Sitting Tight for Respectable Volume

 | Jun 10, 2012 | 10:30 AM EDT  | Comments
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It was another day of nice gains for the market Friday, but also another day of light volume on the NYSE and the Nasdaq. So it goes as the market enters the summer doldrums.

Is it really realistic to believe the market can continue to rally here, even though institutional investors still seem hesitant to buy? The short answer is that anything is possible. Few people trusted Wednesday's strong gains, and even fewer people had any faith in Friday's nice gains, when Nasdaq volume totaled a measly 1.4 million shares. Volume on the NYSE was equally unimpressive at 625 million shares. With so many seemingly expecting this rally to fail, it very well could continue for a while.

Truth be told, several growth names on my screens are putting in a better performance, but lack of volume behind many recent moves gives me pause. It's just hard to trust low-volume moves. Light trade makes for a weak foundation, while heavy volume strengthens a stock's foundation.

What I know right now is that the market is in some dire need of some follow-through, but it hasn't come yet. Perhaps it will arrive next week, though. I'm not giving up hope.

As for individual stocks, decent volume came into Under Armour (UA) Friday, and the stock cleared a buying area of $102.86. Shares jumped 3.5% to $103.31. Volume totaled nearly 1.2 million shares, slightly above its average daily volume of around 950,000. The stock is nowhere near extended yet, and it's still within buying range, but there's added risk buying a high-beta growth name like this when the market remains in a downtrend. Breakouts are tough to play in a market such as this. Some will work and others won't.

Meanwhile, small-cap name Web.com (WWWW) also recently enjoyed a nice breakout. The shares punched above $16.43 on Wednesday in heavy volume. The stock turned in a solid performance Friday, as well, rising 2.9% to $16.90, but volume was below average.

Apple (AAPL) has a strong enough following that it could continue to be a leader. The stock has moved nicely off its recent low of $522 (after a pullback of 19% off its recent $644 high), but its last seven price gains have come in below-average volume. Despite recent strength, Apple is still below its 50-day moving average .To its credit, the stock did clear a descending trend line Friday, but I'm still wary of its recent low-volume move. The stock still has a lot of overhead supply to work through, and it needs to prove itself before I'll become a buyer.

Apple (AAPL) -- Weekly
Source: StockCharts.com

Finally, Alexion Pharmaceuticals (ALXN) continues to trade impressively. It could try to clear a bullish cup-with-handle base soon, with a buy point of $94.36. Shares closed Friday at $92.43, up 2.3%. Alexion has a super strong balance sheet, and it is no stranger to fast growth. In the company's latest reported quarter, profit rose 55% from a year earlier to $0.45 a share. Sales rose 47% to $244.7 million. Revenue growth was driven solely by its flagship drug Soliris, used to treat aroxysmal nocturnal hemoglobinuria, or PNH, which causes a breakdown of red blood cells and leads to anemia.

For 2012, full-year earnings are expected to rise 30% from the prior year, and targets for 2013 are 40% higher than current-year estimates.

My only concern with Alexion is that it currently has a fourth-stage base. Breakouts from late-stage bases like this can succeed, but the stock has made a big move already, so that's something to keep in mind.

Alexion Pharmaceuticals (ALXN) -- Weekly
Source: StockCharts.com

Overall, the market's character has certainly changed for the better. I'm not completely averse to nibbling at a stock here and there, but I know I may have to cut losses short. Remember, the best time to make money in stocks is during market uptrends, and the market is not in one yet.

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