Futures are trading up this morning and markets in Europe are rising. In the first four days of trading, NASDAQ is positive while the Dow and SPX are down less then 50 basis points. Yesterday’s action was constructive as the market led by NASDAQ reversed course as buyers moved in and neutralized the selling pressure enabling market makers to bid up shares. Volume on NASDAQ was heavy. Big cap stocks like Cisco Systems currently lead. The-50 day moving average is an important line of support for the market. The SPX short term support is 1400. Its 50-day moving average is 1401. NASDAQ has short term support at 2392. Its 50 day moving average is 2415. Both averages tested and held support yesterday.
Boston Scientific (BSX) 17.81
BSX suffered a brutal decline last year. Dogs become darlings and darling become dogs. It’s about cycles and stages of trade. BSX peaked in April 2004 at 46.10. That is the high made almost three years ago. It is down over 31% in the last 52 weeks. It is up over 3% so far this year. It trades above its 10- and 50-day moving average and is on the verge of rising and closing above its 200-day ma at 17.86. Stocks that are extended are worth holding but not necessarily worth chasing unless all you care about is scalping. BSX is about to begin a long-term advance and is a timely investment. A toe in the water is appropriate. A bigger position ought to be placed only if it is able to rise and close above 18.15. It opened yesterday at 18.41 and promptly backed off. It traded as low as 16.11 on 12/20. A stop at 16.34 is prudent.
Brocade Communications (BRCD) 8.77
BRCD is a bullish stock that corrected in December and is flashing positive action as it attempts to conquer the 10 zone. BRCD has not traded above 10 since September 2002. A rise above 9.45 on a close and it is highly probable that BRCD rises to the occasion and tests the 10 zone and with that good action comes an invitation to buy. The real buy signal comes when BRCD rises above its recent high at 9.42 made on 11/22. It is in a long-term advance and bounced above and closed above its 50-day moving average yesterday and that action triggered buying power compelling market makers to bid up the price. Its 50-day line is 8.43. It has solid support at 8. The trading stop loss is 7.99.
Blockbuster Entertainment (BBI) 5.89
BBI has a constructive chart. The current rise comes after building a long base as it crawled on the bottom of its range after a brutal decline for over a year. BBI peaked at 30.25 in May 2002. It bottomed on 11/2005 at 3.19. It is in a new advance and trades above all key inflection points. It is best to buy on a pullback in the 5.20-5.50 zones. Place a stop at 4.69.
WebEx Communications (WEBX) 33.60
WEBX is a good short. It is best to short into a rally in the 35 zone. A toe in the water is appropriate so that it could be watched. The 200-day moving average is 35.06. It trades below all key inflection points and has rolled over. The probability favors lower price zones down the road. Selling short into resistance at the 200-day line is the appropriate way to play it with a stop at 37.01.
Papa Johns International (PZZA) 28.34
It is expressing a classic price pattern. It is a good short right now. It had a stunning advance over two years as it rose from a low of 12 to peak at 37.96 on 10/27/06. It is currently in decline. It trades below all key inflection points and is oversold. A rally up to 30 is the zone to hit it hard. Place a stop above the rapidly declining 50-day line at 31.25.
Jack Rothstein is an SEC-registered investment advisor who has been analyzing, buying and selling stocks for more than 19 years. For a free 30-day trial subscription to the Wealthcast Stock Market Letter & Snapshot Service, click here.
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