MLR - Premarket Pulse February 28, 2013
General markets bounced for a second day on lower volume. After much destructive price/volume action in leading stocks and major indices leading to the sell signal on MDM and buy signal on UVXY, a two day bounce is not unwarranted given that the NASDAQ Composite Index found short-term support at its 50-day moving average, a logical area from which a reaction rally can ensue. That said, the UVXY fail-safe of -19% kicked in so the UVXY model is now in cash. UVXY is volatile so a two day bounce can trigger the fail-safe. Alternatively, UVXY will watch for a potential rolling over of the markets in which case it may reinitiate its buy signal as it inversely correlates to the markets. Meanwhile, buying stocks in this environment carries higher risk, so any stocks owned should have stops set tight. And should the market head higher on quantitative easing action, as Bernanke has made clear QE is here to stay, actionable stocks with top fundamentals will show themselves. Keep your watch lists current.
Apple (AAPL) remains a short-sale target as volume increased yesterday and the stock closed lower, looking poised for a downside "breakout" from a small, inverted cup-with-handle formation within its larger head & shoulders-initiated downtrend. A logical upside stop would be the 10-day moving average, currently running through the 53-54 price area. Alexion Pharmaceuticals (ALXN) also remains a short-sale target as it pushes up towards potential resistance at the 90 level, which also serves as a guide for an upside stop. Success on the short side, however, will likely depend on the general market rolling over after its current two-day rally.
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