The market has continued to exhibit bearish characteristics. Even the good day we had Friday was on lackluster volume within the bearish wedge forming on the major indices.
The problem is that institutions are afraid to commit to any long-term commitments with the major trouble in the financial system coupled with slowing growth and rising inflation. Those headwinds, along with oil prices that jumped more than $5 a barrel last week as investors looked for safety from the falling dollar and amid increasing tensions with Russia, have many companies reasonably skittish.
The one positive thing of all this is that even though growth is slowing, the fundamentals of industries outside of finance and housing sector are fairly solid. The biggest problem right now that is affecting markets is the major debacle of
Fannie Mae (FNM Quote - Cramer on FNM - Stock Picks) and
Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks). These two companies are down more than 95% over the last year, losing billions from incompetent management and bad loan practices. Together they own or guarantee about $6 trillion in outstanding mortgages in the U.S. That means investors are likely going to have to foot the tax bill on this mess.
That said, if a year ago I told you that we would have these major problems, with Fannie and Freddie along with the
Bear Stearns crash, $115-a-barrel oil, subprime loan problems, a housing bubble that continues to correct, and military tensions raised by Russia's troops invading Georgia, I bet you would have said that the markets would be much lower than they are today. Although I don't believe that the primary downtrend is near an end, I am impressed at how well the markets have held up through all the negative influences.
Today we are going to leave that all behind and focus on some companies that are working on solid bases and have attractive technical patterns. I have posted charts across several different sectors to show that there are still some positives in this frustrating market.
The first company we are going to look at is
Resmed (RMD Quote - Cramer on RMD - Stock Picks). You can see from the chart at right that the price gapped above its 200-day moving average on very heavy volume during the first week of August. You can also see that the institutional money stream at the bottom of the chart has confirmed the move.
Since the breakout, the prices has been consolidating in the $44 area; a break above $45.53 would likely lead to a strong move higher. A protective sell stop would be prudent underneath about $42.
Bristol-Myers Squibb (BMY Quote - Cramer on BMY - Stock Picks) has been in a basing pattern for the past eight months. The price moved up above the 50-day moving average in late July and has held above that level ever since.
As long as the stock stays above the $21 level, this pattern could lead to a strong break above the major resistance around $23 or $24. I would want the volume and money stream to confirm any move.
F5 Networks (FFIV Quote - Cramer on FFIV - Stock Picks) has pulled back from a slightly extended position and is currently consolidating near the 50-day moving average. If the price can continue to hold above this level, the stock may be ready for a new intermediate-term trend higher.
You can see that the institutional money stream at the bottom of the chart has led the price move and remains near its highs. The final key factor we need to see is a heavy increase in volume on the next breakout.
It is interesting to see that well-known semiconductor behemoth
Intel (INTC Quote - Cramer on INTC - Stock Picks) has been forming a fairly positive technical pattern.
The price broke above the 50- and 200-day moving average during the last month. Recently it moved down to test that level, and it now appears ready to attempt another move higher.
SunPower (SPWR Quote - Cramer on SPWR - Stock Picks) is an interesting semiconductor company that specializes in high-performance solar cells -- semiconductor devices that convert sunlight into electricity. The company is fundamentally very strong and is seeing earnings growth accelerate.
You can see from the chart that it has been working on a major basing pattern over the past seven months. Recently it is broken above the 200-day moving average and is now close to testing resistance at $100. The volume and institutional money stream have supported the move so far, and I expect we could see a breakout above this level soon.
Investing in companies that are fundamentally strong and technically attractive can be a profitable way to trade in a negative market environment. However, it is extremely important that you use prudent money-management strategies along with protective sell stops on every position.
Mark Manning
RSS
