Markets back in an uptrend…maybe
The major market indices have broken through most of the key upside resistance levels mentioned in last week’s post, and the weekly trend picture has returned to almost all positive. There is still major resistance overhead, and it’s entirely possible that the current rally is part of an ongoing larger-scale correction, but the benefit of the doubt for now has to be given to the upside.
Apart from the major resistance represented by the February highs, important near-term upside resistance levels for the major U.S. indices are now about 1440 and 1450 (S&P 500); 2470-2480 and 2500 (Nasdaq); 840-845 (Russell 3000); and 12,600 and 12,700 (DJIA). Key near-term downside support appears to be at about 1415-1420 (S&P 500); 2430 and 2405-2410 (Nasdaq); 835 and 825 (Russell 3000); and 12,350 (DJIA).
New positions
Automatic Data Processing (ADP) – On Wednesday I sold some April 50 calls against my long position in ADP (purchased 3/19/07) as the stock rallied after the company raised its 2007 earnings forecast:
ADP appears to be headed higher longer term, however – as with the rest of the market – it’s not clear whether the current up move will continue or whether prices will trend sideways (or head lower again) over the intermediate term. Downside support remains at about 47-1/2 and 49-1/2 to 50, while the recent highs of 51 to 51-1/2 represent upside resistance.
Caterpillar (CAT) – On Wednesday I sold some April 65 calls against my long position in CAT (purchased 3/19/07) as the stock rallied along with the rest of the market:
CAT is currently in an intermediate-term uptrend, with downside support at about 65 and 63. Key upside resistance levels are at about 68, 70-71, and 74-75.
Gerdau S. A. (GGB) – On Wednesday I sold some April 17.5 calls against my long position in GGB (purchased 3/19/07) as the stock rallied along with the rest of the market:
GGB is in an intermediate-term uptrend, with downside support at about 17-1/2 and 16-1/2. Upside resistance appears to be at about 18-1/4 (where it is now) and at last month’s highs at around 19.
GlaxoSmithKline (GSK) – On Wednesday I sold some April 55 calls against my long position in GSK (purchased 4/21/06) as the stock rallied along with the rest of the market:
GSK is currently in an intermediate-term uptrend, but barely, and needs to hold above the 54 to 54-1/2 support level for this to remain intact. Overall the stock has been going mostly sideways over the last year, which has offered numerous call-selling opportunities. Key upside resistance remains at about 57 to 58.
Wal-Mart Stores (WMT) – On Wednesday I sold some April 47.5 calls against my long position in WMT (purchased 11/20/06) as the stock rallied along with the rest of the market:
I still think WMT looks okay here longer term, but so far the intermediate-term trend appears to be only sideways to slightly higher. Downside support is at about 46-1/2 and 45, while the 48-1/2 to 49 and 50 price levels represent key near-term upside resistance.
Watchlists
Lots of interesting new “upside strength” candidates this week, including Alon USA Energy (ALJ), Annaly Capital Management (NLY), CIBER (CBR), Consolidated Edison (ED), Consol Energy (CNX), Corning (GLW), Delek US Holdings (DK), ENSCO International (ESV), EOG Resources (EOG), eResearchTechnology (ERES), Forward Air (FWRD), Frontier Oil (FTO), Hecla Mining (HL), Helmerich & Payne (HP), Marathon Oil (MRO), MDU Resources Group (MDU), MKS Instruments (MKSI), Murphy Oil (MUR), MSC Industrial Direct (MSM), Oracle (ORCL), Owens & Minor (OMI), PPG Industries (PPG), Semitool (SMTL), Sunoco (SUN), Walgreen (WAG), and XTO Energy (XTO).
New additions to the “oversold” list this week include Group 1 Automotive (GPI) and United AutoGroup (UAG).
