Which Way, Market? Break Outs Suggest Up, Perhaps...

My previous post asked if the market rally was over. It appears suspicions of its death were somewhat exaggerated. While IBD listed it as “under pressure”, today’s action was heartening as the major indexes pushed up against recent highs, on higher volume than the day previous, with the DOW hitting a new 52 week high.


Just when you think the market is going to fail, it surprises us all with another bounce higher. While it is frustrating, it is refreshing on some level – that even the experts cannot predict exactly what will happen. If we all knew what would happen, we probably wouldn’t make any money. A strange paradox indeed.

At any rate, I previously posted a watch list of stocks setting up in bases, and for the most part, the list is still valid. The only stock on that list which is seeing a meltdown in its consolidation pattern is ACOM, which is too bad because it showed tremendous potential.

Stocks that broke out today and are still in buy range include IL, RAX, RHT, ALTR and CPX. RAX and ALTR broke out on increased volume, but it didn’t push above the 40% volume spike you’d like to see (IBD once used to say 50% was the amount you wanted; lower volume levels generally were ok for bigger stocks…use your discretion). DECK previously broke out and is still in buy range.

IL, RAX and RHT all benefit from cloud computing and all seemed to break out on the earnings report of IBM, among others, which made mention of the growing market. This is the kind of secular growth you want to see in a prospective stock purchase. New products, especially from a young company, coupled with tremendous earnings growth spell appreciating stock prices.

This market is still questionable, so use caution proceeding.

The daily stock charts of IL, RHT and CPX are below. Each of these broke out today past their pivot points on volume that was over 50% above average. In IL's case, it was 318% above average. This is the kind of volume spike often seen with new, young companies that are gaining the attention of bigger investors, a most positive sign.