The major averages traded lower on lower volume yesterday. After a number of up days, it comes as no surprise that the market would need to take at least a one day break. Many leaders which have also made good moves over recent days took a breather, and this is logical given that many are extended to the upside. Retail sales came in weak this morning, but weak economic data serves to bolster the argument for less QE tapering. Economists do expect the Fed to announce a specific magnitude of QE tapering next week after their policy meeting, although the consensus is that it would be a measured amount as the Fed is expected to taper in a gradual manner. Gold has moved below its 50-day moving average while silver is finding support at the 50-day line this morning at the time of this writing. This takes both back to their original "bottom-fishing" pocket pivot buy points in the earlier part of August - investors in either should maintain awareness of their stops with respect to positions in the metals' associated ETFs.
We reported on Chicago Bridge & Iron's (CBI) "bottom-fishing" pocket pivot on Tuesday morning and it has since moved to breakout highs. In this market environment, one may wish to take some profit since stocks often fail their breakouts, and the optimal spots to be buying have been on pocket pivots occurring within the base. Until we get a proper uptrend that is not artificially motivated by quantitative easing, many breakouts are likely to fail, unless the stock is a clear leader with first mover advantage and clearly dominates its space such as Tesla Motors (TSLA). Of course, most stocks that show price leadership in this market environment take 3 steps forward then 2 1/2 steps back, often just enough to hit one's sell stops.
Lululemon Athletica (LULU), which has been forming a head and shoulders top formation for most of 2013, gapped down after announcing earnings. The move has taken the stock down through the lows of the right shoulder in the pattern. The move puts it in play as a short-sale target and a shortable gap-down situation. We see the stock as shortable using yesterday's 77.38 intra-day high as your guide for an upside stop.
Nq Mobile (NQ) had a pocket pivot breakout in Thursday's trade. Earnings have accelerated to near triple digit percentages and sales are in the triple digit percentages over many quarters. Group rank 9, pretax margin 37.5%.