Swing Trading Strategies & Stock Picks Since 2003

Dow Industrial Average

Key Statistics: Feb 09

Open: 9910.28

High: 10139.43

Low: 9910.06

Close: 10051.53

Change: 150.25 (1.51%)

RSI: 29.79

MACD: -121.45

Snapshot:

·        US stocks zoomed past the 10000 level of Dow Industrial effortlessly on Tuesday to gain over 1.5% by closing to make gains of over 150  points on Dow Industrial Average, as the hopes soared regarding the fact the fact a bailout solution for troubled European countries like Greece by mounting sovereign debts was now on the cards. Dow closed at 10051.53 points, with a gain of 1.52%. S&P 500 also gained 1.31% in the session to close 13.78 points at 1069.69 points.

·        As many as 27 out of 30 Dow constituents gained some ground in the session, while only two other stocks including Merck & Co. and Bank of America shed nominal ground in the session.

·        All the ten sectors forming part of the Dow ended the day with some gains, led by Materials (+2.5%), Energy (+2.0%), Industrials (+1.7%), Consumer Discretionary (+1.4%) and Consumer Staples (+1.4%).

·        Crude for March delivery ended with a gain of around 2.5% or $1.86 to $73.75 a barrel in trading at the New York Mercantile Exchange. The surge on Tuesday came in light of some tensions in Iran and inventory report, apart from correction in US $.

·        Gold for April delivery finished up $11, or 1%, at $1,077.20 an ounce at the New York Mercantile Exchange. The second successive day of recovery in gold futures came after a weakness that persisted throughout the previous week.

·        Amongst the Dow components which led the recovery on Tuesday session, Caterpillar Inc., the largest bulldozer maker of the world, climbed 5.42%, followed by Boeing 3.2%, American Express 2.04%, Du Pont 2.14%. Coca Cola soared by over 2.58% following an upbeat Q4 performance in which its earnings shot up on volume gains in China and India.

·        Amongst the other stocks, Airline stocks rallied, with AMR Corp.  up almost 14% after news that Japan Airlines Corp. would maintain their partnership. Delta Airlines Inc. shares were up 10%, while United Airlines parent UAL Corp. gained nearly 17% after it reported traffic rose in January.

·        Cognizant Technology Solutions Corp. shares rose 6.3% after the technology services provider reported quarterly profit that topped expectations.

·        The Dow is still down 6.6% from its 15-month high set earlier on Jan. 19.

·        Dollar Index, a measure of broad based currency index of US $ against other major global currencies, shed some earlier gains to end at 79.89.

Strategy

Traders and investors should remain cautious, and should take long positions on stock specific basis only at lower levels. Market is all set to test the support level of up to 9700 on Dow in near future after a long gap.

Market Commentary

U.S. stocks rallied on Tuesday, as investors focused on reports Germany was considering a rescue package for debt-strapped Greece. The same is expected to be finalized by Wednesday. Dow Industrial Average Index rallied over 150 points, or 1.51% to 10051.53 point, after soaring to around 10140 points intra-day at one point, as the market participants got some confidence to buy out at low level. Nasdaq Composite also gained 1.17% to around 2150 points, while S&P 500 index pushed ahead by 1.3% to 1069.69 points.

The day started with an optimistic outlook with a gap-up opening, and carried the gains through till the close of session in all the indices, as 27 out of 30 out of the 30 Dow components ended with moderate to high gains, while only two stocks shed some gains.

All the ten sectors comprising part of Dow gained in the session, led by Materials (+2.5%), Energy (+2.0%), Industrials (+1.7%), Consumer Discretionary (+1.4%) and Consumer Staples (+1.4%).

Heavy gains amongst the Dow components were led by Caterpillar, which gained close to 5.4% on an upgrade by Morgan Stanley to “buy” from “neutral”, which also raised the estimated price target of stock to $70 from $51. The same was followed by Boeing 3.2%, American Express 2.04% and Du Pont by 2.14%.

Coca Cola Co. gained 2.58% after robust Q4 earnings, which were made possible due to the strong volume gains of 29% in Chinese and 20% in Indian markets.

Crude for March delivery ended with a gain of around 2.5% or $1.86 to $73.75 a barrel in trading at the New York Mercantile Exchange. The surge on Tuesday came in light of some tensions in Iran and inventory report, apart from correction in US $.

Gold for April delivery finished up $11, or 1%, at $1,077.20 an ounce at the New York Mercantile Exchange.

Cognizant Technology Solutions Corp. shares rose 6.3% after the technology services provider reported quarterly profit that topped expectations.

Airlines stocks gained substantially in the session, which included AMR Corp, Delta Airlines, UAL Corp, the parent company of United Airlines and a couple of others.

The Day Ahead

International Trade Report for December