Weekend Update: Can Q2 Follow Through?

With the first quarter of 2013 coming to an end this past Thursday I think it is a good idea to take a look at how our top 10 stocks are performing heading into Q2. The SP500 gained just over 10% for the first quarter and continued its surge by finishing at a new all-time closing high. The all-time intra-day high is still roughly 6 points above where we are right now, but having the market finish off the first quarter at its highest closing price ever is impressive. And just to be clear, contrary to what you might hear on the radio or tv news, when the market makes a new high its a very good thing. There are many talking heads out there who love to drum up fear by making listeners nervous about an impending correction. But just know that markets don't crash from new highs, they crash after new highs fail and prices have already broken down, not when they close at record levels. This doesn't mean you should dump all your savings into the market on Monday, but it does mean that the market is strong and new highs are bullish indicators.

Lets take a look at our prospects now that the first quarter is behind us!

AAPL

OK, well AAPL seems to be trying to turn things around here and is forming a consolidation base between $480 and $420. There are a few positive things to discuss: first price has broken and held above its down trend resistance line. Also, the 20 DMA has been reclaimed and is no longer sloping lower, its is flattening and trying to rise. The bad news is that the relative strength trend has not confirmed the price breakout yet and as of this writing a higher high has not yet been formed. We would need to see a move above the $480 level to then feel the trend has fully reversed. Remember if you don't have higher highs and higher lows, its not an uptrend yet. Right now I am interested, but a move above $480 would make me an aggressive buyer (at least in the short term).

MOS

Mosaic still is struggling at those breakout levels around $63. They announced earnings last Thursday and posted a solid quarter. Price has begun to form a triangle pattern, which is a pattern of indecision and is characterized by higher lows and lower highs. Price tends to trade narrower as it gets closer to the apex of the triangle pattern and will then break hard in one direction or the other. Right now caution is advised until we see a move out of the pattern. A positive sign I have noticed recently is the level of buy interest there is in this stock. Look at the volume chart below the price chart; there are lots of large green volume days, which means there is accumulation of the stock underway. Could this triangle formation be the key to launch us over that stout resistance zone? I sure hope so!


HD

HD is still holding up well and has just pulled back from new all-time highs. The long term relative strength trend is now testing its support line, so we will be looking for a bounce in the next couple days to make sure this rally is not coming to an end.


CMI

Cummins has been under performing over the past 2 months and has broken down from its 6-month trend channel. But what is of key interest now will be the resolution of the 3 month trading range it has formed. A break above or below will be the signal we will wait for before proceeding further.

F

Ford is still trying to move higher but has been doing a lot of sideways consolidation over the past 3 months, which is natural after the huge rally it had since August. The relative strength trend support is being tested now and I will be looking for that to resolve soon to indicate to me how healthy this move really is.

WFC

Wells has a nice little setup forming here. After taking out its prior 52-week high, price is now retesting the breakout zone in a flag formation. Also price is retouching the rising 20 DMA; you could buy this right here with a stop below $36 and I think that could be a very fine trade.

 I did some looking through the key banking stocks this weekend (the primary holdings in the XLF, which we looked at last week) and I feel that if a bounce were to occur, it should occur at these current levels. JPM, GS, BAC, C are all showing orderly pullbacks and there has been a lot of chatter over the past week that the financials are being rotated out of. I see no real indication of that here and think they are ready to rejoin the uptrend.


PBW

Clean Energy is struggling here. I posted earlier last week about the potential for a intermediate term top forming in place. I still think that is the case and this will have to go through some significant technical healing before I would go overweight in this position. Price was able to hold the 38.3 retracement level this past week but the 20 DMA has crossed below the 50 DMA and both are beginning to slope lower. I have to assume lower prices are ahead in the near future based on what I'm seeing at the moment. I have reduced my position here to my minimum holding and plan to stay positioned that way until I see progress to refute this current setup.

DDD

DDD looks mighty interesting right here. Downtrend resistance has been broken, price has retaken the 20 DMA and both the long term price and relative strength trend have been able to hold. Also, it appears to me that the 5 wave correction we were watching recently, has completed.  Prices have dropped nearly 40% over the past 3 months and this now seems to have found a bottom.  I'm a long term buyer here with a stop below the $27.50 low.

Enbridge continues to be one of my strongest holdings. It keeps setting new highs and on Thursday it acquired its 46.50 range breakout target. While I am a big fan of this space, I still think a nice pullback would offer a better risk reward entry than current prices. That being said, for a short term position, you would be hard pressed to find too many stronger than this one.

HAIN

I'm just waiting for a breakout in HAIN to get aggressive here. After a 6 month consolidation, price is now retesting the upper range resistance. I like to see these tight flag formations just below key resistance, it tells me that the stock is getting ready to break out. But we are not predictors here, so we will need to wait until it in fact does break above the $62.50 level and holds. If that level is broken, there is practically zero resistance between $62.50 and the prior highs at $74.