MLR - Premarket Pulse February 7, 2013

Published : February 7 2013 at 8:48 ET

Major averages closed near breakeven on lower volume. The action however could be considered constructive as the averages traded tight within range of the prior day's trading, thus considered an inside day. As long as the major market indexes remain within their strong uptrend channels and above the lows of this past Monday, we do not see any major "pressure" developing for the market currently, pending further evidence to the contrary.

The iShares Silver Trust (SLV) SLV has been forming a pennant. SLV has been moving in tight, sideways fashion along its 50-day moving average following last week's v-shaped pocket pivot buy point. Both SLV and the SPDR Gold Shares (GLD) have been tightening up their patterns though are still well ensconced in their basing patterns. We would be looking for a more definitive buy signal in the SLV given its tight action as it "coils" along the 50-day line.

Apple (AAPL) remains actionable as a short if the general market rolls over and one is looking to throw out a short position in AAPL as it sputters around the top of its recent price range over the past 2 weeks. Yesterday the stock found stiff resistance at the top of its range in the 465-466 price area We would like to see the stock break down through the 10-day moving average around 452 as confirmation of its weakness. Should the market move higher, based on studies of prior short-sale "model stocks," AAPL could rally within the context of the general market to the 480-500 level, which is consistent with other leading stocks that have topped in the past and then been "dragged" up by the general market to a logical area of resistance. If such a move and breakout through the 465-466 area occurred, it would bring AAPL close to its 50-day moving average and up towards the neckline of its Head & Shoulders topping formation, roughly in the 480-500 price area. With a market cap now of "just" $429 billion, AAPL carries only a 7.5% weighting on the NASDAQ, down from its weighting in the teens.

Alexion Pharmaceuticals (ALXN) remains within the right shoulder of a head and shoulders type of formation, but with earnings coming up one must consider the risk of remaining short anything in a strong general market. At the very least, if one is bold enough to short the stock around these levels, then a stop at the 50-day moving average should be adhered to. In our view, however, shorting only becomes more viable if the general market rolls over here, which so far does not seem likely. Therefore we believe investors are likely to find more "love" on the long side of the market at this time.

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