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Stocks resilient and now post gains

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Bears are having a heck of a time getting bulls to cave in and I find myself forced to settle for rather small gains in some recently profiled trades in stocks like Celestica (CLS) $36.69 +2.34% that just won't cave in despite other stocks in the contract manufacturing group giving forward-looking earnings warnings.

There's an old saying that you've got to take what the MARKET gives you, and this week the market has given little. While a $2 bearish gain in a stock trading $36.69 like Celestica (CLS) doesn't seem like much (4.6%) in over a week of following this bearish trade, it's not bad considering the more volatile NASDAQ- 100 Index (NDX.X) 1,486, trades down just 0.7% since last Friday's close. It's tough to "expect" 20% downside moves in a market that is rather range-bound.

Celestica Chart - Daily Interval

I wish I could dictate a nice fat range that the markets would oscillate through. With cash coming out of the Treasury market recently and mutual fund inflows showing some pickup there seems to be cash that is putting some bids under stocks.

I do sense some frustration among subscribers that just aren't seeing some big gains in their accounts this week. One thing I like to do is keep track of the broader market averages and sectors on a weekly interval time frame.

As of today, The Dow Industrials have fallen about 1% this week. the S&P 500 "the market" is down about 1% and the NASDAQ Composite is just about unchanged. You can see there has been very little change this week. Yes, there's been some range, but even at the S&P 500 low from yesterday, that would have been just a 1.9% decline from Friday's low.

This type of "range" makes it more important for traders to trade support and resistance levels. The "best" bullish trader are going to come from stocks that have shown good relative strength that have had some sponsorship and pull back to a level of support. The "best" bearish trades will most likely be found in stocks where relative strength is weak and either "sucker rally" to a level of resistance on short-covering, or break down from a short-term level of consolidation.

One stock I think looks like a good short/put right now is shares of Verizon (NYSE:VZ) $46.52 -1.08%. The stock just broke a level of retracement support at $46.72 and next retracement support is near $44. The stock looks to be breaking down from recent consolidation in the $46.70-$48.70 range. MACD indicator just crossed below the signal at .142 and this type of past action has seen the stock decline over a two-week period.

Jeff Bailey
Senior Market Technician
Option Investor

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