As earnings season kicks off this week, MoneyShow’s Tom Aspray takes a technical look at some of IBD’s recommended stocks to see if they now present good buy opportunities with the most recent pullback.
The week ended on a truly ugly note as after making new highs early, the averages reversed to close the day lower. The PowerShares QQQ Trust (QQQ) was down 2.66% on the day with the iShares Nasdaq Biotechnology (IBB) losing just over 4%. It is now down 0.78% for the year while the QQQ is down 1.17%.
Normally, such a daily reversal would be consistent with a significant top but the very recent new highs in the NYSE Advance/Decline, as well as the S&P 500 A/D line, suggest this is not the case. Therefore, I think the divergence between the averages is more likely part of a sector rotation, which has been a dominant trend so far in 2014.
There were other divergences, Friday, as the Vanguard European Stock Index (VGK) was down just 0.40% and is up 1.98% so far in 2014. The Vanguard Emerging Market Index (VWO) was down just 0.17% for the day. Of course, they could catch up on Monday. Tech stocks in Asia have been hit by selling on Monday.
The futures are down in early trading, and as I discussed in the Week Ahead column, I would look for a rebound by the middle of the week and the strength of any rebound will be important.
The Investor’s Business Daily top 50 stocks is a computer-generated watch list of market-leading growth stocks. They use earnings, sales, and price action but recommend only purchasing these stocks when they are near “buy points.” Their list often includes many of the high-momentum stocks. so after last week’s heavy selling, how did their top four stocks perform?
Chart Analysis: Ubiquiti Networks (UBNT), a $3.56 billion wireless communications company, lost 5.94% on Friday consistent with its beta of 1.94.
- UBNT hit a high of $56.84 and with Friday’s close at $40.52 is down over 28% from its high.
- The weekly chart shows next support, line a, in the $38 area.
- The weekly starc - band is at $37.56 with the quarterly projected pivot support at $36.35.
- The weekly relative performance bottomed out last summer when the stock was trading in the $21 area.
- The RS line has dropped below its WMA and support at line b.
- The weekly OBV closed just below its WMA but like the RS line did confirm the recent highs.
- The OBV is still well above longer-term support at line c.
- The daily OBV broke support on March 24 and has dropped above 29% since.
- There is first strong resistance in the $44-$45.50 area with the early April swing high at $47.92.
Qihoo 360 Technology Co. Ltd. (QIHU) is a $10.9 billion dollar Chinese provider of Internet and wireless security products that lost 3.86% on Friday. The stock has a beta of 1.84.
- The company’s 360 Safeguard XP Shield has gotten quite a bit of attention as Microsoft ends its support of XP on Tuesday.
- The stock tested its weekly starc band during the first week of March when it made a high of $124.42.
- QIHU has lost 28% from its high but is still above the late March low of $87.50.
- The weekly starc- band is at $83.13 with the monthly projected pivot support at $83.25.
- The weekly relative performance did confirm the recent highs, line f, but has now dropped below its WMA.
- The RS has long-term support at line g.
- The weekly OBV closed last week below its WMA as volume has been heavy over the past two weeks.
- The daily OBV (not shown) does look weaker as it is below former support.
- There is initial resistance now at $94-$96.50 with the declining 20-day EMA at $101.63.
- The quarterly pivot is at $100.90.
NEXT PAGE: 2 More IBD Top 50 Stocks