A mixed close last week with the
(INDEXRUSSELL:RUT) higher while the
(INDEXDJX:.DJI) closed lower despite the sharp gains in
). The action in both Asia and Europe seems to be following the
same script with Hong Kong's
(INDEXHANGSENG:HSI) higher but Japan's
(INDEXNIKKEI:NI225) a bit lower. Stocks in the eurozone are also
mixed and the futures are flat.
There is a full slate of economic data this week both in the US and
also overseas. Both the US and India will release their latest GDP
data, along with key economic data released from China and Japan.
PowerShares QQQ Trust
) has been leading the
SPDR S&P 500 ETF Trust
(NYSEARCA:SPY) since the late June lows as it is up 10.8% versus a
7% gain in the SPY. The daily and weekly relative performance
analysis indicates that the QQQ is now a market-leading sector.
Click to enlarge
Because of this outperformance, I wanted to focus on the Nasdaq 100
for the weekly starc band scan, which gives a reading of whether a
stock is a high-risk or low-risk buy at current levels. If a stock
closes above its upper starc band (starc+), it implies a higher
risk since the stock is more likely to at least move sideways, if
not pull back over the near term.
Of course, it can also be one way to identify those stocks that are
emerging new market leaders. In this week's table,
) leads the list as it closed 0.5% above its weekly starc+ band.
This is in contrast to the PowerShares QQQ Trust, which is still 4%
below its starc+ band.
From the top 15 stocks on the table, I have chosen four stocks, one
of which looks attractive for new purchase near current levels
while another is an earlier recommendation.
Click to enlarge
Facebook traded in a very tight range from June till the end of
July when it soared in reaction to much better-than-expected
- FB closed on July 26 well above its weekly starc+ band and
this continued for the following two weeks.
- Last week's close was also at the starc+ band.
- The width of the weekly trading range, lines a and b, has
upside targets in the $44-$48 area.
- The relative performance confirmed the breakout in prices as
it surged through the resistance at line c.
- This confirmed the bottom formation, signaling that it was
now a market leader.
- The weekly OBV broke its downtrend, line d, well before the
end of June and soon after surpassed its May high.
Ross Stores, Inc.
- There is initial support now at $34.57 to $37.14.
) is a $14.04 billion discount retail apparel company that hit a
new 42-week high last week on strong earnings with rising sales at
all of its stores. It closed last week 3.8% below its weekly starc+
- The high at $70.86 was just above the August 2012 high of
- The weekly relative performance has broken through its
resistance at line g, indicating that it is now a market-leading
- The RS line had been rising since last March, line h.
- The weekly OBV did form a negative divergence in 2012, line
i, and this downtrend was overcome in July.
- The OBV turned up from its rising WMA last week, which is a
- The daily OBV (not shown) has surged sharply higher so the
multiple time frame OBV analysis looks very positive.
- There is minor support now at $88.46, which is the monthly
pivot for September.
- Additional support at $67.75 (line e) and $67.98, which is
the mid-point of last week's range.
Click to enlarge
- More important support at $64.67
) shows a broad trading range with resistance, line a, at $68.83
that goes back to the 2012 highs.
- The stock closed above its 20-week EMA five weeks ago and has
been edging higher ever since.
- Next month's projected pivot support is at $65.15 with the
20-week EMA at $64.30.
- There is stronger support at $62.92 with the June low at
$59.02, which is a key level.
- The relative performance has moved back above its declining
WMA but is still well below its long-term downtrend, line c.
- The weekly OBV does look better as it tested long-term
support at line d, in June.
Automatic Data Processing
- The OBV has now moved back above its WMA
(ADP) has been moving sideways for the past four weeks with initial
resistance at $73-$73.83 and the starc+ band at $76.37.
- There is minor support at $71.10 and then further at
- The 20-week EMA is at $69.61 with longer-term support, line
e, at $65.30.
- The relative performance turned higher from support, line f,
in early August.
- The RS line is now well above its WMA but still below its
- The weekly OBV is holding above its WMA with further support
at line g.
What It Means:
- There is monthly support now at $66.60
The most overbought stock, Facebook looks very positive over the
intermediate term but needs a significant pullback to create a
reasonable risk entry.
Ross Stores enters a strong seasonal period in September and looks
attractive on a pullback into last week's range.
Qualcomm has a very strong fundamental case as a leading maker of
chips for mobile devices. Technically, it looks as though it will
pull back towards its recent lows, which could present a good
Support for Automatic Data Processing is now at the four-week lows,
which if broken, will signal a shaper correction.
How to Profit:
For Ross Stores, go 50% long at $68.08 and 50% at $67.43, with a
stop at $64.23. (risk of approximately 5.2%).
: Should be 50% long Automatic Data Processing at $55.54, with a
stop at $68.82.
Editor's Note: This article was written by Tom Aspray of
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