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Monday Was Only Dull on the Surface

It appeared that not much happened in the market, but let's check the action under the hood.

The Market

Monday was an interesting day – despite being disguised as somewhat boring. First, breadth on the New York Stock Exchange stayed barely positive for the day at positive 25, despite the S&P 500 losing nearly 10 points. I consider that a plus: Whenever breadth outperforms, I like it. For the past four trading days, breadth has been quite good. Whenever there is more than one day with a net breadth reading of four digits – like over positive 1,000 – I call that good. Yet, despite those good readings, the McClellan Summation Index is still flat. Think about that: We have rallied back all that we lost early last week and still the best the Summation Index can do is stay flat.

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Now an up day Tuesday should finally lift it, but at this point it’s been four days already, so it’s lagging in my view. That’s despite the better breadth.

Now let’s talk about the 10-day moving average of stocks making new lows. It has been heading down since about a week before Thanksgiving. I consider that a positive for the market. Monday Nasdaq saw 59 new lows. Ten trading days ago, we had 69 new lows. Eight trading days ago that went down to 50, and it went lower from there. In other words, Nasdaq’s new lows have got to start contracting again or the moving average is going to start rising again, something we don’t want to see.

If we consider the Summation Index and the new lows, then we tell ourselves neither one looks as though it can withstand another downdraft without turning. I think a pullback this week – and Monday was a good day on that score -- will help flesh out charts and improve them. It should also help sentiment get shaken out again.

New Ideas

Walgreens Boots Alliance (WBA:Nasdaq) has given back almost all of its gains since the buyout proposal last month. Should it come down to that $57 to $58 area, I’d be interested in taking a stab on the long side again.

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The Daily Sentiment Indicator (DSI) for Gold is now 27, so another down day or two and it could get interesting again on the long side.

Today’s Indicator

The 30-day moving average of the advance/decline line is overbought.

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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.

When I reviewed Ulta Beauty (ULTA:Nasdaq) about a month or so ago I had said I thought it could get to the $270 area, and it did just that last Friday. So what now? If it can fill that gap back near $245, then I’d probably get interested in it again. I think the base is too small and short, but should it pull back to fill the gap, I think it can make another run to $270, perhaps it would get into that gap over that level.

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Grocery Outlet Holding (GO:Nasdaq) is another IPO name that is trying to form a bottom. Here’s the issue: The lock up expiration is Dec. 17, so you run a risk of selling showing up. If it can get over $34 before then, my view would still be that there could be selling pressure, but it could be kept in check and not run the risk of a lower low. So the next week’s action is key.

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Novartis (NVS) - Get Free Report has rallied from support (in early October when it tagged that uptrend line) to resistance in the mid-$90s. There is a rule that 90% of the stocks that make it to $90 will make it to $100, but if we put that aside, then I would say it is unlikely NVS is going to get through that old high on the first try up there. I’d call the stock a hold as long as it doesn’t break that uptrend line, but otherwise there is no measured target beyond that old high on the chart, a few bucks from here.

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