Weekend Update March 15: Closing in on All Time Highs

Hi Everyone, I hope you had a good week. I just got news that my wife and I are expecting our second child! We are very excited about that! The tentative due date is October 20. I will keep you all posted on number 2 as we continue through the process. While we are discussing babies, our 14 month old, Lyra, started taking her first steps also this week! So I hope you will forgive me this week as my attention has been on some pretty important things. 

As for the markets, the SP500 just continues to grind higher, much to the irritation of many out there who are under invested. We still have an inverse head/shoulder pattern in play with a target price of 1,566, and all indications show that we should achieve that target.

Being that we are so close to achieving our target and very near all-time highs, I think it would make sense to move your stops up on short term positions. If the SP500 were to break trend and fall through the 1,548 level I would be reducing positions. There will be another time to buy when the market has corrected and will offer lower risk opportunities. For example, choosing to wait for this recent pattern to set up allowed us to position ourselves to get our money invested in a much higher probability situation. Right now we are very near the pattern completion and is the time to start looking for exit points are you holdings. The nice thing about stocks is that you can always buy them back. If you are not correct in your idea of where a stock will move, you can just wait until an opportunity arises again.


Some quick thoughts on our holdings of interest:

WFC

Well my call last week proved to be ill timed. While JPM has performed very well, WFC has been more or less sideways for a year, at least until Friday. Wells got a huge breakout while JPM was hit with some concern over current risk taking strategies. While shares managed to hold up quite well in JPM after the news, Wells clearly started showing some real strength. Both I feel are excellent investments long term and should provide solid returns as housing continues to recover.

DDD

DDD continues its move lower, closing lower every day this week. I feel that we are nearing the end of a 5-wave correction and major support is just below current prices. I suggest you do a little research on Elliott Wave Theory as that will help you understand basic sentiment patterns in the market. This is getting really close to what I would consider a strong long-term buy.

ENB

 Enbridge continues its string of new all-time highs. Just really strong action over the past several years. Keep riding this one but I would wait for a decent pullback to around $42 to put new money to work. I'm not selling ENB up here but I'm not buying either.

PBW

Speaking of wave theory, I think the move in clean energy is in the early stages. I can see how we possibly could have just completed a 2nd wave pullback after a solid 1st impulse wave. A quick note on 5-wave sequences: Typically the 3rd wave is the longest and the 5th wave is the most violent. Any counter-trend wave (waves 2 and 4) should never correct all of the prior wave. Wave analysis is tricky and is much more of an art than a science, but it is based in human psychology and is an important concept to be familiar with.

HAIN

HAIN just won't give up. It managed to hold above a key resistance level of $57 and now seems poised to retest the upper range resistance. I am impressed with how it has managed to hold off the bear flag setup we saw in last weekend's update, and move back above the key $57 level. Also of note, even after a ~25% pullback from its highs, HAIN's long-term relative out performance trend is still intact.

AAPL

Well, well...Some light at the end of the tunnel? We are seeing a positive divergence in momentum vs. price and price has just broken back above the down trend resistance line. $480 is a key level to me, if $480 was retaken I would like to be a buyer. It's not at a buy just yet, but things are starting to look a little better. This week will be very interesting in terms of whether this is a false breakout or if a reversal is developing. AAPL should be on your radar now.

MOS

Mosaic is now retesting its key resistance area. Remember about resistance areas, the more times a level is tested, the more likely it is to fail. After a sharp and rapid decline, MOS looks ready to push to new 52 week highs

HD

Home Depot has begun to take a breather after a torrid 2 week period. It is in mid trend here and sort of in no-man's-land. I would be a buyer near trend support, but the $68 level should provide some near term support also.

CMI

Cummins is about to test its prior 52-week high and is holding near the lower end of its uptrend channel. A cup/handle type pattern is forming and a break above $120 would set this pattern into motion. This cup has a price target to $129 and would retest all-time highs.

F

F still seems to be working on its double bottom formation. This week we saw price get back above the key $13 level and is showing strong action. A break of the prior low around $12 would present a problem to  our double bottom thesis.