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Preview: Alan Farley

Alan Farley

Technician Alan Farley analyzes the charts of featured stocks and sectors.

Copyright: 1996-2011, Inc.

Searching for the Next Market Leaders

Wed, 17 Aug 2011 17:30 GMT

Few stocks have made significant progress in repairing technical damage they suffered during the mini-crash that ended on Aug. 9. As a result, I believe the majority will now chop higher, posting uncertain upticks that will eventually run into a fresh buzzsaw of selling pressure. In turn, these market mechanics predict a retest of the lows and, perhaps, breakdowns to even lower lows.

But a few mavericks and market groups do well during every major downturn -- whether it's a broken tech bubble or a banking collapse. For example, Express Scripts posted a series of new highs after tech sold off at the start of the new millennium while, in the last bear market, McDonald's was trading just a few points shy of an all-time high in December 2008.

Although this decline could last into 2012, it's a perfect time to look for signs of rotation into groups, sectors and issues that might provide market leadership going forward. No, I'm not interested in regurgitating the basket of high-yield plays that allow you to lose money at a slower pace. Rather, let's see if we can find the next stocks that will post new highs in 2011. ...

Click to view a price quote on ZAGG.

Click to research the Specialty Retail industry.


To Play TA, You Have to Adapt

Mon, 15 Aug 2011 17:30 GMT

Everyone is talking about how the market is broken these days, with supply/demand destroyed by rampaging program algorithms. It's hard to argue against the conclusion, given last week's crazy tape, but charting works just as well now as it did two weeks or two decades ago -- picking out price levels where market inefficiencies signal trading or investing profits still works.

It's lazy for the trading community to complain about an uneven playing field, rather than make the adjustments needed to prosper in this digital world. It's a different story for investors; as RealMoney contributor Tim Melvin has pointed out so well in recent years, that discipline has been permanently altered by our fast-fingered derivatives-driven market culture.

But charting guys and gals have no one to blame but themselves if they can't find classic technical structure within the volatile price swings. This has always been true; market prediction has never worked according to the simple scripts or formulas promulgated in the old-school TA books. ...


A Resilient Trio

Wed, 10 Aug 2011 16:00 GMT

Utter destruction has consumed Wall Street for more than two weeks, including a mini-crash that evoked unpleasant memories of the 2008 collapse. Selling pressure has been intense and broad based, but not all stocks have participated equally in the carnage. In fact, a few mavericks have held their bullish technical characteristics and should lead the upside as the broader market stabilizes.

There's no unifying theme in this small basket of protected issues, except for the failure of rampaging program algorithms to destroy shareholder value through exchange-traded funds, their chosen weapons of mass destruction. Of course, there are no guarantees these winners will survive the next selloff, but their resilience to this point marks a bullish divergence that signals opportunity to observant market players.

Green Mountain Coffee Roasters (GMCR)Source: eSignal ...

Click to view a price quote on GMCR.

Click to research the Food & Beverage industry.


Defend Your Portfolio With These Three Tools

Mon, 08 Aug 2011 16:15 GMT

Long-term retirement portfolios, battered and beaten in the worldwide debt crisis, now face their biggest threat since the 2008 banking collapse. How you manage your exposure in the next six to 12 months could mean the difference between a simple drawdown and a total evaporation of the healthy gains posted in the two-year bull market.

I trade actively but also manage the family nest egg, which has been placed at risk in the recent debacle. I'm confident that core capital will survive, because I made the right decisions in 2008, going to 100% cash in the first half of the year and missing the crash entirely. I even kept that money out of high-yield money markets that "broke the buck" when the bottom dropped out.

No, I don't believe we're headed for a second meltdown, but it's nave to bury our heads in the sand, letting our investments go broke because a few rich folks, such as Warren Buffett, pound the tables, telling us to stay the course. If you recall, that's how $39 trillion in retirement savings got wiped out during the market crash. ...

Click to view a price quote on AAPL.

Click to research the Computer Hardware industry.


Can Cisco Get Its Act Together?

Thu, 04 Aug 2011 13:35 GMT

Cisco Systems has transformed itself from well-respected tech giant into perennial loser in the last two years, spiraling lower in a persistent downtrend that's dumped the stock within two points of its 2009 bear-market low. The San Jose-based company is currently the second worst performer in the Dow Industrial Average, just ahead of basket case Bank of America .

This fall from grace is a staggering failure, especially in a secular uptrend that lifted many tech stocks to all-time highs. An aging product line, loss of market share and a bumbling chief executives have all been blamed for the paradigm-shifting decline but the truth is less complicated. The company just can't compete in a commoditized network marketplace, at least in its current incarnation.

The stock has acted better than the broad market since June, raising hopes the worst is over and price is grinding through a bottoming pattern, ahead of a new uptrend. If that's true, the August 10 earnings report might offer a key turning point for the beleaguered company, But buyer beware because this fallen angel has trapped a massive population of bottom fishers in 2011. Cisco (CSCO) -- MonthlySource: eSignal ...

Click to view a price quote on CSCO.

Click to research the Computer Hardware industry.


Take a Defensive Strategy

Mon, 01 Aug 2011 16:15 GMT

Shareholders of defense contractors have watched the U.S. debt crisis closely, hoping that future budgets don't decimate spending in this truly American industry. The resolution will ease anxiety considerably because it's clear that politicians don't want to head into the 2012 elections looking vulnerable on homeland security.

However, it's obvious that defense spending will grow at a slower pace in coming years, compared to the decade that started the day after the Sept. 11 attacks. As a result, sector investors need to do their homework and stick with well-positioned companies that address core security needs, high tech innovation, or must-have functionality.

Military aviation is a huge component of the U.S. defense system and a good place to start this discussion is with companies such as Boeing and Lockheed Martin , which are hiring dozens of sub-contractors to support massive building projects. This food chain will undergo major reform in coming years as a dysfunctional Congress picks and chooses between competing programs. ...

Click to view a price quote on BA.

Click to research the Aerospace/Defense industry.


Stay Skeptical on the Bank Bounce

Mon, 25 Jul 2011 16:15 GMT

Commercial banking stocks stirred to life last week, posting their strongest gains since the start of second-quarter earnings season. The industry's classiest acts, JPMorgan Chase and Wells Fargo, pushed above key resistance levels, but even Bank of America and Citigroup, poster children of the 2008 crash, enjoyed a steady flow of buying interest.

Whether you're a banking bull or bear, it makes sense to remain skeptical about last week's bounce, because this sector has drawn in hopeful buyers repeatedly since topping out in February at nine-month highs, only to deflate like a balloon every time the government fires another warning shot across their bows or another foreclosure fiasco hits the newswires.

These are also economically sensitive companies, dependent on the demands for capital formation in an environment in which U.S. businesses are recording record profits without major physical expansion. This self-contained growth isn't good for commercial banks that make their living by bringing together development capital and new investors. ...

Click to view a price quote on WFC.

Click to research the Banking industry.


Stocks Need Semi Strength

Mon, 18 Jul 2011 16:15 GMT

A healthy bull market needs the full participation of the chip stocks, but that isn't happening. Sector giants Intel , Texas Instruments and Applied Materials are all struggling to finding buying interest.

It's even worse at the middle and lower ends of the capitalization spectrum, with the majority of semiconductor companies caught in major declines.

It's hard to visualize a summer rally, or a sustained tech advance for that matter, until this sector finally rises from the dead. Of course, we know why these issues continue to struggle: the continuous stream of mediocre economic and consumer sentiment data that points to weaker profits in the third quarter and beyond. ...

Click to view a price quote on INTC.

Click to research the Electronics industry.


Running in Place

Mon, 11 Jul 2011 17:00 GMT

Growth stocks and other high-beta issues led the upside during the recent rally, fueled by widespread speculation that economic growth will pick up in the third quarter. Sadly, Friday's horrific employment numbers poured ice water on that theory, warning that deterioration in the labor market is likely to spread deeply into consumer buying habits and corporate hiring decisions.

The vertical trajectory of the rally, which pulled within striking distance of the 2011 index highs on Thursday, adds a major technical warning because relative strength indicators have now struck grossly overbought readings that favor an extended consolidation period or a decline that shakes out weak-handed buyers.

In addition, major indices and market groups remain trapped within broad trading ranges that were set into place in February. These sideways patterns are notorious for euphoric rallies and terrifying selloffs, but, at the end of the day, net price change approaches the flat line over time. In other words, the broad stock universe has been running in place for five months now, churning and burning all sorts of long-term positions, while gaining little value. ...

Click to view a price quote on DPS.

Click to research the Food & Beverage industry.


Small-Caps Have an Edge for the Second Half

Tue, 28 Jun 2011 16:00 GMT

Russell 2000 performance in the first half of 2011 has matched that of the S&P 500 perfectly, with both indices rising slightly more than 2%. This is an acceptable if unremarkable number, yielding an annual return well under 5%. Despite this lockstep behavior, world events predict that small-caps will outperform blue chips from now into year's end, so the actual return may exceed current expectations, perhaps significantly.

Logically speaking, the tight correlation between these divergent indices makes little sense, because small-caps should lag badly in a weak U.S. dollar environment, which favors the S&P 500's currency-sensitive international operations. But that hasn't been the case in the first six months of 2011, so we need to look elsewhere to understand this unexpected alignment.

Of course, the answer lies in the risk-on/risk-off trade that became the dominant hedge-fund play after the implementation of QE2. Dollar downswings since that time have generated buying pressure across the entire spectrum of U.S. equities, tossing small- and big-caps into the same basket. On the flip side, dollar bounces have triggered massive sell programs that dump equities like hot potatoes and park cash into fixed income. ...

Click to view a price quote on CPHD.

Click to research the Electronics industry.


Not the Right Time to Buy Gold

Mon, 27 Jun 2011 16:30 GMT

After struggling to mount that key psychological barrier for more than 18 months, gold futures broke out above $1,000 per ounce in September 2009. The contract then lifted into a steady uptrend that climbed above $1,500 per ounce in April of this year. The rally died just seven days later, with the price grinding into a broad sideways pattern that's still in place as we head into the third quarter.

The yellow metal got its fair share of attention on RealMoney last week, with many thoughtful opinions about price direction between now into year's end. Strongly opposing views reveal a major conflict between bulls and bears -- not only with the futures contract but also with underlying equities as well. At a minimum, it's a sign that something important is brewing in the precious metals pits.

I am going to throw my hat into the ring today, examining the price patterns of gold and its equity counterparts. I'll begin with a conversation I had over the weekend with a long-time trader. We were bragging about silver and the amazing profits we took out of the parabolic rally that ended two months ago. He then asked me when I thought the gold bubble would finally burst. ...

Click to view a price quote on GDX.

Click to research the Financial Services industry.


Plan Providers Poised to Challenge Highs

Wed, 22 Jun 2011 18:00 GMT

Health care plan providers have held up well since the broad market topped out in May and now look poised to challenge their 2011 highs. This bullish action is a welcome change of pace, given the lack of bullet-proof leadership in this difficult spring market. It also gives battle-weary investors a place to park their core capital without worry of overnight catastrophe.

That's been a major issue for weeks now since the European events have been moving the ticker tape, triggering all sorts of dislocations when the U.S. exchanges open for business at 9:30 a.m. EDT. While not completely risk-free, the health care sector is finally living up to its long-held reputation as a safe haven in tough times.

It's also a great way to build profits in a market that has been stingier than Scrooge with trading opportunities that last longer than a few hours. Indeed, fast-fingered, day traders have ruled the roost in the second quarter, taking their gains and jumping back to the sidelines before uncertain, overnight sessions bring greater rewards or painful shock losses....

Click to view a price quote on AGP.

Click to research the Health Services industry.


Internet Stocks to Net Short-Term Profit

Mon, 20 Jun 2011 18:38 GMT

Technology stocks have taken a huge beating in recent weeks, with the tech-heavy Nasdaq-100 index dropping to a six-month low. Damage cut across a broad swath of market movers, but the chip sector was hit the hardest, yielding double-digit monthly declines in eight index components, including Intel and Applied Materials .

Thankfully, relief is on the way for battered tech shareholders. The index has now reached major support that should yield a significant bounce into month and quarter end. With just nine trading days left until the start of July, it's almost time to build the first tranche of sector exposure, even if the lowest low of this nasty decline takes a few more days to arrive.

But the longer-term fate of the Nasdaq-100 and tech universe is less certain because the index just broke the string of higher highs and higher lows in place since July 2010. This violation ends the long uptrend and confirms a trading range that will eventually yield a base for a new rally leg, or a top in a steeper decline that tests 2000, which roughly marks the April 2010 top. PowerShares QQQ Trust (QQQ) - WeeklySource: eSignal ...

Click to view a price quote on AMZN.

Click to research the Retail industry.


Apple Faces Long-Overdue Downturn

Mon, 13 Jun 2011 16:15 GMT

Apple ended a powerful rally in February, well ahead of the broad market, and then drifted lower in an indecisive pattern. This lackluster performance is taking its toll, with the tech icon dropping to within three points of its price at the start of 2011. More importantly, it's now headed into a key test of support at the 200-day moving average.

The list of popular tech stocks that have outperformed Apple so far this year includes Dell Computer, eBay , International Business Machine and Adobe Systems ). Even lowly Intel shows stronger gains in 2011, despite Wall Street's endless love affair with the pride of Cupertino, Calif.

The company's low valuation, compared with the rest of tech land, is a talking point for admirers. But it exposes a weakness that could come into play this summer. Its deep involvement with the American consumer makes it highly vulnerable to the vagaries of the economic cycle. The faithful will buy fewer iPhones and iPads if the slowdown continues and unemployment rises. ...

Click to view a price quote on AAPL.

Click to research the Computer Hardware industry.


Seeking Stocks That Roll With the Punches

Mon, 06 Jun 2011 16:15 GMT

The major indices got pummeled last week after a wave of bearish data revealed a rapidly slowing U.S. economy. Despite the broad selloff, a number of stocks and sectors held up surprisingly well, pointing to rotational activity that could yield higher prices in the weeks ahead. Traders and investors should focus their capital on this interesting minority if they want to survive and prosper in a tough summer market.

The usual suspects got hit hard during the furious decline, with cyclical, technology, retail and small-cap stocks working their way into major corrections. The blue-chips failed to provide a safe haven, dropping the Dow Jones Industrial Average to a six-week low. Even the health care stocks found few buyers, despite the group's reputation for resiliency in weak market environments.

Ominously, defensive plays gave up their 2011 leadership role and dropped into major selloffs. These recessionary favorites had moved higher in unison, with investors allocating a good chunk of exposure to take advantage of low beta and high dividend payouts. The dumping of these safety stocks is a warning that core capital is rushing back to the sidelines, or being forced out of equities to pay for margin calls. ...

Click to view a price quote on IBB.

Click to research the Financial Services industry.


Look for Retail Downside

Mon, 23 May 2011 14:45 GMT

A diverse group of retailers, from big-box discounters to trendy specialty shops, reported mediocre first-quarter earnings last week and issued cautious guidance for the rest of 2011. These reality checks confirm that higher fuel costs are hurting cash register sales and signal the imminent demise of the sector rally that began last September.

Denizens of the American shopping mall got the hardest, with Gap , Limited , Aeropostale , Sears , JC Penney , Chico's FAS , Buckle , Hot Topic and Casual Male all selling off after their reports. Strip mall favorites also got blasted, sending Dick's Sporting Goods , TJ Maxx , Staples and Target to lower ground.

What could turn around this rapid deterioration and get retailers back onto the rally tracks? That's simple, because the majority of guidance reflects the longer-term impact of high pump prices, which might not materialize because the commodity bubble has finally been broken. Indeed, if crude oil sells off to $85 this summer -- as I suspect it will -- unleaded gasoline will drop under $3 and put that cash back onto the pockets of whipsawed consumers. ...

Click to view a price quote on JCP.

Click to research the Retail industry.


Big Tech Breakdowns

Mon, 16 May 2011 17:00 GMT

A variety of big tech stocks are getting sold aggressively, even though the tech-heavy Nasdaq 100 index has held close to the 2011 high in recent weeks. This stealth selling pressure points to a progressive decline that could gather momentum as we head into the long, hot summer. Traders and investors should decide now how they're going to play this correction in order to avoid emotional decision-making in the heat of battle.

Protective strategies for longer-term positions in the most affected names depend on cost basis and portfolio percentage allocation. For example, if you own a modest-sized Apple position from the $190s or lower, as I do, a summer correction could offer an excellent opportunity to add to this perennial winner ahead of strong performance in coming years.

However, if you loaded up in 2011, your Apple position could soon be underwater, which is a bad place to spend a midyear decline. Or, if the stock comprises more than 20% of your portfolio from any price above $200, a major downturn will cause disruption to your investment plans. In both cases, it might be time to sell a few shares, or to pick up options protection. ...

Click to view a price quote on AAPL.

Click to research the Computer Hardware industry.


Aggressive Trades for Cautious Times

Mon, 09 May 2011 18:00 GMT

Last week's selloff did moderate damage to commodity-based equities, small-caps and hot growth issues, but many corners of the market came through the volatile decline with their strong uptrends fully intact. This selective destruction supports the mid-year correction I outlined in April, but it tells us not to expect a 2010-style "flash crash" or anything other than a garden-variety correction.

In addition, the targeted selling pressure points to the start of a stock-picker's market that could last well into the third quarter. So while the new-highs list will probably shrink in the next two to three months, a new basket of market leaders should emerge and attract steady buying interest. Finding and owning members of this elite group could build substantial profits while the broad indices go into their summer gyrations.

Dow Jones Utility Average -- DailySource: eSignal ...

Click to view a price quote on QCOR.

Click to research the Drugs industry.


Mind Your Mega-Caps

Mon, 02 May 2011 15:30 GMT

Mega-cap stocks led the broader market last week, with a plunging U.S. dollar lending considerable support to all sorts of multinational plays. This superior performance is visible in the Dow Industrial Average, which rose more than 2.5% compared with 1.8% for the S&P 500 and 1.3% for the Nasdaq-100 indices. The venerable Dow is now just 1,400 points shy of its 2007 high at 14198.

Ironically, Dow leadership is a topping sign when matched by a shrinking list of new highs, like it is right now. But it's too early to make that call because other major indices closed the week strongly. However, a reversal that drops the S&P 500 and Nasdaq-100 back under their February highs will raise red flags for downturns that fill the big gaps left behind by Intel earnings on April 20.

I don't want to sound too bearish about Dow components and other multinational plays because they could keep on rising long after the broader market tops out and rolls over. In fact, it's a great idea to lighten up on small-cap and big-tech exposure, taking a chunk of that capital and reinvesting it into the big behemoths that we often avoid during bull market advances. ...

Click to view a price quote on BA.

Click to research the Aerospace/Defense industry.


Safe-Haven Retail Plays

Mon, 25 Apr 2011 15:30 GMT

Retail stocks are trading well in this spring market, but rising fuel prices will likely put a damper on cash register sales in the months ahead. This scenario is a dangerous one; the sector could turn south when the positive data flow turns negative, trapping shareholders encouraged by the first quarter's surprisingly strong results.

A group downturn is likely to affect specialty retailers first, as shopping budgets shift from trendy and fashionable to basic and functional. Of course, such an event may be hard to believe at the moment, seeing that a selection of shopping mall favorites, including Abercrombie & Fitch and Ann Inc. , are now pushing against multiyear highs.

But if you take a step back from these popular shops, you'll find that many specialty retailers have been struggling in recent months. For example, Gap , Urban Outfitters and Aeropostale are all trading well under their 2010 highs, stuck in holding patterns that reflect encouraging but mixed monthly sales results. ...

Click to view a price quote on DDS.

Click to research the Retail industry.


Safer Bets in Health Care

Mon, 18 Apr 2011 15:30 GMT

The medical devices subsector offers exposure to the health care industry with less risk than biotechs and more protection than insurers against the government reforms that will dampen profits in the years ahead. As an added bonus, compared to their biotech cousins, it takes less time for these innovative companies to jump through regulatory hoops and get new products to market.

This is a diverse group that includes surgical, imaging and therapeutic devices. A few well known blue chips, such as Nasdaq 100 component Intuitive Surgical , dominate the sector list, but small-caps flying well under the radar make up its vast majority. This allows market players to focus on growth, safety or a combination of both elements when taking positions.

However, sector exposure isn't risk free because device sales depend on medical center budgets that tend to match broad economic cycles. For example, both big and small clinics cuts costs severely after the market crash in an effort to get their financial houses in order. Another downturn could undermine the group, although cutbacks should be less severe than in better known cyclicals. ...

Click to view a price quote on ISRG.

Click to research the Health Services industry.


It Could Pay Big to Think Small

Thu, 14 Apr 2011 16:17 GMT

Although big banks garner most of the financial headlines, regional banks offer more diverse investment opportunities because not all parts of the country suffered equally when the housing market collapsed in 2008. In addition, many of these smaller operations utilized more conservative lending practices and therefore maintained stronger balance sheets through the crisis.

A Thrifty Proposition By Sham GadSolid Charts in a Rocky Sector By Ken ShreveAll That's Needed for a Financial Breakout By L.A. LittleBig Bank, Little Bank By Tim Melvin



Surveying the Big Banks

Mon, 11 Apr 2011 15:30 GMT

Big banks have been running in place for the past two months in a tight holding pattern that has traders, investors and analysts alike scratching their heads about the group's prospects in the second quarter and beyond. That's finally going to change this week, after we get first-quarter earnings reports from JPMorgan Chase on Wednesday and Bank of America on Friday.

Sector confessionals then flood the newswires straight into April 20, when Wells Fargo becomes the last too-big-to-fail behemoth to tell us how things really went in the first quarter. By that time, the impasse between bulls and bears should be decisively broken, with bank indices and exchange-traded funds surging into rallies or spiraling into selloffs that define price action into the summer months.

Although Wall Street loves volatility, the group's hibernation act since February makes perfect sense because key reform legislation has reduced industry earnings and revenue potential at the same time that economic growth has opened new business opportunities. As a result, balance sheets are much better now than they were in 2008, but not good enough to draw in fresh buying interest. ...

Click to view a price quote on C.

Click to research the Banking industry.


Four Fallen Biotechs Strive to Rise Again

Thu, 07 Apr 2011 17:23 GMT

Biotech investors dream about the big payday when, after years of research, trials and data-mining, the FDA finally approves a key drug application. But in truth, most new drugs are destined for the garbage heap of failure, rejected for myriad reasons that include bad chemistry, poor clinical results or dangerous side effects.

A Better Biotech ETF By Don DionRosy-Cheeked Biotechs By Ken ShreveShould You Buy It?: ARIAD Pharmaceuticals By Dave Peltier

We see these blow-ups regularly, when highly popular biotechs are transformed overnight from market darlings into major casualties, yielding catastrophic losses to both traders and investors. Long-term history tells us that this portfolio destruction, rather than being an outlier, is far more likely to happen than a glorious windfall that pays the kid's education and the honeymoon in Tahiti. ...

Click to view a price quote on VVUS.

Click to research the Drugs industry.


Retailers at the Mercy of the Gasoline Pump

Mon, 04 Apr 2011 15:00 GMT

The retail sector is sending mixed messages as we head into the second quarter, with the primary sector exchange-traded fund hitting an all-time high while many sub-components languish in relatively bearish chart patterns. This odd conflict should find resolution in the next one to two months, as consumers and market players adjust to the realities of triple-digit crude oil prices.

We've heard competing theories about how rising fuel prices will affect shopping patterns and business expansion this year. On one side of this debate, Jim Cramer says that demand destruction won't occur until crude oil pushes above $110 a barrel. Some market analysts have struck more cautious notes, saying that gasoline pump prices of $4 or $5 a gallon would undermine the two-year recovery.

Of course, retailers are canaries in the economic coalmine, reflecting growing consumer confidence in good times and nervous retrenchment in bad times. And since the crude-oil breakout into triple digits took place just a few weeks ago, we're still awaiting the bulk of March economic data that will show the early impact, if any, of higher gas prices on cash register sales. ...

Click to view a price quote on XRT.

Click to research the Financial Services industry.


Ending the Quarter in Need of a Correction

Thu, 31 Mar 2011 16:36 GMT

After the strong rally that started in the late summer, which in turn followed reverberations triggered by the "flash crash," I thought the equity markets would sell off in January and enter an intermediate correction. My bearish prediction made sense, because the major indices had lifted into long-term resistance levels that should have held down prices for a number of months.

A Quiet Quarter for Bonds By Tom Graff Checking Up on Financials and Commodities By L.A. Little The Glass Is Half-Full By Ken Shreve Reviewing First-Quarter Insights By Tim Melvin


Click to view a price quote on AAPL.

Click to research the Computer Hardware industry.


Health Care Insurers Need TLC

Mon, 28 Mar 2011 16:15 GMT

Health care insurance carriers have been rock solid in the first quarter, despite a common belief that group profits will diminish greatly under the weight of Obamacare. The sector's resilience may reflect optimism that key reform provisions will be repealed by Congress or overturned by the courts, or just a realization that the carriers will find a way to make up lost income.

In either case, these underloved stocks deserve a second look at a time when it's getting harder to find good buying opportunities. That's especially true because Wall Street now expects the top sector players to grow by 8% to 12% per year in the next five years, despite the overhang of reform. Indeed, it looks like those grim reports on the industry's demise were greatly exaggerated.

Still, careful stock selection is an absolute necessity when picking health care providers because premium increases are politically unpopular and are likely to be denied in certain states, despite a flood of statistics that point to increased industry costs. A few key denials could slow the growth curve greatly and drop one or two of these issues back onto the laggards' list. ...

Click to view a price quote on UNH.

Click to research the Health Services industry.


Think Before You React

Mon, 21 Mar 2011 17:00 GMT

Investors and institutions have pulled a ton of money out of popular stocks and sectors over the past few weeks in reaction to a nonstop flood of geopolitical events. The majority of this capital will rest on the sidelines until the news flow greatly increases risk appetite, but a portion has already found its way back into stocks that should benefit in the new environment.

Cleveland BioLabs (CBLI) -- DailySource: eSignal

You'll find these profitable plays by thinking outside the box and then standing apart from the reactionary crowd. That means avoiding a stock such as Cleveland BioLabs , which took off like a rocket on March 14 because it develops drugs that protect tissue from radiation exposure. Of course, the fear-driven rally flamed out quickly, highlighting the danger in acting emotionally when bad news hits the headlines. ...

Click to view a price quote on TSL.

Click to research the Electronics industry.


Natural Gas Is Back

Wed, 16 Mar 2011 17:00 GMT

The unfolding catastrophe in Japan could finally end the multiyear bear market in natural gas as public sentiment turns against nuclear power. While coal and alternative energy will have a major role in the new power-generation paradigm, it will be impossible to exclude this cheap and plentiful fuel.

The global shift should put an immediate and long-term floor under natural gas prices after the underloved commodity missed out on two energy bubbles and a bull market in equities. While the road to substantially higher prices could be months or years away, the journey has to start somewhere, and even small gains in this humble commodity will deliver high-percentage profits.

Of course, there's huge uncertainty right now -- with geopolitical and humanitarian risk taking a front seat to the selfish aims of stock and futures speculators -- but it's our job to look for opportunities in all kinds of unfortunate incidents. And you've probably noticed that natural gas is one of the few instruments flashing green since the Japanese nuclear reactors broke down on Friday. ...


Japan's Repercussions and the U.S. Markets

Mon, 14 Mar 2011 19:30 GMT

Uncertainty gripped the world financial markets last week, with the major indices spiraling lower in a nasty decline that dropped us to price levels we had not seen since late January. The week started with major anxiety about the Middle Eastern uprising and ended with horrific images out of Japan, following a massive earthquake.

High volatility has buffeted traders and investors for several weeks now, with our focus shifting violently westward on Friday to the historic tragedy unfolding in eastern Asia. While energy, infrastructure and commodity plays may gain new life from the natural disaster, the short- and long-term impact on the broad U.S. markets is far from certain.

Perhaps we can draw conclusions from what hasn't happened yet as the full weight of the Japanese crisis hits the U.S. ticker tape this week. In that regard, pay close attention to the levels I've outlined for these key "tell" instruments, because their behavior, bullish or bearish, will tell us if we're looking at an historic buying opportunity or just a world of trouble. ...

Click to view a price quote on XLF.

Click to research the Financial Services industry.