4 All-Weather Picks Approaching Support

04/14/2014 10:15 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

A technical look at six stocks that were picked by some of Hulbert’s top-ranked advisors in March reveals that four are now getting closer to long-term support, according to MoneyShow’s Tom Aspray.

All of the major market averages, except the NYSE Composite, closed last week below their quarterly pivot levels. The PowerShares QQQ Trust (QQQ) had closed below its quarterly pivot a week earlier, on April 4, and is now close to the quarterly projected pivot support at $83.53.

Last Friday’s review of the market’s corrections in 2010, 2011, and 2012 revealed that they coincided with overly-pessimistic views of the economy or markets. The current concern seems to be focused on, what is expected to be, a weak earning’s season. The positive long-term readings from the NYSE Advance/Decline identified that these corrections would ultimately lead to a good buying opportunity.

That is also the case this time, but stronger sells signal are possible this week that would indicate that the current decline has further to go and will last longer. The growing tensions in the Ukraine do add a further “real” concern to the markets over the near term.

The European markets were hit in early trading, before rebounding, and the US futures are now in positive territory. Many are watching the 1800 level in the S&P 500 which, if broken, could signal a decline to the 1770 area. However, a rally is likely below these stronger levels of support and could be tested.

The improving relative performance of the SPDR Dow Industrials (DIA) indicates that some large-cap stocks should be on your buy list during the market correction, but what other stocks look attractive?

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In the March 21 weekend edition of the WSJ, Mark Hulbert highlighted these six stocks in his article “Stock Picks From Intrepid Advisers.” The table also included their current P/E, as well as their projected three-five year earnings. A technical review of these stocks revealed that four are approaching important levels of support, so investors should now be watching them.

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Chart Analysis: Catamaran Corp. (CTRX) is an $8.03 billion technology software company that specializes in providing pharmacy and healthcare benefits' software.

  • The stock peaked last August at $58.73 and is now down 33.8% from its high.

  • The weekly chart shows major support, line a, from the 2011 high, is at $33.70.

  • The uptrend from the 2010 and 2011 lows is a bit lower at $32.60.

  • The quarterly projected pivot support at $38.44 was tested last week as the weekly starc- band was also reached.

  • The weekly relative performance is below its WMA and is still in a downtrend, line c.

  • The RS line is now getting closer to its long-term support at line d.

  • The OBV broke below support last summer but is now getting close to major breakout support, line f, from early 2012.

  • The OBV is still in a clear downtrend (line e) and the daily OBV shows no signs of bottoming.

  • There is initial resistance now in the $42-$44 area.

IPG Photonics (IPGP) is a $3.84 billion dollar developer and manufacturer of fiber lasers that are used in the semiconductor industry. The stock was actually up just over 1% last Friday.

  • The weekly chart shows that it overcame resistance, line g, last November.

  • The quarterly pivot is at $70.73 with a seven week low at $66.17.

  • The former downtrend at $64.74 now represents stronger support.

  • The longer term uptrend, line h, and the weekly starc - band are in the $60.70 area.

  • The relative performance is above its WMA and shows a solid uptrend, line j.

  • A move in the RS line above resistance (line i) would be very positive.

  • The on-balance volume (OBV) closed the week below its WMA but is still above long-term support at line k.

  • The daily OBV (not shown) does look much stronger as it is rising and above its WMA.

  • There is resistance now in the $75.75-$76 area.

NEXT PAGE: 2 More Large-Caps to Watch

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Celegene Corp. (CELG) is a well-known biotechnology company that focuses on the treatment of cancer and immune related diseases.

  • The stock hit a high of $174.66 in the middle of January and closed last Friday at $136.90.

  • This is a decline of 21.6% and the major 38.2% Fibonacci retracement support from the 2012 low is at $130.28.

  • CELG closed on its lows last week with projected quarterly pivot support at $127.52 and the weekly starc- band at $124.07.

  • The major 50% support is at $116.54 with the long-term uptrend, line a, at $120.68.

  • The relative performance dropped below its WMA at the end of January and is now testing its long-term support at line b.

  • The Aspray’s OBV Trigger (AOT) triggered a sell signal on February 21, as the OBV dropped back below its WMA (point c).

  • The AOT shows no signs yet of bottoming but the daily AOT is well above the late March lows.

  • There is initial resistance at $148 to $151.

Lululemon Athletica (LULU) is the high profile manufacturer of athletic equipment that has been in the news frequently over the past year.

  • The stock peaked at $82.50 last summer and hit a low in February at $44.32.

  • This low tested the monthly uptrend, line d, that goes back to 2008.

  • The major Fibonacci 50% support is at $42.42 with the quarterly projected pivot support at $36.73.

  • The monthly starc- band is at $34.73 with the 61.8% support at $32.94.

  • The relative performance has dropped all the way back to its breakout level, line f.

  • The RS line is well below its declining WMA and the downtrend, line e.

  • The monthly OBV has also retested major support at line h, that was overcome in late 2010.

  • The OBV is slightly above its WMA and a move through resistance at line g, would be very bullish.

  • The weekly OBV (not shown) is well above its WMA and appears to have bottomed.

  • There is first resistance now at $55.45 and then stronger at $57.01.

What it Means: Concerns over the current earnings season has helped precipitate the recent market drop. Over the next two weeks, we should get a better idea of the actual earnings and, more importantly, the guidance for the rest of 2014.

If the experts are right about the earning's growth of these six stocks then they could be market leaders again, once the correction is over. Therefore, the support levels noted above should be watched, but only have a specific recommendation now for IPG Photonics (IPGP).

How to Profit: For IPG Photonics (IPGP) go 50% long at $68.24 and 50% long at $66.44 with a stop at $63.29 (risk of approx. 6%).

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