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Monday, June 14, 2010

Few Stocks Ready to Move in a Range-Bound Market

- The overall market rebounded last week, and as of this morning, SPY was near its resistance level of 111.0. I still believe the market will continue to move in a trading range until mid July (3Q earnings season), even though the upper/lower levels of the trading range may differ from the current 105 - 111.
-In range bound markets, only a few cluster of stocks or sectors show strong trends. Even during the violent market fall over the past several weeks, few individual stocks are at or near their most recent highs. CRM, NFLX, AAPL, many REITs, LVS, auto parts stocks, CMG, etc.
-I mentioned the Natural Gas sector as having potential to move up in the next several weeks. Many Natural Gas plays are on this list. These companies also drill and explore for oil, but much of that is land-based (not offshore based) drilling. There are also many ADRs on this list, which makes sense if we assume that the strongest economic growth will remain with China, Brazil, & India.
-But the common factors among all these stocks are that each is at or above both their 50 & 200-day moving averages. Furthermore, each stock's price has been moving within a range for the past 6 months or longer. I also looked at Volume by Price indicator on Weekly charts, provided by http://stockcharts.com/h-sc/ui?s=CHL&p=W&b=5&g=0&id=p32746176393 When a stock starts to move away from the price range it has recorded the most volume, it tends to meet relatively little resistance to moving much higher (or possibly lower) before it settles down at a new price range.

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