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4 Stocks With Relative Strength Heading Higher

WINDERMERE, Fla. ( Stockpickr) -- The U.S. stock market retreated for the second day in a row on Tuesday as investors continued to lock in gains following the news from over the weekend that al Qaeda leader Osama Bin Laden had been killed by U.S. Special Forces.

If you just look at how the overall U.S. averages performed on Tuesday, you would have completely missed some of the massive destruction that was going on underneath the hood. The Dow Jones Industrial Average finished the day virtually flat up 0.15 points to 12,807.51, while the S&P 500 lost only 4.6 points to 1,356.63. The tech-heavy Nasdaq lost 22.46 points to close at 2,841.62, while the small-cap tracking Russell 2000 dropped 11 points to finish the day at 843.77.

The more sinister action was seeing in some market-leading stocks that were absolutely hammered during Tuesday's trading session. Sina (SINA) dropped 9.4%, (SOHU) fell 8.5%, (BIDU) lost 5.1%, and (PCLN) traded off 2.8%.

Related: 30 Large-Cap Stocks to Beat the S&P 500

One market-leading sector that was completely trashed Tuesday was the silver complex. The iShares Silver Trust ETF (SLV) dropped 5.2%, and the ProShares Ultra Silver ETF (AGQ) traded down over 10%. Some nasty action was also seen in some of my favorite silver miners, such as Endeavour Silver (EXK), which lost 6.5%, First Majestic Silver (AG), which fell 5.1% and Silvercorp Metals (SVM), which finished down 3.9%.

Silver has been a leading a sector for quite some time now, as market players poured money into the precious metal to hedge against a weak U.S. dollar and rising inflation. There's no way to sugarcoat the recent selloff in silver. It's been violent, fast and extremely bearish. Despite those characteristics, silver had a massive run coming into this decline. Profit-taking was bound to happen, and it should be of no surprise that silver was hit hard with selling right after it tagged the psychological important $50 level.

I would now watch to see how the SLV acts as it approaches its 50-day moving average of $37.76 a share. I full expect that level to get hit very soon. If the SLV holds around that area and you see the selling volume lighten up, then look to be a buyer with a tight stop. In fact, I would look to get long everything silver-related I mentioned above if the SLV can hold its 50-day. I would suggest using call options on the AGQ for the most bang for your buck.

Remember, the longer-term uptrend for silver is still intact, but in the short-term, we're going to need to see silver stabilize and stop the sharp drops. It would be constructive to see some sideways trading action in the SLV so a base can be built before the short-term trend can reverse.

Despite all of the destruction underneath the market on Tuesday, there were a number of stocks that displayed some relative strength and look poised for higher prices.
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