Violent Moves in Big Names

 | Feb 25, 2013 | 7:51 AM EST  | Comments
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ip

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slb

There have been a lot of violent moves in individual stocks in the last two weeks. This is something that is rather unusual in a market that has essentially been in a trading range for nearly a month.

On Jan. 25 the S&P closed at 1502. On Friday of this past week it closed at 1515. In a one-month timeframe we have essentially done a lot of up and down and not made much progress.

Yet, let's look at a chart of International Paper (IP). This chart is through last Wednesday's close. For nearly a month IP was like the S&P, milling around in a trading range, unable to make new highs (it's stocks like these where those lagging new-high statistics show up). On Wednesday, it crashed down through the short-term uptrend line and took out the low of late January. The stock was down almost 5% in one day.

Source: StockCharts.com

Now look at what transpired on Thursday and Friday, keeping in mind that Thursday was a down day in the market. It made a lower low and surged on Thursday and continued that surging on Friday, up about 7% from Thursday morning to Friday's close, finally making a new high. This is not some thinly-traded small-cap stock, folks.

Source: StockCharts.com

And it is not just the moves on stocks that go down and then go back up. Look at this chart of Schlumberger (SLB) through Feb. 14. Isn't that a textbook breakout?  Look at how SLB had that same flag-pole-type move up and out of its base in mid-January when it went to $76 from 73. That period of choppiness in the S&P looked like a standard consolidation/flag on the chart, so when it surged on Feb. 14, it was doing exactly what it was supposed to do, chart-wise.

Source: StockCharts.com

But now look at what SLB did in the week following that breakout. It not only slumped, it gave it all back and more and was barely able to recover during Friday's rally.

Source: StockCharts.com

These are just two examples, but my pile of charts has plenty others I could have chosen that had similar moves. Is it any wonder the individual investor has no interest in trading individual stocks with these types of violent moves?

In the meantime, the rally on Friday did not change any of the indicators or statistics. For example, breadth using the advance/decline line was terrific and right in line with the 1% rally in the S&P. If we do the same exercise using up volume and down volume we get a totally different story.

Adding up Thursday and Friday, we'd get the S&P up a bit more than three-and-a-half points. We get the advance/decline line positive by about 350 issues. If we use NYSE floor volume it was dead even. If we use NYSE Composite volume it was negative for those two days by about 100 million shares. Those sorts of statistics don't improve the indicators. So, I remain in the correction camp.

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