Market Sending Mixed Signals – Silver, Healthcare, Natural Gas, Biotech

by Olivier on May 9, 2011

The market is still sending lots of mixed signals. I see lots of traders ‘looking under the hood’ and reporting they don’t like what they see. Often times it is not easy to quantify this notion. You will see many seasoned traders just state that they went through hundreds of charts and that the strong stocks are not acting well, leadership is diminishing, failed breakouts are abundant and lots of erratic trading and churning is going on. I use the exact same approach and sift through a great number of charts to gauge the market’s health.

In the end only price matters. So if your position is up you make money. Simple as that. What is not so simple, is to decide if the market environment is worth playing at all. I am quoting Charles Kirk here who labeled the recent market environment as ‘one of the most challenging ones’ he has seen in quite a while. As a consequence he is mostly in cash and not being aggressive with his trading. Needless to say, I completely agree with his current take of the market.

One of my deeply rooted beliefs is that most traders struggle with ‘craving for the action’. Put another way, they have a tough time simply standing aside every now and then:

There are times to be aggressive and there are times it is best to stay in cash.

I am still mostly in cash and I have no intention to aggressively trade this market. That being said I did a quick and very profitable trade holding ZSL for 3 days in order to hedge my physical silver position and also because the odds for the recent down move in silver were as close to perfect as it gets. Currently I am holding a position in MRGE – Merge Healthcare. I’ve traded MRGE in the past, it has been part of my healthcare sector overview chart since I created it and it is part of my public list. The stock is acting well, recently surged on high volume, is reacting well to good news and is part of a sector which is currently one of the strongest. Other than that, I am mostly neutral and not interested in most of the stuff I watch.

A few random thoughts on various stocks and sectors:

  • Silver: Technical damage is huge. It will take months for the chart to set up again. No need to rush things. Let the dust settle.  A seasonally much stronger period will start in fall or winter.
  • Gold: Technical damage is negligible compared to what happened with silver. Interestingly the Price of Gold in Euro might be setting up for a breakout to the upside.
  • Biotech: Still in a stealth bull market. FBT is the ETF of choice if you want to get involved. FBT is on my public list and I mentioned FBT – Biotech ETF in this audio post.
  • ANDE – Andersons Inc.: Stock wasn’t able to take out the 50$ level. Placing a stop buy above 50$ looks like a good plan. No need to rush here. Stock need to set up again. If ANDE can take out 50$ on its next attempt I would consider odds for a move towards 70 -80$ a high odds proposition. Will re-evaluate once the stock trades around that round number again. ANDE weekly chart analysis
  • Technology: Some stocks are looking good and trading very close to their all time highs or 52 week highs. A few good looking charts that come to mind are: AVGO – Avago Technologies, CALX – Calix, CIEN – Ciena, SOLR – GT Solar and QLIK – QLIK Technologies.
  • Uranium: Charts are broken. Until the charts set up again I am not interested. Uranium – Sector Overview Chart
  • Natural Gas: This is the one sector where quite a few related stocks have significantly profited after the Fukushima incident. From a purely technical perspective this is going to be the winning sector of the future as money flowed into that sector after Uranium stocks got crushed. Solar didn’t benefit. That makes me think the market is viewing Natural gas as the only viable alternative to nuclear. I like MTZ – Mastec, FCG and FCGL two ETFs related to natural gas producers. Keep in mind leveraged ETFs like FCGL are not suited to hold for longer periods of time due to time decay issues, contango issues etc. Natural Gas – Sector Overview Chart

I see trading more as a sporting challenge and try to erase the thought of the money. – Paul Rotter

My public list with all my charts can be viewed here:

Buenas noches!

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