Futures are near flat this morning with jobless claims and PPI data on tap. After the close today, chip giant Intel Corp. (INTC) will report its fourth quarter earnings, which ar expected to come in at 53 cents a share. Bond auctions continued in Europe, with Spain and Italy raising money in hopes of avoiding an eventual bailout. The market continues to push higher without much rest, making it hard for active traders to initiate new positions. Without buyable pullbacks in the markets, you have to look for individual stocks that have put in base consolidations.
Agricultural Stocks Have a Bright Future
One sector saw some healthy digestion before perking up yesterday was the agricultural group. Fertilizer stocks in particular have a strong fundamental story as the world population grows in size and affluence, necessitating a greater amount of tenable land necessary to feed the people. Traders should be looking to buy the dips all year in the agricultural stocks, says Marc Sperling of T3Live.com. The leader in the group is PotashCorp. of Saskatchewan (POT), but other names like CF Industries Holdings, Inc. (CF), Monsanto Company (MON), The Mosaic Company (MOS) and Agrium Inc. (AGU) broke out to fresh highs yesterday after the premarket crop report. Expect to see further upside action in these stocks this week and all year, says Sperling.
Banks Perk Up After Positive Comments
Another group that was strong yesterday was the financial sector, which saw some positive comments boost specifically big bank shares. JP Morgan Chase & Co. (JPM) CEO Jamie Dimon came out with positive comments on the future of the banks, even suggesting that JPM may pay a $1 dividend this year. Wells Fargo also issued issued a recommendation to buy big bank stocks this year. Citigroup Inc. (C) broke out about $5, Bank of America Corp (BAC) is above $15 after foreclosure crisis concerns sent the stock down to $11 as recently as December, and group leader Goldman Sachs Group Inc. (GS) remains firmly in an uptrend that is close to seeing the stock reach pre-ABACUS levels. Sperling feels the banks will outperform this year and revert to the mean after being disproportionately beaten down during the financial crisis. With the White House appointments of Gene Sperling and William Daley, Washington has made clear its intentions to be business and Wall Street friendly.
Lululemon Stretching Its Legs Near Highs
Yoga apparel maker Lululemon Athletica (LULU) was one of the stories of the market last year as women lined up outside the company’s retail stores to snatch up their magic stretchy pants. No matter how you feel about the frivolity of a company that hangs its hat on selling yoga pants, Lululemon has established a strong brand and it is impossible to ignore the strength of the stock and the quality of the fundamentals. The company has continued to exceed growth expectations, raising guidance Tuesday to send the stock back near all-time highs after a modest pull-back.
Evan Lazarus of T3Live.com says LULU should have another push higher in the near-term through 52-week highs above $74.60. He believes traders should first look for a mult-day momentum move to $78.25, with a longer-term swing target into the mid-80’s. LULU can be a volatile stocks to trade, so make sure it fits your risk appetite and maintain tight stops at yesterday’s low of $71.50.
Magnet Stocks Crossing Technical Buy Areas
The bulls took the market into high gear on Wednesday as the advance-decline line was positive by better than 2 to 1. The participation in the breakout was broad, a healthy sign for the market.
There is an old expression that has been repeated over the last year by famous hedge fund managers like David Tepper and Bill Gross, “Don’t fight the Fed”. Over the last year, it should have been more like, “Don’t fight a globally coordinated Fed!” The American central bank is not the only one propping up asset prices. European authorities are doing everything they can to avoid contagion in the region due to sovereign debt crises. Over the last few days we have seen ‘successful’ bond auctions in Portugal, Spain and Greece, a positive sign for the economy and markets.
The relentlessly bullish action increases the potential risks of a heavily over-bought market. However, bull markets, by nature, can remain stochastically overbought for extended periods, and such a reading is not a good reason to stay out of the market. Look for the individual stocks with strong fundamentals that are not too far extended, says Jordan Kimmel of T3Live.com. During a bull market, identify stocks and sectors you like and look to buy the pull-backs in those names as long as the valuation remains attractive. If stocks look start to tick down through important support levels on heavy volume, then you may look to lighten up on positions to avoid big losers as we get extended.
As far as stocks showing up in Kimmel’s Magnet Stock Selection Process, we are seeing some outstanding under-the-radar companies making moves. Mesabi Trust (MSB), already with outstanding fundamentals, is working higher and almost ready for an official MACD and stochastic buy signal. China MediaExpress Holdings Inc. (CCME) moved over the technical “go level” on the point and figure charts and #2 overall ranked Magnet stock Acacia Research Corporation (ACTG) did as well. IDT Corporation (IDT) got oversold and started back up today. China Shen Zhou Mining & Resources (SHZ) has also come up on Magnet and was the strongest of the rare earth stocks yesterday.
*DISCLOSURE: Marc is long C, GS, WFC, JPM; Short SPY. Evan has no positions mentioned. Jordan is long MSB, IDT, SHZ, CCME, ACTG.
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