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Cyclical scenario has Forest/Paper posting gains

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Stocks remain mixed as the session nears its final hour of trading as the Dow Industrials (INDU) tries to hang on to gains at 10,061. Technology stocks continue to lack any amount of prolonged buying as the NASDAQ-100 Index (NDX.X) falls 2.5% to 1,236.91 and threatens to violate Monday's low of 1,228.94.

Even a technology bull is perhaps looking for some other sector of the market to flash a "buy signal" for upside action that would move a bear off his barstool and come in to cover and prop up his technology stocks and one group a bull looks to as a sub-sector of the deeper cyclicals is the Forest/Paper Products Index (FPP.X), which is bucking the broader market action.

Forest Paper Products Chart - Daily Interval

The Forest/Paper Products Index (FPP.X) chart shows similar technicals as that found in January and most likely has some bears looking to move to the sidelines and some bulls active in the sector. A close back above the 50-day moving average could spark further gains, similar again to the January timeframe.

Smurfit-Stone Container Corp. Chart - Daily Interval

I like shares of Smurfit-Stone (NASDAQ:SSCC) as a bullish trade for bulls looking to play in a stronger segment of the market. The point and figure chart of SSCC remains bullish and currently has a bullish vertical count of $25.50. The first sign of trouble on the p/f chart would be a trade at $14.00. Should the stock break the $18.50 level, that would trigger a spread-triple top buy signal. Good risk/reward trade in a stronger sector of the market.

I like the SSCC November $17.50 calls (JJQKW) offered $0.80. No stop and target $24 on or before option expiration.

Jeff Bailey
Senior Market Technician
Option Investor

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