Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:
Technically Speaking, This Bull Needs a Break by Michael Kahn
Summary: Technical analyst Michael Kahn makes the case for a near-term bull market correction: Stocks haven't dropped 10% since March 2003 (their second-longest streak ever); weak volume during the market's rebound off February lows; growing positivity in investor sentiment with a distinct lack of fear; momentum indicators like RSI showing the market has moved to overbought territory. Some individual stocks are showing the same tendencies: (1) Kohl's (NYSE:KSS) chart is 'rife with technical deterioration' -- momentum indicators have broken down, and peers like Target (NYSE:TGT) are calling for weak sales. (2) Advanced Micro Devices (NYSE:AMD) -- shares have collapsed over the past year, but shares, while low, aren't cheap. All major technical indicators point down, and there is no sustained volume flowing into the stock. There are also stocks that look ready to weather any storm: (1) BHP Billiton (NYSE:BHP) -- has been in a solid uptrend since 2003, yet its relatively low 11.2 P/E ratio gives it a price cushion. A move down to mid-low $40s (from $49) would provide a safer entry point. (2) Lab equipment maker Millipore (MIL) -- February's decline could not get shares to fill in an earlier gap, and a break through resistance at $75.25 will power the next move up.
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