Stock Trading Ideas Of The Week

Last week the market continued its march towards the highs for the year. Its a slow march with nearly every daily high and low being re-tested in the following days but there is no sign of retreat. The Dow Jones is within striking distance of the 2010 high and the S&P and Nasdaq aren’t far behind. So the question now is what will happen once the highs are reached.

The initial reaction to the G20 meeting over the weekend was a drop in the US dollar however, it recovered and shows signs of wanting to push higher. Continuation of the short term bounce in the dollar, which started last week, would put pressure on the market. Longer term however, any “quantitative easing” by the Fed should drive the dollar lower and relieve that pressure. The dollar index could find resistance around 79.00 and then again at 80.00.

We also have signs of shorter term weakness in crude but longer term strength. On the weekly chart of USO we have a bull flag pulling back to the 20 week moving average. On the daily chart the shallow pullback within the flag shows as a double top and a possible lower high. So as with the dollar, we could see some short term (daily) pressure on the market from crude, but weekly charts look higher.

Southwest Airlines (LUV) gapped up last week after probing below the 20 day ma and testing its daily uptrend line. Transportation stocks have been among the stronger sectors recently, and airlines have done particularly well. The lower volume consolidation on LUV after its gap gives a well defined swing trading opportunity, with an entry over Monday’s high ($13.57) and a stop under Friday’s low ($13.30). First target would be Thursday’s high ($13.83) although some profit could be taken around 13.70. Next target would be the high for the year at $14.16.

Steel stocks have been showing relative weakness to the market and many of them gapped down on Tuesday morning based on expectations of lower prices and weaker sales. Both US Steel (X) and AK Steel (AKS) gapped below daily support levels and have room to drop. X could be shorted under Tuesday’s low ($39.78) or intraday under $40.40 from the 60 minute base. Intraday target would be $39.80, while swing targets could be at $38 and $37.

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