Small-caps continue to lead the market higher, and tech stocks are back in rally mode. I expect the Nasdaq and Russell 2000 to continue to pave the way for higher highs. The Financial Select SPDR (XLF) and Market Vector Biotech ETF (BBH) are additional clues to watch for to confirm strength or a sudden sign of market weakness.
For now, though, momentum seems strong as the suit-and-ties are once again late to the party and could get antsy to play catch up. Traders and mutual funds managers could open new positions over the next three days to show they were fully invested for 2014 and for 2015’s books. The bears still need to be respected following the December lows, but the warnings signs I’m watching for haven’t occurred yet. A bear market won’t happen until a break below the 10-year uptrend lines on the major indices occurs, so until then I’m riding shotgun with the bulls into January.
Since tech stocks are surging higher, I want to reiterate a trade I gave earlier in the month that’s still offering traders an opportunity to get positioned with plenty of upside: JDS Uniphase Corporate (NASDAQ:JDSU).
JDSU is among the strongest tech stocks, and on Dec. 3, I recommended that you buy to open the JDSU March 14 calls (JDSU150320C00014000). I got in around 70 cents, but if you missed that trade, with the calls trading around 95 cents now, I still think it’s a good entry.
A mini-trading range has formed, with resistance for JDSU at $14-$14.25. The 52-week peak is at $14.99. Near-term support is at $13.75. A drop below this level could lead to $13.50-$13.25 and the 50-day moving average. A continued pullback to these lower levels would trigger my Stop Limit of $0.80, but given the strength in tech stocks I think it’s more likely the calls will climb to my updated profit target of $1.40.
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