Going Our Way

Welcome to this week’s edition of The Growth Stock Report!

Traders,

It was a stellar week for us!

Our current position:

VERY CAUTIOUS, USE SMALL PROFIT TARGETS!

In this week’s edition you will find:

Where We Are:

We had an agreeable week with the market as new highs in commodity and energy stocks helped our recent breakouts.

Metals USA (MUSA), highlighted in last week’s edition, stole the show while posting over a 20% gain from its breakout buy-point.

We believe it’s wise to take off half of a position after a 20% gain no matter what. We believe there is still potential MUSA for the intermediate-term.

Mannetech Inc. (MTEX), gave us a healthy breakout and has now moved 10% higher from it’s buy point.

Also breaking out, Palomar Medical Technologies (PMTI) gave us a decent move, though did not put up the volume consistent with institutional sponsorship. We like the stock, though will be quick to exit if things should turn bad.

From the sizzling commodities sector, Steel Dynamics (STLD) continues to look good, though still shy of a 20% target at 47.77.

And our energy picks KCS Energy (KCS) and XTO Energy (XTO) are alive and well, both short of 20% targets at 18.10 and 43.68 respectively.

The major indexes look strong at present, as the Dow and S&P 500 are poised for new highs:

Charts courtesy of Stockcharts.com.

Technically speaking, cup-and-handle patterns on the Dow and S&P 500 certainly look and are bullish. We continue to hold reservations about longer-term upside potential for U.S. equities. Breakouts can lead to fakeots, but as always we will trade what is and not what should be.

For the Nasdaq 100 we need to see its 5-week range taken out to the upside to feel more comfortable over the potential of the market as a whole.

We are watching closely for institutional support at these levels, and are looking at last Monday’s heavy selling a possible precursor to more.

Also tilting the bullish side of the scale:

  • Banking Stocks ($BKX) put in a bullish tail on a 10-month trend line.
  • The Semiconductor Index ($SOX) is just shy of taking out last weeks high, and looks to be in good shape as it remains north of a longer term trend line.
  • Internet Stocks ($IIX) are challenging a critical long-term trend line. This is a key sector as goes enthusiasm for the market – we gauge it as a sentiment indicator.
  • Pharmaceuticals ($DRG) broke a 10-month trend line to the upside.
  • Homebuilders ($DJUSHB) put in a stellar weak and are looking parabolic after taking out its upper channel line. This is very consistent with the pattern of a climax top – where it stops nobody knows.

Volume: Monday’s heavy distribution is a sign of caution.

Leadership: The top 10 industry groups from the 6 month RS screen are:

OIL GAS DRILLING EXPLO

STEEL IRON

RESIDENTIAL CONSTRUCTI

INDEPENDENT OIL GAS

RESORTS CASINOS

HEALTH CARE PLANS

OIL GAS EQUIPMENT SVCS

MULTIMEDIA GRAPHICS SF

INFORMATION DELIVERY S

INDUSTRIAL EQUIP WHOLE

New Highs vs. Lows: The number of new highs on the combined NYSE and Nasdaq exchanges continue to indicate healthy upside sponsorship with the new lows in tech stocks picking up some.

What We Like:

We continue to favor commodity and energy type stocks.

For a more aggressive small-cap play, we are looking at Vaalco Energy (EGY).

Potential breakouts in the energy sector are Petroleum Development Corp. (PETD) and Houston Exploration (THX). What we don’t like about these stocks is that they are technically lagging the energy sector.

Patience pays in this game! We feel it is always best to wait for nothing but the best circumstances for our money. This means sitting tight while healthy technical pictures take form.

What Was Important About Last Week:

  • Consumer Confidence remains steady.
  • Home Depot (HD) put up a disappointing earnings report and was met with selling pressure.
  • The consumer price index came up with nothing of concern for the market.
  • Federal probing into Fannie Mae is uncovering issues related to book-cooking.
  • Viacom (VIA.B) reported solid earnings. The stock sold off.
  • Durable goods orders fell 0.9%.
  • The U.S. economy grew at its fastest rate since 1999 for the second half
    of last year with a 3.8% increase.

What We Are Watching For This Week:

Key earnings releases:

Many pharmaceutical companies will be reporting this week.

  • MONDAY: Tiffany & Co. (TIF)
  • TUESDAY: Ford Motor (F)
  • WEDNESDAY: XM Satellite Radio (XMSR)
  • THURSDAY: Hovnanian Enterprises (HOV), Shuffle Master (SHFL)
  • FRIDAY: Ceradyne (CRDN)

On the economic front we have potential market movers with:

  • MONDAY: New Home Sales, NAPM- Chicago
  • TUESDAY: Construction Spending, Vehicle Sales, ISM Manufacturing Index.
  • WEDNESDAY: EIA Petroleum Status
  • THURSDAY: Jobless Claims, ISM Non-manufacturing, Productivity and Costs
  • FRIDAY: EMPLOYMENT SITUATION, Consumer Sentiment, Factory Orders

This Week’s Scans:

SETUPS

BREAKOUT WATCH

BASE BUILDING

SHORTS

This Week’s Word On Discipline:

“Being ignorant is not so much a shame, as being unwilling to learn.”
— Ben Franklin

DISCLAIMER: Past Performance Is Not Indicative of Future Returns. All commentary provided by The Growth Stock Report is for educational purposes only. The analysts and employees or affiliates of The Growth Stock Report may hold positions in the stocks or industries discussed here. This information is NOT a recommendation or solicitation to buy or sell any securities. Your use of this and all information contained in The Growth Stock Report is governed by the Terms and Conditions of Use. Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not represent that it is accurate or complete, and that it should be relied upon, as such.

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