It was another positive week for stocks as the Dow Transportation Average led the way, gaining 2.3%, followed by a 1.2% gain in the Dow Utilities. Small caps were also strong with the Russell 2000 over 1.3%. Oil and gas was the top industry group, up over 2%, while the technology sector was hit hard as Microsoft Corp. (MSFT) was down 11% last Friday after testing its daily starc+ band early in the week. Given the S&P 500’s rally from the late June lows, I was cautious in last week’s column Should You Be Buying Now even though I acknowledged that another 1-3% on the upside was still possible. There are still no signs of a top with first support at last Wednesday’s low. In determining whether a new position should be established or not, you have to consider whether you are buying near resistance or selling near support. By determining your stop level, you can determine the risk, which should determine whether the position is taken or not. Focusing on risk is the key because if you take too many high-risk positions, the odds of success are not in your favor. Click to Enlarge My weekly starc band scan of the stocks in the S&P 500 reveals that quite a few stocks closed last week above their weekly starc+ bands. As a reference, the Spyder Trust (SPY) closed last Friday just 1.5% below its weekly starc+ band. It is important to remember that just because a stock closes above its weekly starc+ band (overbought), it does not mean that the stock cannot still move even higher. But each consecutive week a stock closes either above its starc+ or below its starc- band (oversold), the odds increase that prices will at least consolidate, if not reverse. In the summer of 2011, the consecutive closes in gold above the monthly starc+ bands warned of a significant trend change. On the table, I have also included the % that they are above their 200-day moving average. The first eight stocks on the list are above their weekly starc+ bands. While that does not mean they can’t still go higher, they are a high-risk buy at current levels. At the top of the list is Xilinx Inc. (XLNX), which closed last week 1.6% above its starc+ band and is 12.5% above its 50-day MA. It is also important to determine whether the stock is above or below long-term resistance. Let’s look at the four most interesting stocks on the list. Click to Enlarge Chart Analysis: Xilinx Inc. (XLNX) is a $12.1 billion dollar semi-conductor company that reported earnings last week that their 1st quarter net income was up 21%. Since the June low of $37.63, it is up 21.9% and has already exceeded the quarterly R2 resistance. The first support is in the $42.60 area, 7.1% below Friday’s close, which is quite a bit of risk. There is more important support at $41.47, which was the May high. The weekly chart has multi-year …read more
Source: FULL ARTICLE at Forbes Latest
