By Greg Harmon of DragonflyCap.com
After looking at over 500 charts and posting my thoughts on many of them, I have found some good set-ups for the week. This week’s list contains eight long ideas, one short set-up, and two breakout plays. These were selected and should be viewed in the context of the broad market’s daily and weekly trends, reviewed Friday, which look to bring a continued rise in the price for gold. Crude oil and the US dollar index will be looking for a catalyst to move out of their recent ranges. US Treasury bonds look to continue lower as emerging markets move higher. Volatility may be making a comeback, which could stall the equity markets, which look good and still in uptrends with the QQQQ a strong leader.
The longer-term monthly macro view heading into November looks positive for gold and emerging markets. US Treasuries are in a flag testing the downside. Crude oil is also in a flag, but not giving any clues of its next direction. The US dollar index appears to be headed lower. The SPY, IWM, and QQQQ all look good for more upside on a monthly basis, but with close attention to the diverging volume.
Sector analysis shows two concepts. First, the market in general, as measured by the SPDR select sector funds, looks more bullish the longer the time frame used, with the monthly charts the most bullish, the weekly slightly less, and the daily even less so, confirming the macro view. Second, one sector, consumer staples, as represented by XLP, shows up in the top tier of each time frame and gets support from Technology (XLK) and Consumer Discretionary (XLY) on the shorter time frames. There is also one sector that shows up as the worst on all time frames: Financials (XLF). Do your own homework, but use this information to your advantage.
(As always, you can see these individual charts and more on my Twitter feed.)
Here is the top ten for the week in alphabetical order:
1) Atwood Oceanics (ATW)
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Atwood Oceanics has been trying to raise the roof at $32.80 for a few weeks. You will notice that this level has also been support in February and April, so it is a very important level. If it can get above $32.80, then it can run to $34.10 and higher before meeting resistance near $37.25. Don’t hold it below $31.50.
2) Caterpillar (CAT)
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I have been watching this bull flag in Caterpillar for a couple of weeks waiting for a break out. If it breaks to the upside, then a measured move would put the target near $93. A fall below the flag could test $74.40, the 50-day simple moving average (SMA). The turn in the moving average convergence divergence (MACD) indicator and the relative strength index (RSI) suggest the break will be higher.
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|pagebreak|3) Cost Plus (CPWM)
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Cost Plus has been in a bull flag for a few weeks also. If this one breaks the flag higher, above $5.40, then it will see resistance at $5.90 and a target of $6.65. If it breaks the flag lower under $5.00, then there is support at $4.25-$4.29. The RSI and MACD are both falling, but the SMA is rising, so watch both ways and play what it gives you.
4. Hain Celestial Group (HAIN)
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Yet another bull flag for Hain Celestial, only longer and broader. If this can get above $25.20, then there is first resistance at $27, followed by $29 and then $31. The measured move from the flag would be near $29. The 50-day SMA at $23.76 provides the downside support below the flag.
5. Jet Blue Airways (JBLU)
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JetBlue broke out of a long ascending triangle and on Friday retested the breakout level at $6.90. If it continues to hold, then it will see resistance at $7.20, where the initial breakout stalled, before heading to the measured move target of $9.90.
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|pagebreak|6. MedQuist (MEDQ)
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MedQuist has been in a short flag after rising from its previous bull flag. If it breaks higher above $8.75, then a new target of $10.50 will be established. If it falls below support at $8.10 and $8, then it can fall to $7.25 quickly. The falling RSI and MACD, as well as the upward tilt to the flag, suggest the break may be down. Watch and play what it gives you.
7. Mellanox Technologies (MLNX)
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Mellanox gapped up on Thursday, the tested and held on Friday. An open above $22.00 would be a buy signal with a target of $25.25 initially and then $26 or possibly $27 from there. The MACD is building and the RSI is rising, adding to the potential for a further move.
8. Micron Technology (MU)
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Micron gapped up on strong volume on Friday. If it can hold at $8.12, it can run to $8.71 or more. The MACD and RSI are both rising and supporting a further move.
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|pagebreak|9. Sunstone Hotel Investors (SHO)
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Sunstone Hotels broke out of a descending channel a couple of weeks ago and is now in a bull flag between $10.50 and $11.00. If it can get above $11, there is resistance at $11.85 followed by $13.00. Both the MACD and RSI are bouncing and heading higher, supporting the possibility of another move higher.
10) Yingli Green Energy Holding (YGE)
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Yingli Green Energy has been in a bear flag and probed under it on Friday. If it can break below $11.40, the support from September, there is space to fall to $10.00. Use $11.73, the 200-day SMA, as a stop.
Bonus Idea: Blackstone Group (BX)
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I have been trying to avoid all the financial names in the hope that if I do, then maybe they will move one way or another, but Blackstone is making me take notice. It has been holding $13.25 support in a bull flag for a couple of weeks. This past week, the RSI and MACD both started to improve. If this keeps up and it can break through the top of the flag at $13.75, then it will not meet resistance until $14.85.
By Greg Harmon of DragonflyCap.com
