Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Stocks moved sharply higher today as investors and traders sought to renew this rally.  In anticipation of IBM’s earnings announcement after the market close, stock prices rose almost 150 points on the broad market, or about 1.29%.  The last time this happened, traders were reacting to an Intel announcement of higher profits – which actually occurred.  The following day the market moved sharply lower.

However, IBM did report increased earnings after the market and in contrast with Intel, pointed to more confidence in future business levels.  So we’ll have to wait out the market reaction as trading resumes tomorrow.

A technical analysis of the daily chart shows a recovery in prices back to the highs for the year.  This move recovers the sharp loss of Friday’s trading.  Unfortunately, today’s trading volume was lower than last Friday’s and actually lower than every trading day last week with exception of the down days.  As a matter of fact, trading volume on the up-days has generally been trending lower since the year started with the rally on the first trading day of the year.  This is generally not a good sign for price growth strength.

The move up today put prices above the PSAR indicator, a good sign, but I’ll reserve judgment until prices break-out above the highs of this consolidation.  Just because prices have moved above the PSAR doesn’t guarantee they’ll continue in that direction.

On the 30 minute chart prices jumped up right from the opening bell.  Prices continued up with a small pullback before lunch.  Prices flattened a little during lunch then moved up some more with the last hour of trading creating a close at the highs of the day.  This is generally a good sign for carrying momentum into tomorrows trading.

Trading Strategy:

The market looks poised to renew this rally.  However, action has been extremely choppy.  You need to be extremely careful of whipsaw trades in this type of trading environment.  There is still a possibility that this consolidation may be creating a reversal area.

On the other hand, a solid break to the upside into new highs for the year and a strong close above the highs could renew the rally.

For tomorrow you should consider new long positions from our selection of top stock picks only if all three major market indexes are:

• Above the high made in the first 30 minutes of trading
• Moving up after 10am market time
• Above a price level of 11755 on our market charts

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