Buyers in Control

 | Dec 16, 2013 | 4:28 PM EST
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After a dreary week, the bulls kicked off the final full trading week of the year with upbeat action. It didn't gain much traction following the gap-up open but did stay solidly green, and there was plenty of positive action. Bulls seemed to lack conviction, which isn't surprising after the difficult trading experienced over the past week, but there are signs of optimism that the end of the rally so many are anticipating has finally kicked in.

Despite toppy action in last week's leaders, Twitter (TWTR) and Facebook (FB), the market managed more than 220 new highs with bigger-cap names taking the lead. The small-caps have been trading very choppy lately and that is driving some traders to focus more on the "safer" big-caps.

Breadth slipped most of the day but still finished at a little better than 2-to-1 positive. TWTR has been the leading stock in the market lately, but outside of that, not much really stands out. That may change if this rally can pick up a bit of steam, but it is going to take some digging to stay on top of the leading names.

I'm optimistic we can build a little more momentum, but chatter over the Fed policy statement Wednesday could raise concerns about how soon tapering becomes a reality. I would like to see more stocks show up on my radar, but I'm looking for the buyers to stay in control at least a few more days.

Have a good evening. I'll see you tomorrow.

Dec. 16, 2013 | 1:54 AM EST

Stick With a Bullish Bias

  • Bulls embrace positive seasonality and keep pushing.

One aspect of the market that has been challenging this year is how often we see good point gains in the indices but with no real energy. To a large degree, that is a function of limited participation by individual traders but it's still surprising how there can be so little excitement with so much green on the screens.

While we still see good gains in the indices, breadth has slipped a little and there are plenty of intraday reverses in key names like Twitter (TWTR) and Facebook (FB). My list of stocks making new intraday highs has slowed to a crawl. Finding the names with sustained momentum is definitely a tricky task.

One stock I added to the Sharkfolio today is Revolution Lighting Technologies (RVLT). We had nice trades in this one earlier this year and I think news of a contract may put it back on track. The hot money will often come back to a stock that has treated them well in the past, and that might be the case here.

Unless we have a major change in the price action, I'm going to stick with a bullish bias and keep looking for new inventory. I believe the bulls are going to embrace positive seasonality and keep pushing.

Dec. 16, 2013 | 10:35 AM EST

Putting Money to Work

  • The key is just finding good entries.

As I noted in Columnist Conversations this morning, this is the week the market tends to have the year's strongest positive seasonality. Traders are aware of that and they are busy trying to put money to work. It didn't hurt that soft action over the past week created a decent setup.

Breadth is running very strong with 3,800 gainers to 1,400 decliners and just about every group except precious metals is showing strength.

Market players seem particularly focused on chasing Twitter (TWTR), Facebook (FB), Google (GOOG) and Apple (AAPL). The big-cap momentum favorites are leading the action but there is plenty of movement elsewhere.

I suspect buyers are going to be aggressive going after any dips, and I anticipate very strong underlying support. The key now is just finding good entries.

Himax (HIMX), which I mentioned last week as having a good-looking cup-and-handle pattern, is breaking out today after Northland named it a top pick for 2014. I'm looking for a chance to add. I started a position in laser play Zeltiq Aesthetics (ZLTQ), which has a bull flag pattern and could make a run over recent resistance.

Dec. 16, 2013 | 8:03 AM EST

A Year-End Flourish?

  • Stay selective and manage positions tightly.

Finish strong.

--Drew Brees, NFL quarterback

The indices had a rough time last week but the big question now is whether it has given us a good setup for a strong finish to the year. Positive seasonality kicks in strongly at this point and we all know about the potential for a Santa Claus rally.

It has been a big year for the indices but active managers have had one of their worst years of relative performance ever. That suggests that there will be some pressure to try to finish off the year with a little flourish.

We have already seen some signs of aggressive fund managers pushing for returns with the recent action in names like Twitter (TWTR), Facebook (FB) and Tesla (TSLA). The big-cap, high-beta names are where hedge fund managers go to find relative performance and there have been signs of it even though the major indices have not reflected that action well.

Another thing to keep in mind as we approach the end of the year is that there is a strong tendency for fund managers to try to hold up their best performing stocks until we conclude the year. The big funds don't tend to sell and lock in the gains because they hope that their key holding will stay strong. If they have to bolster them with some additional buying, they aren't opposed to doing so.

This time of the year often produces some good trading for aggressive traders. It is somewhat of a self-fulfilling prophecy as it is anticipated. Traders tend to make it happen by following each other in and out of the hottest names. Typically, the action in the last full week before the Christmas holiday sees a jump in volume as interest picks up. I'm expecting to see that again.

While last week was challenging, especially for many small-caps, it really is the ideal setup for a good finish to end the year. We worked off some of the frothy, sentiment and many stocks have come back down to test support levels. You don't have to chase if you want to put money to work.

There is more talk about the possibility that the Fed will announce some tapering when it issues its interest rate decision on Wednesday at 2 p.m. EST. Many pundits have attributed the recent weakness to fears of tapering. so there is going to be some nervousness over the announcement. Most market commentators think it will be another month or two before the Fed makes its move, but any hints at all that tapering is coming could give us some increased volatility.

We have a standard Monday morning gap on the way and traders seem anxious for some holiday spirit. Stay selective and manage positions tightly -- and we should be able to make some money.

Columnist Conversations

we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
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