August 23rd, 2008

Trade While You Wait: ARLP, ORA, CY, FSLR, SOLF

Is it base-building or right shoulder of a elongated head-and-shoulder top? No one knows and we won’t know for sure until and unless we either go up 5-6% to cross above the 180-day moving average or down 6-7% to cross under the trendline at the neckline. The weight of economic and political backdrop points towards the latter (further moves down), I’d say:

One look at this chart explains why trying to figure this market has been so difficult since last summer when the market first crossed the 2000 Tech Bubble All-time High trendline. The decline was just over 20% (a Bear Market) and everyone wants to believe it’s over but nothing yet confirms that it is – especially when we see market volume declining daily as the Index moved up. I’ve been writing about this elongated top formation since July 7, or nearly 2 months. Because I’ve changed the slope of the neckline, I’ve moved the bottom further down to 925-45 from 1027 (for those interested, 945 happens to be significant as the neckline of the 2002-03 bottom!).

There’s a long way to go before we hear an all-clear signal and the market can be very boring (and treacherous) for traders. While mostly in cash, double shorts and precious metals (ouch!) waiting for the bottom, can try some longs as opportunities present themselves. One such opportunity again seems to be the alternative energy stocks like solar, coal and geothermal:

  • ORA (Ormat)
  • FSLR (First Solar)
  • SOLF (Solarfun)
  • CY (Cypress Semiconductor)
  • ARLP (Alliance Resource Partners)
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