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Base Metals, Tech Are Good Plays


Sector highlights and trading ideas.


Since it seems to be the hot topic, I thought it worth while to take a look at what's shaking out there from a technical perspective.

The Majors

After Boo's shake on Friday, the S&P has now broken to the upside of the recent triangle or wedge formation that so many have been watching. Despite this momentary run by Hoofy, it is going to take quite a bit of work to churn through the overhead resistance within this area. The area we find ourselves in now served as the bottom in 2007. If Hoofy wants to remain in control at least in the short term, he's going to have to power through with some volume. The next significant resistance level would be the downtrend line which would come into play above 1,400.

The Nasdaq is lagging the breakout party a bit and still remains within a tight wedge formation. All eyes are watching the upper and lower trend lines.

Sector Highlights

Select Sector Financials (XLF): The financials are holding where they need to but haven't yet caught any momentum to break out of the most recent consolidation area. It is a positive that the sector is holding lows and may be putting in a reverse head and shoulder bottom. The longer-term trend line, which has presented significant resistance and will do so again, is not far above.

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PowerShares DB Base Metal Fund (DBB): With just about all things commodity ripping, it is tough to find anything presenting a decent risk reward. All eyes have been focused on the precious metals however only just recently have the base metals come back on the radar. The DBB may be a diversified way to play the action with an excellent technical bent. The ETF has recently put in a double bottom in addition to breaking a longer term downtrend. The closed end fund is now consolidating recent gains and looks poised to add further upside. I recently added this for my more methodical separate accounts and will keep a stop below the $24.00 level, letting my shares run.

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Trading Ideas

Nokia (NOK) seems to be poking its head above a longer term down trend after experiencing a nasty sell off in January. Yesterday's break comes on lackluster volume which should be watched carefully however if the stock can either keep the upward momentum or simply hang above the 50 day moving average, I suspect a challenge of highs may be coming.

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Akamai Technologies (AKAM) looks to be finalizing a low level cup and handle within a longer-term downtrend.

It's too early to suggest this stock is ready to turn back up however the pattern is promising and may be worth watching. The buy point would be on a break of the most recent consolidation area, above $34.50 on high volume, with a stop on a break back below the 50 day.

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Ultimate Software Group (ULTI) is struggling to keep its technical pulse going. This software company is on the verge of breaking an uptrend going back to 2004.

So far, each time it has started to crack, it has been met with buying that has kept it hanging by its fingernails, however I suspect it may only be a matter of time before the buyers are out of powder and this one tumbles. I like the idea of adding anticipatory short shares in this area with a stop above $30.00. I would add to my short on a break below $25.20.

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No positions in stocks mentioned.

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