Thursday’s reversal not a good sign, but …
Another mixed picture for the markets this week. Of most immediate concern is last Thursday’s downside reversal on the daily charts, which – if it’s not soon reversed itself – could portend a short- or intermediate-term top.
On the other hand, market action still has yet to convincingly demonstrate that the current choppiness is anything more than consolidation in the still-intact intermediate-term uptrend. Near-term downside support levels are about 1410-1415, 1405, and 1390 for the S&P 500, and ~2400 for the Nasdaq. Upside resistance levels remain ~1440 on the S&P 500, and ~2500 on the Nasdaq.
New positions
Hershey (HSY) – Last Wednesday I sold some February 50 puts on HSY as the stock fell back to its 50 support level after the company reported weaker-than-expected earnings for the latest quarter:
The stock showed little sign of recovery in the following days, suggesting that a retest of the 47-48 level may be likely. Below that, the next support is at ~45. As always with any puts I sell, I’m comfortable owning the stock on a longer-term basis if it’s put to me.
YRCW (YRC Worldwide) – On Friday I sold some February 40 puts on YRCW as the stock dipped on more bad earnings news in the trucking sector:
Technically the stock has recently been showing intermediate-term strength after experiencing a long-term decline from its early-2005 peak of about 65 to its recent low of about 35, made last August. For its intermediate-term picture to remain positive, YRCW probably needs to remain above the 38-39 level.
Watchlists
New stocks of interest showing up in the “upside strength” scans include American Axle & Manufacturing Holdings (AXL), Newell Rubbermaid (NWL), Rayonier (RYN), The Stanley Works (SWK), and Universal Health Services (UHS).
New additions to the “oversold” list this week include Precision Drilling (PDS) and SK Telecom (SKM).
