In similar vein to our recent breakdowns blog post below we now look at the groups that are the weakest within the market based on their low FusionIQ Master technical scores.   

As expected given the recent economic weakness it is not surprising to see retail based  groups dominating the worst performing groups.

With plastics and other commodity shooting through the roof it is not surprising that ShengdaTech scored a high volume, short squeeze breakout. With a point and figure target of $ 14.00 and close to 15 % of its float short.  SDTH shares are likely to continue to surge in the coming days.

Devry Inc (DV) which operates higher educational facilities across North America scored a FusionIQ short squeeze and breakout.  Typically higher education companies tend to do well when the economy weakens as enrollments spike as displaced workers seek to retrain or improve their skill sets. With a point and figure target of $ 74.00 DV shares offer good upside potential.

Given the recent market weakness we thought we would highlight some potential short candidates for blog readers to take advantage of profits from a continued market downdraft.  The names list below are mostly stocks that are on FusionIQ timing Sell signals but more important they are also going down on above average volume suggestive of institutional movement out of these names.  Note the list still has a lot of financials in it.

The chart below, which tracks the % of stocks within FusionIQ and where these issues lie within the FusionIQ score distribution range , illustrates that nearly 60% of all issues within the FsuionIQ ranking system currently fall within the lowest (or bearish) decile range.  This distribution skew suggests the market is clearly weak here and defense should be played aggressively until we hit a level of issues in the 0 to 40 range lose to 70 %.

Boeing Co. (BA) gapped down on three times its normal and scored a new FusionIQ breakdown yesterday.  Now while no one can predict the day to day trading swings with a high degree of accuracy, Boeing’s 23 FusionIQ Master Technical rating does give us a fair amount of confidence that BA over time will trade down to our target of $ 50.00.

Our proprietary QQQQ model went to a neutral several days back.  While not infallible its’ shift to neutral does at least raise a cautionary tone for the near term outlook for technology.

Hibbett Sports Inc. (HIBB) scored a new FusionIQ short squeeze BUY yesterday as it broke out on almost 2.5x its normal volume.  With almost 23 % of its float short there is an abundance of future liquidity that can come into the name as  it rises in price.  With a point and figure 36.50 HIBB shares offer good upside return potential.

FusionIQ has powerful pre-canned trading screens.  One of its’ unique trading screens is the high ranked, high volume breakouts.  This screen looks to find stocks that are highly ranked in the FusionIQ ranking system and are also trading up on abnormal volume.  Abnormal volume tends to be a sign of strong institutional accumulation so this screen can potentially identify new leadership stocks.

To see more FusionIQ trading screens become a member by signing up today at http://www.fusioniqrank.com/login.php

The S&L/Thrifts sector of the market continues to make new lows.  We highlighted that the banks were weak several weeks back on this blog.  We suggested then that positive sentiment does not equate to market bottoms and the sentiment among many was that the banks were cheap and should be bought.  Meanwhile the sentiment of the moment was that energy and commodity issues were over-extended.   As the last few weeks have played out we see the banks have gone lower and the energy/commodity names higher. 

Until investors start worrying about the banks(and embracing energy/commodity issues)  instead of embracing them there will be no bottom (or top).

Ion Geophysical Corp. (IO) shares scored a new FusionIQ 100 rating for its technical price strength.  As a provider of seismic data services to the exploration industry IO is likely to see increased use for its services as new exploration will continue to be on the front burner as oil process remain high.  The point and figure target, while conservative at $ 25.50 offers ample upside potential given the groups leadership position.

Trimble Navigation LTD (TRMB), a maker of electronic products, enabled by Global Positioning System technology, broke out on Friday on 5.70 times its 21-day average volume.  The point and figure target of $ 70.00 gives investors plenty of upside potential in a market where strong upside potential is needed in order to risk capital given the tenuous trading of late.

Please find the attached table below which ranks FusionIQ groups by their Master Technical Score.  Although everyone keeps saying the commodity related groups are extended as the table shows they continue to hold the top spots in FusionIQ.  Groups never tend to top when everyone says they "Can't" go higher.   They top when everyone is fully invested and singing the groups accolades.  Again at this juncture the sentiment is still suspicious and not embracing.

The following table of names was created in FusionIQ's powerful custom screener.  We have chosen to look for value issues by choosing low P/E's however where it differs from traditional value screening because FusionIQ then screens for technical strength, so the resulting screen not only finds value but finds value with relative strength. 

The table below highlights stocks that meet FusionIQ's criteria for short squeezes - Short Squeezes as we have stated before offer excellent opportunity as short-term factors line up to bring in excess buying pressure and move prices higher.

Staples Inc. (SPLS – FusionIQ – Master technical score (76)) continued yesterday’s breakout this morning on the heels of its hard-fought battle to acquire the Dutch company Corporate Express (CXP), gaining the acceptance of the board after having increased its bid three times to 1.7 billion euros ($2.65 billion).  Its bid consists of an all-cash offer of 9.25 euros ($14.33) per share, up from 8 euros per share ($12.40) and, still earlier, a bid of 7.25 euros ($11.23), each of which Corporate Express (rejected in turn as too low).

Given the reaction of the share price investors are rewarding SPLS shares and see the acquisition as a major positive.

The Agricultural Chemicals group is still the only area of the market that is acting well.  As seen in the chart and table below we list the issues that make up the group and could continue to move.

The FusionIQ short squeeze screen can generate great short term trading opportunities as excess liquidity drives prices higher in the short run.  Please find attached in the table below new FusionIQ short squeeze candidates.

Lehman Bros. (LEH) raised $ 6 billion in new capital to shore up its balance sheet after suffering $ 2.8 billion in losses.  However as today's price action shows even in the face of this seemingly good news LEH shares are selling off and still on a new FusionIQ timing sell signal.

Tech issues have been acting stronger than the broader market for a few months now.  This looks like a rotational trade out of commodity sensitive issues, which have been leading for several years and back into techs.  In that vein the Powershares QQQQ, a tracking stock for the 100 largest issues on the NASDAQ and a great proxy for techs, remains on its’ FusionIQ BUY signal from May 1^st (see chart below)

Please find in the table below a great example of how FusionIQ’s custom screener can produce targeted trading ideas.  In this screen which we have run on this blog several times we use FusionIQ’s powerful custom screener to find stocks that are on new FusionIQ timing BUY signals but have traded above average volume relative to their 12-day average volume flow.  The screen in essence is looking to see where aggressive institutional trading is occurring.

Washington Mutual Inc. ((WM) – FusionIQ Master Technical Score – 9) shares have been like most financials over the last several months, utterly obliterated.    However just when many people thought the financials were bottoming now many, such as WM, are making new 52 week lows.  The moral of the story is it is hard to catch a falling knife so don’t try, unless of course you worked in the circus in a previous life !!

We still remain negative on the financials across the board so don’t be seduced by the fact they appear cheap.

Newpark Resources, Inc. (NR) a provider of environmental services to the oil and gas exploration and production industry, primarily in the Gulf Coast market broke out again yesterday on very heavy volume.  This was the third recent high volume price spike within the last five days.  Newpark Resources is part of one of FusionIQ’s strongest groups, Oil Field Services, which lends credibility to its recent strength as we would much rather purchase a strong stock in a strong group than a strong stock in a weak group.

With a point and figure price target of $15.25 there is plenty of upside left for NR shares.

We highlighted Marvel Enterprises Inc. (MVL) in this blog several weeks back on the heels of the box office success of Iron Man.   Yesterday MVL shares scored another FusionIQ short squeeze as the Incredible Hulk get set to open nationwide on June 13^th.   Given the success of Iron Man, the Hulk movie is expected to have another tremendous impact to MVL’s bottom line.

The point and figure target for MVL shares remains $ 42.00 so there is still solid upside to position into MVL shares ahead of the release of the Hulk.

Today, our Large Cap Sell Screen identified Lehman Brothers (LEH) as a Sell. It has a current master score of 33 (out of 100) and has an abysmal technical score of 17.  It went to a sell signal back in March around $52, and two weeks later, traded as low as $20.25. It recovered somewhat, flipping to neutral around $44.  

Its now back on a sell signal, with a $20 price target. .

The MidCap Sell Screen found a smaller financial: CIT Group (CIT). It also went on a Sell. Same set up as Lehman Brothers: First sell signal was in March about $16, fell to $6.45 a few weeks later, back to a neutral a month later.   Now, CIT is back on a Sell/Short rating, with a target about 30% lower.

Traders who short stocks should always work with stop losses. The financial sector, with outside investors, have been very volatile, with squeezes occurring regularly.

Construction spending fell again in April as home building continued a more than two-year-long slide.  The Commerce Department reported that construction activity fell by 0.4 percent in April after having been down 0.6 percent in March. Construction has not increased since last September as the building industry continues to be battered by the worst slump in housing in decades.

Private residential housing construction dropped by 2.3 percent in April, the 26th consecutive monthly decline. Private non-residential activity, however, rose by a strong 1.6 percent, pushing activity in this area to an all-time high as spending on shopping centers, office buildings and hotels all showed big gains.

The 0.4 percent drop in overall construction was slightly smaller than the 0.6 percent fall economists had been expecting and the decline in March of 0.6 percent had originally been reported as a larger 1.1 percent drop. Rising numbers of foreclosures are dumping even more homes on the market.

With the exception a few stocks – the attached table shows most issues have bearish FusionIQ ranks.

Marriott said Monday that weakness in the U.S. market will likely drag on what has been a strong performance by hotels worldwide. Chairman and Chief Executive J.W. Marriott Jr. said he would be surprised if anything changed in the second half of the year.

The lodging industry, along with many sectors, has been squeezed as consumers tighten spending due to the continued housing slowdown, eroding credit, rising food and gas costs and recession worries. Revenue per available room, also known as revpar, is a key gauge of a lodging company's performance. Marriott, speaking at events related to the New York University International Hospitality Industry Investment Conference, said the company now anticipates North American revpar growth of about 2 percent, down from its prior forecast for growth between approximately 3 percent and 5 percent. Marriott said he would be surprised if North American revpar strengthened in the second half of the year, citing weaker demand. Demand from weekend leisure travelers is down and midweek demand, bookings that mostly come from business travelers, has begun to soften as well, Marriott said.

With a Fusion IQ master score of only 29 we agree with Marriott that this sector as well as its stock is likely something to be avoided.