Wang’s Happy Trading

Although the market did not show much conviction in a direction last week, it did finish with modest gains. The afternoon rally, on Friday, left the market in a good position to continue to recover from the bottom.

SPX

SPX added +1.13 points on Friday to close at 1349.99. It closed above the 10-day and 20-day MAs. Its MACD went a little higher.

Nasdaq

Nasdaq lost 10.74 points to close at 2321.80. It closed right at the 10-day MA. The 10-day and 20-day MAs are flattening. The MACD rose slightly.

For the new week, I think the market is in a good position to rise above the daily MAs. But, like last week, I think we need to see the market open strongly; any weakness could increase the risk of testing the bottom again. A strong opening could carry the momentum through the week. The daily MAs are bunched up pretty closely now. With one good solid rally, the market can rise above the 30-day MA, which would likely cause the MAs start to turn up. So, if the market rallies up Tuesday and Wednesday, we could see another positive week. We’re still waiting for the market to make up its mind and confirm the double-bottom.

Sector Watch
Many sectors are shaping up for more upwards movements.

FXI (Chinese ADRS)

FXI made an impressive jump on Friday afternoon, just before the close. Its 20-day MA had already begun to turn up, and it is within striking distance to its 30-day MA. The daily upper BB is also within reach. FXI options are on the expensive side though. March 150 calls are already over $10. This is why I’m introducing a new ETF to my watch list.

PGJ (Chinese ADRs)

PGJ shows a similar daily chart to that of FXI. Its top holdings are also very similar to those of FXI. But, it is much cheaper, presently trading just under $30. Its March $28 calls are just above $2 per contract.

USO (oil)

USO seems to be in a breakout mode. It broke above $75 and caught its rising daily upper BB. The 10- and 20-day MAs are already rising.

OIH (oil services)

OIH is also showing rising 10- and 20-day MAs. It closed above its 30-day MA and is basically right at the daily upper BB. Going above $170 can easily push it to $180-$185.

XME (metals and mining)

XME contines to make gains. It is looking very strong and has just started a new bullish formation with its rising 20-day MA now above the 30-day MA. Going above $70 can induce a breakout. Goldman Sachs came out with a downgrade on the coal sector, causing XME to drop a bit. 4 of XME’s top 10 holdings are coal producers (ACI, CNX, FCL, BTU). We’ll have to see how these coal companies perform next week, although Goldman’s “timely” downgrade (on the Friday of an expiration week) could be an expiration manuever that gave this group a chance to let off some steam. If these coal plays rally back up next week, XME could be looking at a breakout.

Hope you’re enjoying your long weekend and getting lots of rest and fun! I know I am!

Some positive energy for everyone!

Happy President’s Day!
HappyTrading! ™