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Expect More Ups and Downs to Come

Let’s take a look under the hood to see what we can expect following Monday’s rebound.

The Market

It was not exactly the liveliest of rebounds, was it? But it’s always worth it to take a look under the hood.

For starters, the Russell 2000 outperformed the S&P 500. That might be the biggest shock of all. As you can, imagine breadth was good not great. Volume was the same, good not great. And Nasdaq had more new lows than new highs for the day.

On the sentiment front, the put/call ratio was a very low 73%, which is not what we want to see on a rebound. We’d rather there be skepticism.

Aside from that, not much changed in terms of the indicators. But the charts are another story. We’ve already discussed the banks, which traded in a very mediocre fashion Monday. Now let’s look at Cummins Engine (CMI) - Get Free Report. I know it’s an odd name, but see how it topped out in early November and once it started down in December it has been a one-way street?

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What I want you to focus on is the rebound today. It’s the most solid rebound this stock has seen in two weeks. Last Thursday, it staged a rebound but had no follow through. This rebound will be no different in terms of watching it, but this is what I mean: At some point these stocks will have to stop going down if we are going to get the market into any kind of shape for a rally that lasts longer than a few days.

The bottom line is I still envision we will see ups and downs in the market, but the sort of concentration in a few stocks that we have seen will have to stop if we are going to have any sort of renewed upturn.

I want to end by noting that the oil stocks continue to get sold, but the Daily Sentiment Indicator (DSI) for oil is now at 16. And it is 17 for Copper.

I also feel compelled to tell you that the DSI for the Canadian dollar. I am using an exchange-traded fund Invesco Currency Shares Canadian FXC (FXC) - Get Free Report, and the chart is now at 10. That means I think it’s getting overdone and especially if it’s down tomorrow I’d buy it for a trade.

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New Ideas

Square (SQ) - Get Free Report finally filled the gap Monday when it got up to $80. There is a measured target around $82 or so, but I’m in favor of taking some profits on this gap fill. Square is expected to report earnings later this month.

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I am still waiting for WorkDay (WDAY:Nasdaq) to get itself up and out of this pattern it is trying to breakout of. It's slated to report early next month.

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Today’s Indicator

The 30-day moving average of the advance/decline line is not yet oversold.

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Q&A/Reader’s Feedback

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

If Helmerich & Payne (HP) - Get Free Report could get back over $42, I would like it a whole lot more. Notice how Friday it didn’t make a lower low; I like that. But then Monday comes along and it can’t rally. That makes me fret that it is just consolidating before it heads down again. So getting over $42 is key, because that reclaims the breakdown and makes this a false break. HP reported Monday.

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I still like Jetblue (JBLU:Nasdaq), because right now it still appears that this is a natural pullback to the breakout. I would change my mind if the stock fell significantly under that $19.50 level.

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NIO (NIO) - Get Free Report is OK, as long as it stays over that line that comes in around $3.50. I suspect that pike high at $5.50 will be problematic on the next rally though. It's slated to report early next week.

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