US stock futures point to a slightly lower open Friday despite strong earnings after the close yesterday from chip giant Intel Corp. (INTC) and this morning from JP Morgan Chase & Co (JPM). China raised its reserve-requirement ratio for banks overnight, something they have done several times over the past year, undercutting metal prices and putting some modest pressure on US futures. Gold and silver were hit hard yesterday and continued to be weak overnight.
Traders can digest a slew of economic data today, the first being retail sales and CPI at 8:30 am EST. Later in the day, look out for industrial-production data from the University of Michigan’s Consumer Sentiment reading. Earnings season will begin to heat up next week, with a host of big names set to report.
Many traders lightened up positions yesterday after seeing some broad selling in the afternoon. The market has remained extremely overbought for an extended period of time without a significant pull-back, and it would not be surprising or unhealthy to see some sort of correction. With bullish sentiment growing and many investors expressing their intention to “buy the dip”, the question is ‘how far can a correction go?’ Regardless of how strong the market may be, maintain your risk discipline with stops in place.
Caterpillar Looking to Build on 2010 Strength
Caterpillar Inc. (CAT) was the strongest performing DOW stocks in 2010 as a recovery play, surging nearly 60%. On a technical basis, the stock put in several buyable bases last year, and looks to be resting again before new 52-week highs, says Mike Lee of T3Live.com. If you believe in an American recovery, you should believe in construction equipment companies like Caterpillar.
CAT has been trading sideways in a tight range since December, and could take some time to break above previous highs. For long-term investors, the stock also has the insulation of a 2% dividend. Lee believes CAT should be a part of any long-term portfolio. The measured move for the stock in the short term is $100-102, says Lee, but can be held for the long-term depending on your approach to the market.
Acacia Technology Leads Magnet Stocks
The advance-decline line was flat yesterday in a low intensity market. The market remains over-bought, but top-ranked Magnet stocks keep providing nice action.
Although the market has significant upside from here, it never hurts to take some small profits in the way up, says Jordan Kimmel of T3Live.com. The Magnet Stocks Selection process is for long-term investing, not short term trading, and it’s important to give ideas some room to play out. With that being said, Kimmel feels some short-term topping action in a few holdings like TravelZoo Inc (TZOO), ReneSola Ltd. (SOL), Camelot Information Systems Inc. (CIS).
On the other side of things, several of the top ranked Magnet stocks crossed technical levels and broke out. Stocks on this list include Acacia Research Corporation (ACTG), China MediaExpress Holdings (CCME), and and IDT Corp (IDT). Kimmel says he will look to add to positions in ACTG and DDIC, two stocks that remain out of the headlines for now. He feels it’s only a matter of time before institutions can’t ignore the accelerating revenues, high margins, and excellent price action in these stocks for long before possibly initiating positons. Sometimes institutions need to wait for more volume, liquidity and market cap. That is why, Kimmel says, individuals actually have the advantage in today’s markets.
*DISCLOSURE: Evan has no positions. Mike Lee has no relevant positions. Jordan is long MSB, IDT, DDIC, ACTG.
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