The overseas markets set the tone for the opening of the US equity markets shattering the calm, and basically optimistic view, from last Friday's close. Of course, the horrible events in Boston created more fear in the market as the selling increased into the market's close.
The dramatic losses in gold and silver last week were indeed A Triple Alert For Stocks as the US equity markets were indeed vulnerable. Monday's decline, in my opinion, is likely part of a top-building process, and I would not expect prices to accelerate to the downside over the near term.
The S&P futures are showing nice gains in early trading and if the major averages can close higher Tuesday, we could see a pretty strong rebound in the S&P and Dow. On a lower close, we could get another day or more of selling before we get a two-three day rally. The iShares Dow Jones Transportation (IYT) and iShares Russell 2000 Index (IWM) were especially weak Monday, confirming the bearish setups I discussed last Thursday.
Though quite a few of the positions in the Charts in Play portfolio have been either sold or stopped out , now is the time to be managing your existing positions. In today's column, I wanted to update the portfolio and focus on two recommendations that have worked out as I had expected and two that did not.
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Chart Analysis: Automatic Data Processing (ADP) hit a low $54.02 last November, and I recommended it on November 27, which was filled the following day at $55.44.
- The sharp setback in late December held well above our stop.
- I recommended taking profits on half the position at $61.42, which was filled on February 19 (see arrow).
- ADP hit a high last week of $66.21 and dropped sharply Monday closing just above the uptrend at $64.
- There is further support at $63.30 with the quarterly pivot at $62.54 while the 38.2% Fibonacci support from the recent highs is at $61.50.
- The relative performance is still holding above its WMA and did confirm the recent highs.
- The on-balance volume (OBV) just retested its March highs, line c, last week and has dropped below its WMA.
- The weekly studies (not shown) are positive.
- My initial upside targets were in the $95-97 area and half was sold at $95.54 on February 5.
- Given the impressive nature of the rally and the closeness to the weekly starc+ band I recommended selling half the remaining position at $108.78.
- The daily relative performance broke through resistance, line f, in early 2013, which was a bullish sign.
- The RS line has been below its WMA since April 1 and has just broken its uptrend, line g.
- The daily OBV did not confirm the recent highs, line h.
- The OBV has also broken its uptrend, line i, and is below its WMA.
- The quarterly pivot at $101.86 is now being tested with further support at $100.
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Murphy Oil Corp. (MUR) is one of my recent recommendations in the energy sector but it is not working as well as those I made earlier in the year.
- The original recommendation was made on March 11 as longs were established at $62.14.
- The breakout last week above the resistance at line a looked impressive but MUR has dropped 6% in the past three days
- The daily uptrend, line b, has been broken and Monday's close was well below the daily starc- band.
- The quarterly S1 is also being tested with further support at $59.88.
- The daily relative performance has also reversed sharply and has broken below its support at line c.
- The daily OBV dropped as MUR was breaking out and has also now violated its support, line d.
- There is initial resistance now at $62.19 and the quarterly pivot with further resistance is at $63.40.
- XLB peaked at just over $40 in March and made a secondary high at $39.50 last week.
- It dropped sharply Monday and broke its short-term uptrend (dashed line) closing below its starc- band.
- It is now very close to the stop at $37.08.
- The relative performance and OBV have been giving mixed signals for the past month.
- The RS line broke support in March and has stayed below its declining WMA
- The OBV was much stronger than prices in March but is now testing its uptrend, line g.
- The volume Monday (see arrow) was very heavy.
- There is first resistance now at $38.74, which is the quarterly pivot.
What it Means: As I have been advising for many weeks, I hope you have your stops in place and hope you took some profits on strength. A further drop will not alter the positive longer-term trend for stocks but will bring prices more in line with the economy.
To be profitable, it is just as important to manage those positions that do not work out well. I will be looking to close out the positions in MUR and XLB unless they see a dramatic turnaround and will update via Twitter.
How To Profit; No new recommendation
Portfolio Update: Still long Automatic Data Processing (ADP) from $55.54 with a stop at $63.30.
Also long Kansas City Southern (KSU) from $85.35 with a stop at $99.33.
Long Murphy Oil Corp. (MUR) from $62.12 with a stop now at $59.19 but will watch any rally closely.
Also long the Select Sector SPDR Materials (XLB) from $38.46 with a stop at $37.08 but will watch any rally closely.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.