TCM Notes : 5/19/09

• Sell in May and go away, eh? Not so fast. Mr. Market is not done yet. We reclaimed the 9dma in all the indices. We'll need to make a higher high to truly recharge the uptrend, but Monday's action was encouraging. The Nasdaq closed above it's 200dma which had been offering resistance for several sessions. The one caveat : lower volume across the board. This hints at institutional money not widely participating. So there's that, but as Doug Kass points out pension funds are underweight equities and overweight fixed income. A re balance is in order and their buying power can push indices to higher highs. Moving forward we still have the moving averages and retracement levels underneath us for support. The trend still remains up, so trading with it remains to be the safest avenue.
• Going through a few charts on some IBD names and THOR has been one that has been persistently on their screens for over a year. Looking at a daily chart you will not see the selling pattern emerging, but flipping over to a weekly chart you can see it. A huge Head & Shoulders pattern. It looks to have just put in the right shoulder of this pattern. Now many will say it's not a H&S pattern until it breaks the neckline. If you wait for that you miss all of the move in my opinion. Neckline looks to be about 22 to 24 depending on your interpretation of the pattern. Downside target could be as low as 16. Out of the money puts would be one way to go at this one. 31.20 would be the stop to the upside as a high above that would eliminate the pattern. With a PE of 61, P/B at 3.46, P/S at 5.02, Revenue of 300+m, and a market cap of 1.5B......this one is overvalued based on the same metrics of it's industry peers. Another catalyst that could make this materialize would be abandonment of THOR by IBD momentum chasers. They do it every time.
• As noted in my twitter feed Monday, UYG traded back above it's 23.6% retracement level of 3.98. This level should provide support moving forward. It helps the cause that GS put BAC on their conviction buy list along with several other large banks that comprise the index. XLF, the proxy for UYG, is $1 away from it's 2oodma of 13.30. A move above that level puts 14.48 in play. For UYG to get to it's 200dma we would be looking for another 100% upside. This is entirely possible as stocks that fall over 80% have to make moves in excess of 400% just to get back to even. So don't be fooled by those that say, "but it's up over 200% from it's lows!" They're just pissed they didn't buy the low. Trust me because I'm one of them! Armageddon is not coming. Those that claim different are late to the party. Things are still messed up though, but the market looks past that.
• AIPC did break it's neckline on a H&S pattern. Selling volume has picked up so this one could get down and potentially violate it's 150/200dma supports. 16.84 gap fill would be the ultimate target on that one. That might be a long shot though.
• I'm ashamed I never mentioned QSII or CERN earlier in the year as a trade on digitizing medical records. Both are making breakouts again from higher levels. While those may be too lofty to chase two other names in this space could play a game of catch up. The "tide lifts all boats trade." MDRX and ECLP both look like decent weekly chart candidates. They are up against major resistance levels now, that if broken, could lead to several dollars of upside. Don't think it's worthy of a pairs trade by going short QSII or CERN because both look strong on a monthly chart.
• Pivots for SPY, UYG, and SSO for Tuesday are : 90.38, 4.10, and 25.33.