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With Market Hard to Chase, Look at the Value Menu

John Darsie
Mar 28, 2013, 8:46 AM


Futures are near the flat line this morning as Cyprus gets set to re-open its banks. There are anecdotes of long-lines at Cypriot banks as many customers look to withdraw money after seeing the bailout agreement contain a tax on deposits. There are worries that the Cyprus bailout creates a dangerous precedent for future bailouts and could trigger bank runs in the future. Right now, though, US markets do not seem to care much about Europe, as yesterday we also shrugged off a weak Italian debt auction and traded back to near the flat line during the session.


Resilient remains the key word for this market. We have noted faulty signals at various times over the last couple of weeks, but each time the market seems on the verge of a deeper correction it finds support and rallies back to high. Never fight the tape, but I also think adding on new swing positions at these levels into the end of the quarter is not the correct approach. Watch the all-time high in the S&P as the pivot resistance for this market. A break above that could bring some momentum into the market.


The action remains very stock specific during this holiday shortened week, the last trading week of the first quarter. Among economic events to watch today, we have GDP and jobless claims coming out at 8:30 AM EST.


In today's Morning Call we are taking a look at a few value names that aren't always on short-term traders' radars, but have bullish patterns nonetheless. Perhaps if you are reticent to put money to work in high-beta names with indices at all-time highs, these are some of the names you could turn to.


The discount retailers in particular have some nice patterns, with these stocks looking to break macro pivot resistance points.


Wal-Mart (NYSE:WMT) saw a nice two-day breakout and is holding well above key moving averages. WMT is building an upper level base above prior breakout level of $74.10 and looks poised for another potential move higher.


CostCo (NASDAQ:COST) is acting very well as the uptrend since November has acted as support every time its been touched. Look for potential continuation above $106.77.


Target (NYSE:TGT) is stair-stepping higher above its 8-day moving average. The chart looks good on a macro time frame as well as short-term time frame. The pullback during the second half of the trading session yesterday could open the door for better buying opportunities. As long as it stays above $68, we could see higher prices moving forward


Even more value oriented stocks are forming nice upper level patterns that could give way to more upside. Even if you don't get the explosive price appreciation, you have a healthy dividend to keep you comfortable.


McDonald's (NYSE:MCD) is building a nice base at $98, a strong support level from the March 8th gap. The longer it holds above this gap, the higher the possibility we could see a breakout move above current resistance of $99.70.


Pepsi (NYSE:PEP) has been flagging nicely above its 8-day moving average after igniting on March 22. Last time it put in a bullish flag pattern in February, we got some nice upside follow-through. Around $78.75 marks the next breakout of its current wedging/flagging pattern.


Proctor & Gamble (NYSE:PG) has has been consolidating in an upper-level range for more than a month now. It looks poised for a potential breakout above $77.50. If you are looking to build a value portfolio, this name is a great place to start.


Three other value staples have seen very impressive price action, but might be a little bit harder to justify for new entries after recent runs.


Johnson & Johnson (NYSE:JNJ) continues on its quest for a new high without taking many breaks along the way. The stock looks strong as its accelerated uptrend remains intact. The 8- and 21-day moving averages could provide a nice gauge of composure for an uptrending stock like this.


Coca-Cola (NYSE:KO) also has an aggressive rally recently since it bounced off its 21-day moving average on March 18. It took a break yesterday as it ended 1.18% lower, but it could be a healthy pull-in for this high-performer to allow its key moving averages to catch up. As long as it holds above $39.90, we could see continuation to the upside.


Kellog's (NYSE:K) has been extremely impressive in a steady accelerated uptrend since July 2012. Kellogg has a strong chart and certainly doesn’t give its investors many reasons to worry.


The financial have been a bit weaker over the last two weeks after leading the market for several months, and with European headlines coming back into the focus, I think they are definitely something to be wary of.


Goldman Sachs (NYSE:GS) in particular has been weak recently due to its sensitivity and exposure to Europe. The fact that the Fed rejected its capital plan also helped weigh on the stock recently. GS was boosted yesterday by news that Warrant Buffet bought warrants, and the stock finished in green with 0.93%. It held current support of $144.70, and you could use this level as the new base to trade against, either as a stop on a long position or a trigger short, depending on your strategy.


Morgan Stanley (NYSE:MS) is also teetering on the edge of upper level support at $21.90. The longer we hold above this intermediate support, the higher chance we could see the stock get back in motion to the upside.


Bank of America (NYSE:BAC) has been perhaps the most impressive bank recent after the Fed approved $5 billion in share buy backs and a $5.5 billion redemption of preferred shares. Like the rest of the sector, through, BAC has been weakening a bit and lost the support of the 8-day MA on the pull back on Monday. It lost the 21-day yesterday, and the $12 level is the next key support to watch.


JP Morgan (NYSE:JPM) is the laggard of this group and has been in a downtrend since March 15. The bank dropped below its 50-day moving average yesterday, showing little buying interest. It’s an avoid for now.


Citigroup (NYSE:C) has a descending channel in place since March 15 when it got rejected at $47.60 level. It already broke a key support level at $44.70 from prior highs, the next support level is sitting at the 50-day of $43.71.


Wells Fargo (NYSE:WFC) is the more risk-averse company in the banking sector, and thus it is not as sensitive to each headline out of Europe. Keeping with the value theme, WFC also pays a nice dividend and is part of Warren Buffet's Berkshire Hathaway portfolio. It’s something worth watching as it is approaching its 21-day moving average where it could find some buyers.


Deutsche Bank (NYSE:DB) is a German bank that has shown weakness during the Cyprus bailout saga. It's simply important to note the technical damage here as a sign of caution.


The action remains very stock specific as the action dries up this week, but there has been some really impressive action in pockets across the market.


Visa (NYSE:V) has shown impressive strength of late. The stock first saw its breakout of the month-long range on Monday at $162, then got a further boost Tuesday when Nomura analysts reacted positively to reports that Visa may end up buying Visa Europe, which is currently run as a separate entity. V had nice follow-through yesterday and saw its third day up. However, Visa is pretty extended from its key moving averages at this point, and might be hard to buy until a rest and consolidation.


Facebook (NYSE:FB) had a nice Red Dog reversal at $25.03 yesterday when the stock gapped down and pulled back early before it eversed through Tuesday’s low of $25.03 and went as high as $26.28. FB closed the day up 3.5%. This is a name that you could look for upside follow-though in during the next few sessions potentially.


Netflix (NASDAQ:NFLX) saw a nice bounce off its 8- and 21-day moving averages on Tuesday after positive comments from Pacific Crest, then the stock turned out to be a breakout failure on Wednesday when it got rejected at $197 resistance level from pivot highs. Could we see a further pullback? There is some support at the 8-day moving average at around $185.72, so keep an eye on that level.


OpenTable (NASDAQ:OPEN) is building a nice mid-level base. The longer it consolidates at these levels, the higher chances we could see a breakout above $63, so keep this stock on your radar.


Mercado Libre (NASDAQ:MELI) also has a nice set-up as it’s flagging nicely at upper levels. The stock looks poised for a potential break above $96.


Monsanto (NYSE:MON) showed impressive strength the last two days on the news that it had settled a major disupre with DuPont, a major competitor in the seed business. The two companies announced broad patent-licensing deal. Under the terms of the agreement, announced Tuesday, DuPont will pay Monsanto at least $1.75 billion over 10 years for the rights to technology for genetically engineered soybeans that are resistant to herbicides. MON saw a new high at $105.52 on Wednesday.


Ocwen (NYSE:OCN) and the rest of the mortgage servicers have seen impressive bounce over the last three days. The stock took its 100-day moving average, and now has some resistance at the 50-day at around $39. A break and close above this could take us back to highs.


Research in Motion (NASDAQ:BBRY) released its fiscal 4th quarter earnings numbers today. The stock initially pushed about 3% higher after the numbers but has since weakened as we get closer to the open.




*DISCLOSURES: No relevant positions

Last Updated ( Thursday, 28 March 2013 09:28 )
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