The major market averages rose minimally on higher volume as they exhibited a bit of churning action, though true churning occurs on days which have significantly higher volume than the 50-day average volume. S&P 500 profit growth for the first quarter is running at a relatively slow 4.9% rate, suggesting the economic recovery remains tepid at best and lending credence to the idea that QE and the massive liquidity it has injected into the markets that continues to drive the rally.
Acadia Pharmaceuticals (ACAD) broke out of a nice flag formation Monday on strong volume. The pullback on Tuesday on lower volume comes as no surprise, thus the stock is still actionable.That said, the biotech stock is still losing money and has nearly non-existent sales. However, it does have a significant drug in its pipeline that offers the only treatment for Parkinson's related dementia, and the stock did have three powerful gap ups over the last six months. Industry group is ranked 6th. Given that it is a biotech with no earnings, risk is higher here so position size accordingly.
While the tight uptrend in the major averages continues to new heights, always keep a close eye on your stops as risk management is rule number one. Given the extended state of most leading stocks, a pullback or period of digestion is not out of the question, and would likely be necessary if the rally is to continue over the intermediate term.
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