By Kevin Marder
Near-term expectations should be tempered owing to the recent peak in momentum. To illustrate, the candlestick chart below of the Nasdaq Composite shows spinning-top patterns for the Wednesday and Thursday candles. This suggests indecision, which is understandable before the monthly jobs report.
Chart created using TradeStation . ©TradeStation Technologies, 2001-2015. All rights reserved.
The spinning top is characterized by small real bodies (the difference between open and close) when compared with recent price action. After a strong advance, it can often precede near-term weakness.
Otherwise, intermediate-term there is little of the distribution that would suggest a correction is imminent. Longer-term, the narrowing in breadth globally is to be expected for a mature bull market. Asia, Europe, and emerging markets all lag the stateside market.
As noted Wednesday, one longer-term signpost that is often referred to here, the performance of the S&P 500 vs. interest-rate proxies, is beginning to weaken, but not considered red-flag material.
For example, the brokers are close to hitting a new high when looking at the ARCA Securities Broker/Dealer Index /zigman2/quotes/210598459/delayed XBD +0.30% . This would confirm the recent high made by the S&P. However, this is offset by the rolling over of the NYSE Financial Index and its inability to match highs with the S&P. This divergence is worth keeping an eye on.
Any easing in the Nasdaq Composite should not be frowned upon. Such pullbacks, if that is what materializes, allow the specialist in relative-strength, growth-stock leaders to further separate the wheat from the chaff. Just as important, a rally following a short-term decline in the averages usually produces a spring-loaded, catapult-like move in the true leaders upon which the alert, opportunistic operator can capitalize.
Within the list, the biotech glamours, prancing all over the tape, litter watch lists everywhere. One of three leaders are bios, and about one in two are healthcare/medical names.
While most are extended above recent support areas, leaders like AMAG Pharmaceuticals , Anacor Pharmaceuticals /zigman2/quotes/204110601/composite ANAC +0.05% , Auspex Pharmaceuticals , Bluebird Bio /zigman2/quotes/207450173/composite BLUE +0.93% , Cempra , Cyberark Software /zigman2/quotes/206810080/composite CYBR -0.25% , Depomed , Esperion Therapeutics /zigman2/quotes/207049816/composite ESPR +1.63% , Medivation , Ovascience , Palo Alto Networks /zigman2/quotes/207599953/composite PANW -0.19% , Pharmacyclics , Qorvo /zigman2/quotes/209919828/composite QRVO -1.68% , Regulus Therapeutics /zigman2/quotes/202916513/composite RGLS -2.04% , and Tetraphase Pharma should be kept on watch lists for when they reset and offer attractive entrance.
Among the names, Receptos was mentioned here Wednesday (" An aggressive entrance would consist of a takeout of the Feb. 23 high of 133.76 ."). Thursday, the biotechnology concern sprung past this pivot point to break out of a 10-week base, up 10% on volume 191% above normal.
For those seeking an entrance into the stock, a small pullback below 140.00 could be waited for, with the idea of entering a long position and using the 130.00 area as a support point to hide a stop under. This would present risk of about 7%.The stock is up about 470% since last summer.
Chart created using MarketSmith . ©2015 MarketSmith Incorporated. All rights reserved.
Page BreakQorvo /zigman2/quotes/209919828/composite QRVO -1.68% is an integrated circuit maker created this year through the merger of RF Micro Devices and Triquint Semiconductor. Most analysts who track the company on Wall Street eye earnings growth of 107% in the March 2015 fiscal year, followed by another 28% in the 2016 year.