Update: Best Next Boom Stocks?

02/22/2013 10:45 am EST


Thomas Aspray

, Professional Trader & Analyst

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

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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?

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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


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Nucor Corp. (NUE) has had a rough week as it traded as high as $48.60 Tuesday and closed Thursday at $44.70. They just announced the payment of their 160th consecutive dividend this week and NUE has increased its dividend every year since 1973. It currently yields 3.10%.

  • The 38.2% Fibonacci support is at $44.67 with the 50% support at $43.56.
  • The weekly chart shows that NUE broke through a major downtrend, line a, in late December.
  • The downtrend along with the more important 61.8% support and the quarterly pivot are in the $42.46 area.
  • The weekly relative performance also broke its long-term downtrend, line c, late last year.
  • The RS line will drop below its WMA this week.
  • The weekly on-balance volume (OBV) has turned down from its downtrend, line d, but is still above its WMA.
  • The OBV needs to turn up in the next few weeks to complete the correction.
  • The daily studies (not shown) are negative and NUE closed below its daily starc- band Thursday.
  • There is first resistance now at $46 with further in the $47.40 area.

Southwestern Energy Co. (SWN) is a $12 billion dollar gas exploration company. The stock has been underperforming the market so far in 2013. The stock was down 3.3% intra-day Thursday as it reported a fourth quarter loss but then closed up on the day.

  • The weekly chart shows good support (line f) and the weekly starc- band in the $30 area.
  • The weekly relative performance dropped below its WMA in early December and is now testing its uptrend, line h.
  • The weekly OBV is trying to close back above its WMA but it is still below the resistance at line i.
  • The daily studies (not shown) are trying to turn positive as the daily starc- band was tested Thursday.
  • There is first resistance now in the $33.60-$34.14 area.

What It Means: It may take many more months, if not more, before there is clear evidence that Barron’s is right about their “gas fueled manufacturing upswing.”

The long-term charts of Calpine (CPN), LyondellBasel Industries NV (LYB) and Nucor Corp (NUE) still look positive. To keep them positive, they will need to resume their up trends in the next month. Nucor Corp. (NUE) needs the closest watching.

Southwestern Energy Co. (SWN) appears to be bottoming and looks like an attractive purchase for more aggressive investors on further weakness.

How to Profit: For Southwestern Energy Co. (SWN), go 50% long at $32.06 and 50% long at $31.18, with a stop at $29.88 (risk of approx. 5.5%).

For LyondellBasel Industries NV (LYB), go 50% long at $56.32 and 50% long at $55.06, with a stop at $53.81 (risk of approx. 3.4%).

Portfolio Update: Should be 50% long Calpine (CPN) at $18.52 and would add 50% long at $18.06, with a stop at $17.34 (risk of approx. 5.2%).

Should be 50% long Nucor Corp. (NUE) at $44.84 and would add 50% long at $43.96, with a stop at $42.17 (risk of approx. 5%).

Long Williams Companies (WMB) at $32.10 and sold ½ at $35.74. Use a stop at $31.42.

Portfolio Corrections and Omissions from Charts in Play portfolio: Should be 50% long the Market Vectors Brazil Small-Cap (BRF) at $43.06 and would add 50% long at $42.12, with a stop at $39.91 (risk of approx. 6.1%).

For Select Sector SPDR Materials (XLB) should be 50% long at $38.76 and 50% long at $38.08, with a stop at $36.48.

Longs in Toll Brothers Inc. (TOL) from $30.34 were stopped out at $33.88.

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