Check Your Portfolio for Profit Leaks

09/10/2014 10:15 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

Many bearish strategists have started to switch their market view, so MoneyShow’s Tom Aspray analyzes the Charts in Play portfolio holdings for stocks that have started to act weak or that are not keeping pace with the S&P 500.

The intra-day reversal in the shares of Apple, Inc. (AAPL) encouraged the market bears, who had another reason to sell. The market internals were solidly negative with declining stocks leading advancing stocks by a 3-1 margin.

Another day of similar selling will push some of the short-term market indicators into oversold territory. Tuesday’s decline coincided with another Wall Street strategist giving up her bearish view. The senior analyst from Wells Fargo gave a 12-month target at 2100, which was quite a change from her yearend target of 1850.

This is in addition to the other bearish strategists discussed in Tuesday’s column that have also switched their market view. The key market tracking ETFs are already near short-term support, which may hold. Of course, a deeper correction is possible that could take the Spyder Trust (SPY) back to its monthly pivot and chart support in the $195.61 to $197.36 area.

In any market environment, one should continue to analyze their portfolio holdings for stocks that have started to act weak or that are not keeping pace with the S&P 500. Let’s look at some examples from the Charts in Play portfolio.

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Chart Analysis: The PowerShares QQQ Trust (QQQ) closed 0.83% lower Tuesday but held barely above the month’s low at $99.03.

  • The close was just 0.53% above the 20-day EMA at $98.72.
  • At the August low, the EMA Osc hit a low of 1.12% with the monthly pivot now at $97.86.
  • The July high was 97.51% while the monthly projected pivot support is at $95.81.
  • The Nasdaq 100 did make a new high on September 5 and closed below its WMA Tuesday.
  • The WMA is still rising which is a positive sign.
  • The daily on-balance volume (OBV) also staged an upside breakout in August and has formed higher highs (line b) in September.
  • The OBV is still above its WMA while the weekly OBV (not shown) has made significant new highs.
  • There is initial resistance at $101.46 with the monthly projected pivot resistance at $103.88.

The Finish Line, Inc. (FINL) is a $1.06 billion specialty retailer of athletic shoes and accessories that was recommended on August 11.

  • Over the next six days, FINL dropped below its 20-day EMA before turning higher.
  • A move above the July high at $30.71 should signal a move to the monthly projected pivot resistance at $31.17.
  • The weekly starc+ band is at $32.34 with the monthly at $34.31.
  • The daily relative performance has turned higher closing just above resistance, line d, on Tuesday.
  • The RS line has short-term support at line e.
  • The bullish weekly OBV analysis in early August was confirmed by the daily OBV breakout (line f) on August 22.
  • The OBV just dropped down to test its WMA on the recent pullback.
  • There is short-term support at $28.71 and the monthly pivot.
  • Additional chart support lies in the $27.60 area.

NEXT PAGE: Two More Energy Sector Stocks to Watch

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The energy sector was discussed in last week’s Watch These Lagging Sectors as I noted that the SPDR S&P Oil & Gas Exploration (XOP) had tested but not exceeded the quarterly pivot at $78.97.

  • I have overlaid the XOP chart on that of Phillips 66 (PSX), which was recommended in early August.
  • The line chart of XOP shows that it has dropped sharply this month as it is testing the August lows, line a.
  • This is in contrast to PSX, which made a significant new high last week at $87.98.
  • The daily RS line has been in a shallow uptrend for the past two weeks but is holding above its WMA.
  • The weekly RS line (not shown) is positive but has not yet made new highs.
  • The daily OBV failed to make a new high last week as it formed a negative divergence, line c.
  • The OBV has closed below its WMA but the weekly is still positive.
  • The 20-day EMA is at $85.79 with more important support now in the $82.75 area.

Sonic Automotive, Inc. (SAH) was a pick in the consumer discretionary sector as the Select SPDR Consumer Discretionary (XLY) is up 4.8% from the August lows.

  • In contrast, SAH has lagged as it is close to its August low of $23.61.
  • The quarterly projected pivot support is at $23.51.
  • The daily RS line shows a series of lower highs, line f, and dropped to new lows this week.
  • The weekly relative performance is below its WMA.
  • The daily OBV has made slightly lower lows, line g, as it has traded in a tight range.
  • The weekly OBV has turned down after testing its WMA.
  • The August rally stalled below the quarterly pivot at $25.48, which is now important resistance.

What it Means: If the market does see a deeper correction, I think it will be a buying opportunity and give us a chance to add to our position in the PowerShares QQQ Trust (QQQ).

As for the energy sector, I think the selling in SPDR S&P Oil & Gas Exploration (XOP) is a bit overdone. I will be watching a rally closely and would take partial profits in Phillips 66 (PSX).

We close out the position in Atwood Oceanics (ATW) as it was not acting well and is down 6.3 this month.

The action in Sonic Automotive, Inc. (SAH) is also disappointing and will reduce the position size.

How to Profit: Add a 25% long position in PowerShares QQQ Trust (QQQ) at $97.52 or better, stop at $92.89.

Portfolio Update: For Phillips 66 (PSX) should be 50% long at $82.66. Sell ½ on the opening and use a stop at $81.39.

For Sonic Automotive, Inc. (SAH) should be 50% long at $24.24. Sell ½ on the opening and use a stop at $23.47.

NEXT PAGE: The Charts in Play Portfolio

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