These stocks are strong performers, but a key technical measure indicates risk may be high for new buying. Keep watching them closely and look to buy at lower levels.
The rally from last week’s lows has been fairly impressive, as many stocks and ETFs show gains of over 10% in just a few days. Typically, sharp gains like this are more characteristic of a rally against the major trend.
Stocks are higher in early-Monday trading on new plans to support the Eurozone banks. A strong close Monday with strong A/D numbers could complete the bottom formations in the Advance/Decline (A/D) lines that we have been watching. This would put the market in a position to rally into the end of the year.
If last week’s lows in the stock market do hold, then those stocks and industry groups that are acting stronger than the market should be favored. This makes the relative performance, or RS analysis, especially important.
The entry point plays a key role in whether any trade or investment will turn out profitably. The table above shows the ten stocks in the S&P 500 that are the closest to their weekly Starc+ bands.
Often times a stock will close at or above the weekly Starc+ band for a week or two before they complete a short-term top. Clearly, buying a stock at a level that is close to its weekly Starc+ band has a higher risk and generally requires a wider stop.
Chart Analysis: International Business Machines (IBM) closed last Friday just $4 below the weekly Starc+ band at $186.40. On the weekly chart, you can see that IBM closed above the weekly Starc+ band in July and below the Starc- band in August.
Reynolds American (RAI) closed strong last week and well above the July/August highs. The all-time highs from June at $39.87 are now being challenged. The weekly Starc+ band is at $40.93.
NEXT: 2 More Stocks with Strong RS Analysis