While the markets didn't really do much of anything on Tuesday , the small caps as represented by IWM were able to negate their bearish divergence from last week to a certain extent by closing above the descending trendline that defined the top of their recent consolidation. IWM now sits above its December highs while its 9 and 20 day moving averages curl up under it. It seems like much of the twitter stream has been getting antsy and calling for a pullback or outright top recently, but as long as the trend remains bullish, I will not fight it. However, I am playing lighter than normal and taking profits quickly as I feel that is the prudent thing to do at this time.
Looking at a chart of SPY, we again see a perfectly bullish picture with absolutely no reason to think of shorting at this time. $127.80 or so is the level to watch for a new leg up in this rally, while the area around $126 will likely serve as a good spot for the buy the dip crowd. Watch these two levels and find charts that will likely mirror the action in the broader markets.
Below are several charts I will be watching as they consolidate and which I expect will follow a breakout in SPY with a breakout of their own.
City Telecom (CTEL) broke out on heavy volume last November, and ultimately failed at the $16 level. It has been fluctuating between the mid $15's and $14, and appears close to resuming its uptrend now that it finds itself close to the apex of its multi-month consolidation.
Ezcorp (EZPW) has been on a steady rise since last fall, and has found consistent sellers at the $28 area. It consolidated in an orderly manner while it waited for its 20 day moving average to catch up to it, and now finds itself approaching a rising trendline that should give it some upward bias.
IAC/Interactive (IACI) has been trending upwardly for over a year now, and has recently found good support at $29 while it has consolidated after its most recent move up. Watch for a break of its descending trendline along with the recent highs of the last few days around $29.85 as a signal that IACI is ready to retest the top of its current range at just under $31.
Liverperson (LPSN) has experienced the same rudderless volatility as the broader markets to start the year, but still finds itself within a rising triangle as it attempts to base out after a strong breakout over the key $10 level. Before this recent runup, $11 marked the all time high price for LPSN. LPSN may not be ready for a move yet, but this is one that i'll be watching as it bases out between $10 and $11.50.
Sangamo Biosciences (SGMO) has had a great run up from $4 last year, and has recently been held in check by sellers at the $7 area. After a couple of failed tries at holding above this level, it has now closed above $7 two days in a row. It's rising 20 day moving average is swiftly approaching which may mean that SGMO will continue its upward momentum. Watch for a break of today's highs on volume to signal a resumption of its rally.
XL capital (XL) has recently run up along with other insurers, and now finds itself consolidating just below last year's highs. I will be watching this one for continued momentum if it breaks recent highs with heavy volume.
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