buy. We looked at the chart of JPM last night and I noted that if it broke $53, the next target was in the $50 area. It only made it to $52.50 today. So here's what we need to watch in relation to this stock, and other banks in the coming days.

Does it gap up and leave an island behind? An island is just as it sounds; it needs to leave today's price behind with a body of water around it. If there is any "connection" to the "land," then there is no island. So a gap up where the gap does not get filled is bullish. A gap that can't get over $56 and fills the morning gap leads me to believe there is still unfinished business down below.

Aside from that, we had a moderate reversal off the lows, but breadth stayed poor again. The number of stocks making new lows contracted, so there are still fewer new lows than the previous peak reading. I maintain the view that we have a trading low coming, but I also find it hard to believe folks will throw caution to the wind and rush to get long before a long weekend where the rest of the world trades while the U.S. does not. The best news is that we are finally heading toward a short-term oversold condition, although I still find it hard to be able to pinpoint it.

New Ideas

General Electric (GE) had a fresh breakdown today. The top now measures to the $25 area. It gets a day or two to recapture $28, and a failure to do so sets up that lower target.

I remain skeptical of the oil stocks and especially with OPEC rumors running rampant, but I do expect the Energy Select Sector Fund (XLE) to have one more rally before we roll back over. That's why the chart of Schlumberger (SLB) is interesting to me. If it can break out over $70, I think it can rally to $72-$74. If it can't, then the channel stays in effect.

Today's Indicator

The 10-day moving average of the put/call ratio has turned back up (bearish).

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.

When we last looked at Twitter (TWTR), I noted the stop was at $24 because if it broke from there it was a long way down. It measured to $14. This is where it sits today. Again, just because a stock gets to its downside target doesn't mean it's a buy, just that a short should be covered. There is plenty of resistance at about $16, so I would sell it if it should get back there.

I am so afraid to trust the base that has been built in Deere (DE) because how many of these bases have worked lately? But if DE gets over $80, that will be a breakout that would measure to fill that gap in the $90 area. I can say this: I don't know where the stop should be, but if it trades back to $72, even if it holds down there, then I would not like it. A breakout would be much better if it doesn't make another trip to the lower end of the range.

We had a good short call on Disney (DIS) in December when it formed that head-and-shoulders top. Our first target was near $100, where all it did was have a rest before breaking again. That top measures to about $82. Was this week's plunge enough? If it was, then DIS will need to get through $93 to $95 to impress me. Otherwise, this is simply a rally back into resistance. And there certainly is no base to speak of. What would impress me is if it rallied to about $95-ish then pulled back to $90-ish to form a head-and-shoulders bottom. Then I might be more interested in making a larger bet.

Regards, Helene Meisler

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