STOCKS

The long anticipated pullback has finally happened, and MoneyShow’s Tom Aspray examines the charts for potential candidates for the market’s next leg up.

The March S&P 500 futures dropped down to test the February 7 lows at 1494.50 on Thursday (the low was 1495) and then closed at 1502. Volume has been heavy over the past two days and the A/D lines have dropped below their support as discussed yesterday.

The stock index futures are showing nice gains early Friday and a close back above Thursday’s high would be the first sign that the correction may already be over. A rally to new highs next week would catch the majority by surprise but may cause the formation of some negative divergences.

The data on manufacturing Thursday was disappointing as the Philadelphia Fed Survey was much weaker than expected and the PMI Manufacturing Flash Index showed some evidence of a slow down

chart
Click to Enlarge

In a January Barron’s cover story The Next Boom, they focused on eight stocks that they thought would benefit from resurgence in manufacturing. On the table above, I have added the closing prices from February 21, which reveals that six of the eight stocks are now lower than they were at the time of the article.

In January’s column 4 Best Next Boom Stocks, I recommended three of the stocks and two of them reached my initial buy levels on Thursday. Do these stocks still look attractive and are others on the list now worth buying?

chart
Click to Enlarge

Chart Analysis: Calpine (CPN) peaked at $20.09 on February 12 and then Thursday had a low of $18.28, which was just above the 50% Fibonacci retracement support at $18.27.

  • The 20-week EMA is also now being tested.
  • The quarterly pivot is at $17.83 with the weekly starc- band at $17.67.
  • The weekly uptrend, line b, is now in the $16.85 area.
  • The relative performance has dropped below its WMA and is now testing its uptrend, line b.
  • The weekly OBV was very strong on the recent rally after it broke through its downtrend, line c.
  • The daily OBV (not shown) did form a ST negative divergence at the recent highs and is below its WMA.
  • The OBV multiple time frame analysis is positive for the intermediate-term trend.
  • There is initial resistance now at $19.15-$19.40.

LyondellBasel Industries NV (LYB) went ex-dividend on Wednesday and is down just over 10% from the January 31 high at $64.20.

  • The 38.2% Fibonacci support is at $56.77 with the October high and the 20-week EMA are in the $56 area.
  • The quarterly pivot is at $54.54 with the 50% retracement support at $54.40.
  • The weekly relative performance did confirm the recent highs and has just dropped below its rising WMA.
  • There is more important support at the uptrend, line e.
  • The weekly OBV also confirmed the highs and is now testing its WMA.
  • The volume has picked up over the past five days and the daily OBV is well below its declining WMA.
  • The down gap Thursday leaves first strong resistance at $59.88-$60.20 and then at $61.20.

NEXT PAGE: 2 More Stocks to Watch

Tickers Mentioned: Tickers: XLB, SWN, NUE, TOL, LYB