How to Trade New Fledgling Rally

Scott Redler |

Crude oil rallied yesterday for a fourth straight day as Qaddafi loyalists staged counter-attacks in Tripoli. That winning streak, however, appears in jeopardy as Japan's credit downgrade stokes investor fears about demand. Also adding to demand worries is a US energy report suggesting crude oil stockpiles may increase.

Stocks saw their largest advance in a week with many technology stocks helping to lead the way as Apple (AAPL), Google (GOOG), Baidu.com (BIDU), Amazon (AMZN) and Netflix (NFLX) all gaining over 4%. Investors clearly were on the search for growth companies as other biggest tech gainers include Green Mountain Coffee (GMCR) and Lululemon Athletica (LULU) up over 11%, while Altera (ALTR) and SanDisk (SNDK) posted gains over 5.5%.

While many will quick to place the markets back into rally mode, it is important to take note of the save haven stocks outside of the gold plays that held up during this multi-week correction. Agriculture stock CF Industries (CF) is already back at 52-week highs, while cigarette names Altria Group (MO), Phillip Morris (PM) and Lorillard (LO) are all flagging above major moving averages. Surprisingly, liquor distributors have been relatively weak as Anheuser-Busch (BUD), Boston Beer (SAM), Diageo (DEO) and Molson Coors Brewing (TAP) all remain below moving averages.

Investors continue to look ahead to the Ben Bernanke speech on Friday in Jackson Hole, Wyoming hoping to hear signals of more monetary easing to help sagging demand and a slowing US economy.

The S&P Continues to Trade Within Lower Pivot

Symbols: $SPX, SPY, $INDU, QQQ

While yesterday’s strong bounce was definitely a positive for the market, it does not change the fact that we are still stuck in the lower pivot. When can investors be confident about adding to positions?

What Sectors Can Investors Flock to for Safety?

Symbols: MO, PM, LO, TLT, TIP, BUD, SAM, DEO, TAP, GLD

With traders speculating on the possibility of QE3 from the Fed, it’s time to examine what sectors could benefit most from inflation. The most obvious ones are the commodity stocks, which have already seen a massive run up in the past few weeks.

Strength is Shown by Stocks Holding Above the 200-Day

Symbols: AAPL, GMCR, LULU, CMG, MA

Market corrections can be painful in the short-term, but they also allow traders and investors to sift through stocks to find relative strength. Right now, high beta tech has resume its leadership role, and select stocks look ready to take off.

Wednesday’s Watchlist: BIDU, AMZN, NFLX, RIMM, LVS

Symbols: BIDU, AMZN, NFLX, RIMM, LVS

Traders will be watching Baidu (BIDU), Amazon (AMZN), Netflix (NFLX), Research in Motion (RIMM), and Las Vegas Sands (LVS).

Silver Breaks Wedge Pattern, What’s Next?

Symbols: SLV

For a long stretch of the past few years, silver handily outperformed goal, at one point accelerating to dizzying heights before coming crashing back down to earth. With gold back in the lead, silver has fallen a bit off the radar, but it currently has a constructive technical wedge that could lead to higher prices.

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Disclosure: Scott Redler is long SPY and AAPL

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CMG Chipotle Mexican Grill Inc. 406.89 6.86 1.71 88,361
SAM Boston Beer Co. Cl A 175.85 2.85 1.65 3,052
DEO Diageo plc 101.24 0.85 0.85 97,435
MPC.C:CA Madison Pacific Properties Inc. Class C Non-Voting 2.90 0.00 0.00 0
BIDU Baidu Inc. 163.17 1.50 0.93 161,521
MO Altria Group Inc. 64.08 0.09 0.13 499,024
AAPL Apple Inc. 109.06 -0.84 -0.76 5,847,618
LVS Las Vegas Sands Corp. 61.60 0.61 1.00 422,662
AMZN Amazon.com Inc. 749.01 8.67 1.17 608,508
GMCR Keurig Green Mountain Inc n/a n/a n/a 0
BUD Anheuser-Busch Inbev SA Sponsored ADR (Belgium) 103.03 1.64 1.62 599,444
LULU lululemon athletica inc. 56.21 0.90 1.62 480,060
PM Philip Morris International Inc 88.12 0.04 0.05 387,440
NFLX Netflix Inc. 120.11 -0.70 -0.58 1,090,066
TAP Molson Coors Brewing Company Class B 96.13 0.50 0.52 121,348

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