3 Hot Stocks for a Fickle Market

07/07/2011 5:30 am EST


It’s important to understand market forces, but you don't have to let it handcuff your investing, says Joseph Pames of Shortex.

Our real deficit is being manifested by already shrinking discretionary spending, to the tune of 25%. Alas, the scale of cuts suggested could do real damage not only to the economy, but jeopardize various quality of living standards, safety, education, and the seeds of future economic growth.

Despite waning economic data, corporate earnings could rise by 20%. The disconnect between economic data and corporate earnings expectation could be construed as an aberration, due to Japanese shortages of parts, high gasoline prices, and turmoil in Greece.

Commodity prices are softening after a recent surge, home prices continue to fall, manufacturing growth is slowing, and job growth is weakening.

However, investors and traders are being encouraged by recent reversals and surges in the major indices. The economic soft patch, deficit fears, the EU's debt dilemma, and the length of the bull market are the concerns that led to the recent market drop.

And technicians are relying on the historic follow-through of the past ten years, reflective of the movements of the market for the months of June and July.

Agrium (AGU) is a producer and marketer of agricultural nutrients and products. It's being sought after due to high food prices and demand.

In correction/retraction mode since early March, shares reversed with heavy volume, penetrating the 50- & 200-day moving averages. Volatile, but could hit $95 in the near term.

Buy AGU between $80 and $85, and set a stop loss at $77. [Shares have been just over the buying zone, in the $87 range, so a dip in the next few days could be a buying opportunity—Editor.]

A.O. Smith (AOS) makes residential and commercial water heaters. The company reported first-quarter earnings of $41 million, or 88 cents per share, on revenue of $417.4 million against the consensus of 47 cents a share on revenue of $409M.

Continued geographic expansion and specialty strong selling of its brand a culprit. Shares rocketed with heavy volume through the primary resistance line at $39 to $40. A challenge of the secondary resistance line of $42 to $43 is in the offing.

Buy AOS between $39 and $41, and set a stop loss at $36. [Again, shares are just barely out of the zone on Wednesday afternoon, hovering around $43—Editor.]

Pfizer Inc. (PFE) is a diversified global research-based pharmaceutical company. Its big project is seeking to extend its exclusivity on the little blue pill (Viagra) until 2019.

The stock has been trading over its 50- & 200-day moving averages since February. A correction could see primary support at $19 to $21, but the longer-term uptrend should continue.

Buy PFE between $19 and $21, and set a stop loss at $18.60. [Shares are trading in the high end of the buy range at press time, near $20.75—Editor.]

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