Swing Trading Strategies & Stock Picks Since 2003

Dow Industrial Average

Key Statistics: Mar 19

Open: 10780.00

High: 10819.90

Low: 10694.22

Close: 10732.99

Change: -37.19 (-0.34%)

RSI: 86.05

MACD: 42.39

Strategy

The recent uptrend has taken a pause after long unabated gains for more than a week. There are chances that markets may witness further correction next week as traders may choose to book profit as markets have started showing signs of tiring out, and the indices appear to be overstretched.

Market Commentary

The US stock markets retraced marginally on Friday after making small gains for eight successive sessions. The Dow Jones industrial average slipped nearly 37.19 points, or 0.34% to close at 10732.99 points. The signs of tiring out in the market were evident in market, as S&P 500 shed 0.51% in the session to close at 1159.21 points in the session. Even the Nasdaq composite shed even higher by 0.71%, to close Friday’s session around 2371.7 points.

Friday also brought the quarterly options expiry in which stock index futures and options as well as individual stock futures and options all expire at the same time. However, a wild movement throughout the movement led to a spread over the fluctuation due to same in the entire week.

In the Friday session, 22 Dow constituents out of 30 stocks ended the day with declines, and the other stocks gained with mild gains or almost flat.

The losers in Dow constituents on Friday were headed by Caterpillar, American Express, Chevron, IBM, 3M and Exxon Mobil.

However, Coca Cola, United Technologies, Verizon Communications were the main gainer in the session.

Telecom was the only gaining sector on the Dow, while Materials (-1.0%), Energy (-0.9%), Tech (-0.8%), Financials (-0.7%) were the main losing sectors. The only sector to remain flat in the session was healthcare.

Meanwhile,four additional banks in Georgia, Alabama and Minnesota were closed by regulators Friday, bringing the national total to 37 for the year to date. 

In another major overseas news filtering on Friday, investors were spooked by the Reserve Bank of India's move to increase its key lending rate to 5% and its borrowing rate to 3.5%. The Bric funds and ETFs tracking emerging markets like India were surprised by the move, and shed some gains on Wall Street. The move by RBI to raise repo rate and reverse repo rate came after the WPI inflation almost kissed the double digit on Thursday.

The strength in the US Dollar, leading the Dollar Index to 80.72 led to weakening of some key commodities and commodity stocks in the Friday session. The energy stocks remained weak throughout the day, in wake of the same.

The smartphone maker Palm plunged 29% Friday after reporting a steeper-than-expected quarterly loss after the close of trade Thursday. Palm also said that a big build-up of inventory will drag on current-quarter revenue.

The major advancers from non-index stocks Titanium Metals shares jumped 3.4%. Ross Stores was up 3.7% after it announced late Thursday that its fourth-quarter profit rose to $1.16 a share. Lloyds Banking Group shares soared 9% after the bank said it expects to generate a profit in 2010, due to improving bad-debt charges and falling costs.

However, apart from Palm, the major losers included A.P. Pharma plunged 41.2% after the pharmaceutical company received a letter from the FDA that indicated questions remain about its treatment to prevent side effects of chemotherapy. Sun Power Corp also shed 14% after it indicated that its earnings for 2010 may remain sluggish at $1.25 a share, well below the analysts’ estimate of $1.65.

During the Friday session, the gold deliveries for April weakened to $1107 after the strength witnessed in US $.

Crude futures for April also closed at least $1.07 lower at $80.42.

The Day Ahead

No major economic indicators are to be released on coming Monday.