Top Trade Ideas for Week of January 10, 2011, #1-5

After looking at over 700 charts, I have found some good setups for the week. This week’s list contains 9 long ideas, and 2 short setups, the first five of which are below, to get you started early. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which looks like more pain for long holders of Gold and Treasuries, but brighter for the US Dollar index and Crude Oil. Emerging markets look better higher with perhaps a slight pullback. Neither the Chinese market nor the Volatility Index look to play a factor in influencing the US markets. SPY and QQQQ look like the best of the US market Indexes, with strong bullish charts where as the IWM may need to pullback some before it can join them higher. A review of the sector charts within the equity markets shows the Winners to be Industrials, Technology and Health Care and the Losers on the Battlefield to be Materials and Consumer Staples, a clear rotation, with the rest battling at the Front Lines for the time being.

(As always you can see details of individual charts and more on my twitter feed and on chartly.)

Here are the first 5 ideas for the week:

1. Caterpillar, Ticker: CAT

Caterpillar was a big winner on the last move up and has been in a bull flag for three weeks now after that move. The Relative Strength Index (RSI) has worked off its overbought condition and the Moving Average Convergence Divergence (MACD) indicator is leveling and starting to improve. Translation: It looks ready to explode higher again. Based on a symmetrical measured move from previous price action look for a target of 110 when it moves above 95.

2. Radian Group, Ticker: RDN

Radian is breaking out of a descending triangle and found some resistance just below the 200 day Simple Moving Average (SMA) near 9.25. The inside candles from the last two days suggest consolidation for another move. With the MACD improving and the RSI well below trouble territory I look for that move to be higher. Above 9.25 it will see resistance at 10 from the November high and then 12.00-12.25 from the prior resistance in March a and the gap in May.

3. Silver Wheaton, Ticker: SLW

The Doji star Friday with big volume may spell the end of the bleeding for Silver Wheaton. It needs to be confirmed with a move higher, but with the RSI starting to level this could happen very soon. It will meet some resistance at the 50 day SMA at 35.65 and then next at around 40. 33 would be a good place to put a stop.

4. Jazz Pharmaceuticals, Ticker: JAZZ

Jazz has been in a bull flag for several weeks and has now worked off the overbought RSI condition. The signal that it is ready to move higher will be the MACD beginning to decrease. It is already leveling. Watch also for the price to move over 20 on strong volume. This would create a target higher on a measured move of 22. This is at all time highs so there is clear air higher above that. Watch it run like a city dog let loose in a country field.

5. Valeant Pharmaceuticals International, Ticker: VRX

After a strong move higher Thursday Valeant printed a shooting star Friday and nearly a Gravestone Doji. The RSI has moved to a relatively high 83, signaling an overbought condition as well. On confirmation of the shooting star, by a move below the close Friday, look for it to head lower with a target of 31. 36 could be used as a stop.

#6-10

Bonus Idea

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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