NASDAQ 100 EQUAL-WEIGHT ETF HITS NEW HIGH -- FOUR STOCKS SHOWING RELATIVE STRENGTH IN THE ENERGY SECTOR -- BIG DATA STOCKS MAKING BIG MOVES -- SEAGATE HITS KEY LEVEL AS WESTERN DIGITAL PULLS BACK
NASDAQ 100 EQUAL-WEIGHT ETF HITS NEW HIGH... Link for today's video. Technology remains one of the strongest groups in the stock market. We can see this because the Nasdaq 100 Equal-Weight ETF (QQEW) is already above its January high. Not many index or group ETFs are trading at 52-week highs today. In contrast to the Nasdaq 100 ETF (QQQ), which is weighted by market-cap, each stock in QQEW has a relatively equal weight. Apple accounts for around 12% of QQQ, but only 1% of QQEW. This makes QQEW a better representative for the Nasdaq 100 as a whole. Chart 1 shows QQEW bouncing off the support zone and surging over 5% the last four days. To be fair, QQQ is pretty close to its January high and also showing relative strength. Chart 2 shows QQQ getting a bounce off support in the 34.5-35 area last week and continuing higher this week.
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Chart 1
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Chart 2
FOUR STOCKS SHOWING RELATIVE STRENGTH IN THE ENERGY SECTOR... I highlighted three energy-related ETFs in Monday's Market Message and would like to break down the Oil & Gas Equip & Services SPDR (XES) today. Weakness in this ETF stems mostly from price declines in offshore drilling and supply companies. These include ATW, DO, GLF, HERO, NE, OII, RDC, TDW and RIG. DO, HERO, NE and RIG are at 52-week lows, while ATW, RDC and TDW are near their April 2013 lows. Despite pervasive weakness in this subgroup, more diversified oil equipment and services stocks are performing much better. Perhaps the offshore companies missed out on the fracking boom. Chart 3 shows Halliburton (HAL) finding support near the September lows and filling the mid January gap with a move above 50. The stock followed thru with a move above the January high over the last three days. Chart 4 shows Baker Hughes (BHI) breaking channel resistance with a gap in mid January and continuing higher the last few weeks. The stock hit a 52-week high with the move above 59.
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Chart 3
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Chart 4
Chart 5 shows Nabors (NBR) finding support in the 16.5 area and breaking wedge resistance with a surge above 17.25 last week. The rally continued as the stock moved above the January high this week. Chart 6 shows Schlumberger (SLB) bouncing off a support zone that extends back to late September. The indicator window shows the price relative (SLB:$SPX ratio) turning up in early January as SLB outperforms the S&P 500 this year.
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Chart 5
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Chart 6
BIG DATA STOCKS MAKING BIG MOVES... A new group of data and relationship management companies sprouted up over the last two years. While big companies, such as IBM (IBM), Oracle (ORCL) and Teradata (TDC), still dominate the space, these new players are making inroads with a focus on the cloud. The next four charts will highlight a few of these companies. Keep in mind that these stocks typically have above average volatility and risk. Tableau Software (DATA) recently beat on earnings and surged to a new high. Chart 7 shows the stock breaking out in December and continuing higher throughout January. DATA gapped above 87.5 on February 5th and this gap is holding. Admittedly, the stock is short-term overbought and it would be prudent to wait for a correction or bullish continuation pattern to emerge before considering an entry.
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Chart 7
Splunk (SPLK) is the other big player, and a competitor to Tableau Software. Chart 8 shows SPLK in a clear uptrend over the last six months. The stock recently bounced off support in the 72.5-75 area with a move above 80. The upper trend line of the rising channel marks the next target in the upper 80s.
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Chart 8
Chart 9 shows Verint Systems (VRNT) breaking out in early December and hitting new highs in January. The stock fell back with the rest of the market over the last few weeks and then firmed near the early January gap (green zone). A bounce off this support level with good volume could signal a continuation of the bigger uptrend. Failure to bounce and a break below support would argue for a continuation of the January decline.
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Chart 9
Chart 10 shows Marketo (MKTO) finding support in the 29 area, breaking resistance at 34 and then moving to a new high in January. The stock pulled back in late January with a falling flag and then broke flag resistance with a surge the last few days. Broken resistance and the flag lows mark support in the 38-39 area.
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Chart 10
SEAGATE HITS KEY LEVEL AS WESTERN DIGITAL PULLS BACK... "Pairs trading" is a market neutral strategy where traders go long one stock and short another. Also note that both stocks usually come from the same industry group. For example, Coca-cola (KO) and Pepsi (PEP) are the perfect pair for such a trade because they have similar businesses and they are the dominant players. Finding two similar stocks, however, is often the easy part. Picking which one to sell and which one to buy is the tricky part. I am not really a short-seller and prefer to avoid short positions when the overall market is in a clear uptrend. I am just highlighting this strategy as something to consider for the future. Two stocks came to mind recently that may fit this strategy. Western Digital (WDC) and Seagate Technology (STX) are both in the digital storage business. Demand for computer hard drives has fallen over the last few years, but you would not know if by looking at the charts for these two stocks. A little research reveals that both companies have made inroads into tablet storage and cloud storage.
Chart 11 shows WDC in a long-term uptrend over the past fourteen months. In fact, the stock doubled from February 2013 to January 2014. Clearly, WDC is doing something right. Most recently, the stock fell back with a falling wedge the last few weeks. This could be a mere correction and a break above 86.5 would signal a continuation higher. Should the stock break the December 2012 trend line, a deeper correction could unfold with a target in the mid 70s. The indicator window shows the StockCharts Technical Rank (SCTR) holding above 90 this year and holding above 70 since March 2013.
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Chart 11
Chart 12 shows Seagate getting hit hard in late January, but in a long-term uptrend over the last fourteen months. The stock has been more volatile than WDC and the uptrend is clearly less consistent. Nevertheless, this decline puts STX at an interesting juncture because support is at hand. Notice that the 62% retracement, broken resistance, the November lows and the December 2012 trend line all converge in the 47.5 area.
