Stock of the week: Rocket Fuel

I'm going to feature a new stock of the week as often as possible.  Let's dig in.

After stellar earnings Rocket Fuel (FUEL) traded up ~25% at one point Thursday.  What really interests me is on Wedneday Intel took a small 1.5% stake in the company.  Before that news, I sort of just figured FUEL was some all hype no substance junk just based on how it traded.  I doubt i'm alone in that assessment.  Now, with a reliable chip maker like INTC betting on them, the business seems pretty legitimate.  

This isn't to say just because of Intel the company has legit prospects now(who knows), just that it does alter our perception in a meaningful way.  

Just a few deets on the business: the revenue growth is strong at about 60% clip Y/Y last quarter, operating cash flow is improving but still negative, and the margins are dropping.  

We see the nice wedge base that had developed since August.  The breakout measures to 23 and there is an open gap in the 24's.  It's worth noting there are only 30M shares floating with a pretty size-able short interest.  That said, another rip higher could lead to another share offering.

I'd like to use further weakness closer to the breakout area to get long trading against the gap or pivot points.

Trade 'em well

Rotation Report: ice out

The move of the week was Nat Gas after gaining a cool 13%.  The weekly MACD crossed positive here and is still quite oversold.  There sure seems like there is more upside coming throughout the winter.  BTW, it's f****** cold here in the midwest!

Shifting to the Equity markets, VIX term structure continues to probe further into the toppy zone.  Given the sideways action in most of the indices, bulls would've preferred to see this measure pull back.  Well, we've got a LOT of bulls now and some need shaken out.

The Microcaps have stalled out at resistance.  All the moving averages are amazingly flat

Alibaba has been very strong as it rides the upper bollinger band higher, and now it seems like weekly they are announcing smart business moves.  It's an obvious dip buy candidate.

Long term treasuries are trying to base out at a long term pivot level.  The market is healthy even though the large tail is ugly.

Groups


The broad biotech ETF briefly broke above the spring highs.  At the same time this popped out of the rising channel.  It's worth watching the next move here.  It may want to test the channel's lower boundary in the high 140's.

We can also see a rising channel in the XBI relative strength.  Note the lack of new RS highs.

Energy Producers are trying to break meaningful resistance.  Note RS already broke out.

Shifting to the internals of broad energy ETF XLE, we see the Advance-Decline line is breaking higher over the same resistance faced by the group.

We also see XLE relative strength breaking a 2 month downtrend.  Money is rotating to the group.

The Natural Gas Index is testing it's falling 50 day MA and upper bollinger band as RS broke short term resistance.

Lest we forget the Miners.  The whole mining group is seeing plenty of buyers in broken stocks.  There volume last week was insane!  

The consumer ratio is testing a long term support line.  Will it hold or fall out of bed?

Retail really started to show strength last week as shown via XRT RS.

Home Builders broke resistance from the start of the year.  Is that a monster ascending triangle in the works?  

INTL

Brazil found buyers at the 618 fib retrace.  The election lows at 39 are BIG TIME.

Japan is at a key confluence.  Is QEinfinty going to help Japan?  If you think it will, here's your shot

Currencies

The Dollar is reaching resistance and the RSI is forming an M that occurred in prior equally strong rallies.

The short yen ETF met it's measured move last week.  The whole weekly candle is outside of the upper bollinger band.  Maybe it's due for some rest.

Commodities

Oil found support at an old major pivot in the 76-77 area.  It's hard to be negative with this next support here.

Trade 'em well!

About high yield bonds

After now breaking out of the range this week, we can say with meanigful certainty that this was a false breakdown in the junk corporate to investment grade corporate bonds ratio.  This is a bullish sign from the bond market.  

We're going to hear a ton about how high yield isn't making new highs with equities.  What matters more in the immediate term (at least to me) is how this ratio handles the orange resistance line and the September high if it gets there.  If anything, that might be when the equity rally stalls.

Also note the action in HYG itself.  We can go ahead and ignore those bad ticks.  It's a bullish consolidation until it's not.  Note how the HYG almost always lags SPY when SPY goes up.

I'll be talking more about this as it's likely becoming a day to day thing worth monitoring over the next week or two.

Trade 'em well

A biotech spec in genomics

AFFX is an interesting genomics company.  They don't have gangbusters growth yet, but they do have one segment growing quickly.  Who knows if they grow up and reach their full potential, but this chart is a beauty on a longer timeframe.  

As we can see this huge continuation pattern comes after making higher lows and breaking a 4 year falling channel.  This is one of the types of setup I work for.  I can see this stock in the mid teens by the time spring rolls around.  Maybe we get a pullback or some consolidation at these old highs first. who knows.  

Trade 'em well!

Discretionary

It was a huge break down in consumer discretionary relative strength this week.  No doubt, it is UGLY.

This is something that has been building for quite awhile.  A new factor here might be this new ice cold weather that's popping up on forecasts for the next couple of weeks.  Nat gas prices have actually jumped about 20% in seven trading days.

We know the farmers almanac suggests this will be another rough winter.  Remember how much 'weather' effected last year's holiday sales?  The market may be starting to price that in now.  

There are a couple of factors that make me think that holiday spending isn't going to be dreadful and actually has decent potential.  Be sure to check out my latest See It Market piece.

In short, we've clearly got some broad consumer weakness now, but we may be setting up for some upside surprises from holiday spending and the consumer is far from dead, just more cash strapped and responsible

Trade 'em well!