Sam Collins, InvestorPlace Chief Technical Analyst
New York, Feb.15, stock picks .- Stocks closed mixed Thursday, despite a resurgence of buying in the energy sector and a huge day for mergers and acquisitions. And despite the almost boring tape action, the Russell 2000 small-cap index closed at a record high and the Nasdaq confirmed a new 12-year closing high.
H.J. Heinz (NYSE:HNZ) jumped 20% after agreeing to be acquired by an investment group, which includes Berkshire Hathaway (NYSE:BRK-B) and a private firm. And US Airways Group (NYSE:LCC) and AMR Corporation (OTC:AAMRQ), parent of American Airlines, settled on a merger.
At Thursday’s close, the Dow Jones Industrial Average was off 10 points at 13,973, the S&P 500 rose a point to 1,521, and the Nasdaq gained 2 points at 3,199. The NYSE traded 672 million shares and the Nasdaq crossed 426 million. Advancers and decliners were even on the Big Board, and on the Nasdaq, advancers were ahead by 1.2-to-1.
The Nasdaq finally overcame the three barriers to a further advance by surmounting this week’s closing high of 3,196.89 and last September’s high of 3,196.93. MACD ended in bullish territory, but volume and breadth were nothing to write home about.
It may not have been an ideal breakout, but at least the index is now in open territory. Now we will see if it can capitalize on its gains.
While the Nasdaq has been struggling to inch ahead, the midcap stocks, as illustrated by the S&P 400 MidCap Index, have had their after-burners ignite and are making new highs almost daily. The index’s MACD is in bearish territory but is moving sideways, which questions the further sustainability of such an extreme angle of advance.
Like the S&P 400, the Russell 2000 small-cap index has an extreme angle of advance. However, a further advance in this index is supported by an upward-trending MACD. This tells us that the advance could last for at least several more days. But small-cap positions should be protected with tight stop-loss orders.
Conclusion: The Nasdaq’s struggle hasn’t been pretty and neither has its “breakout.” However, it has been burdened by the breakdown of Apple (NASDAQ:AAPL) and several other highly visible negative performers, while the junior indices have been flying north. Speculators and traders should either nail down profits or use trailing stops to protect their hard-earned gains, since nothing goes up forever.
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