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Beware Of New 52 Week Highs During Options Expiration Week

|Includes: AAL, BIDU, The Cheesecake Factory Incorporated (CAKE), LUV, SPY

Since mid January the major stock indexes have topped out in the short term and a pullback has been underway. The Dow Jones Industrial Average hit a high at 10,729 on January 19th, 2010 and made a short term low on February 5th, 2010 at 9,835. During that time many commodity and financial stocks lead the declined sharply. However, it is interesting to point out that since the March 2009 low the market has not had a single 10 percent correction.

Since this January 2010 pullback/correction began there are stocks that have been immune to the market pullback. Baidu Inc(NASDAQ:BIDU) is one stock that has made a new 52 week high climbing toward the very popular 500 level. Interesting enough this is options expiration week and this is going to be a popular strike price for most investors going into the Friday February 19th expiration.

The Cheesecake Factory(NASDAQ:CAKE) is another stock that is making a new 52 week high this morning. This stock is technically still strong on the daily chart and may trade into the important 25.00 resistance level.

Chipotle Mexican Grill(NYSE:CMG) also made another new 52 week high this morning. This stock remains very strong on the charts. However, during the week of options expiration a lot of games can sometimes be played by the institutions. The 110.00 level could be a popular level for this stock as it nears the end of the week.

There are also a couple of airline stocks that are making new 52 week highs today. The first is U.S. Airways(NYSE:LCC). Most airlines have been trading higher recently on lower oil prices and a lot of rumors of consolidation in the industry. Southwest Airlines(NYSE:LUV) is also at a new 52 week high. This stock is considered by many as the best run airline in the business as their business model is very different from the legacy carriers.

Today the market is very strong trading higher after a long weekend as the U.S. Dollar pulls back. However, some stocks that have made new 52 week highs have been resilient to the recent market conditions and should be watched closely into options expiration on Friday February 19th.

Nicholas Santiago
Chief market Strategist