Seek Potential Decliners When Bulls Start Faltering

I guess I lead a charmed life. I arrived in Salt Lake City Tuesday to 72 degrees and clear skies, every bit as nice as San Diego. The biggest difference was the lack of cars carrying surfboards. However, there was a lot of funny-looking white stuff on the surrounding mountains -- someday I'll have to check that out!

As for the market, the major averages continue to hang around resistance, giving the bulls some hope that the next leg up is right around the corner. I don't see it. Monday's intraday highs revealed the maximum strength of the bulls: They couldn't push prices one tick higher. Tuesday's intraday highs fell woefully short of previous levels. Simply put, the bulls shot their bullets on Monday, and now they're shooting blanks.

Assuming that the market will show us a few days of weakness, here are a few stocks worth watching. Today, let's look at Apache (APA - commentary - Cramer's Take), New York Times (NYT - commentary - Cramer's Take), Qualcomm (QCOM - commentary - Cramer's Take), AutoZone (AZO - commentary - Cramer's Take) and Pan American Silver (PAAS - commentary - Cramer's Take).

Apache

Apache is doing what I call a slow roll. Since last November, it has run more than 18 points, a nice rally. It's due for some profit-taking, which is what we're seeing here, along with your garden-variety sector rotation. This stock is sitting right on support, and any additional weakness would set up a good, low-risk short entry.

But I think a move higher would be an excellent opportunity to short the stock at a higher level. If that happens, just watch Apache's reaction to the 20-day moving average (the middle Bollinger Band) and the 50-day moving average. Both will likely act as insurmountable resistance.

New York Times

I guess more people are surfing the Net than surfing the Times these days. New York Times is in a declining channel. A series of lower highs and lower lows makes this a fairly smooth-riding short. The channel is about 10% of the price. The middle Bollinger Band is now acting as resistance, while the prior rally reached the upper Bollinger Band. That's bearish. I'd consider shorting this now, but would be alert for a bounce around $42.50. If recent history repeats itself, that bounce won't amount to much.

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Dan Fitzpatrick is a freelance writer who trades for his own account. His columns focus on quantitative strategies for trading and investing. Fitzpatrick is a member of the Market Technicians Association and authors The Stock Market Mentor, a newsletter focusing on the proper use of technical analysis for trading and investing. At time of publication, Fitzpatrick held no position in any stocks mentioned, though positions may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. While Fitzpatrick cannot provide investment advice or recommendations, he welcomes your feedback and invites you to send it to [e-mail].