TradeMaster Daily Stock Alerts Blog

Small-cap stocks are expected to open higher, lifted by an extension in the crude oil pullback, solid action in the U.S. dollar and a decent tone on the earnings front. The Russell 2000 (NYSE:IWM) was up about 0.3% in after-hours trading, which suggests a cash open near 719.00.

Crude oil prices continued to slide after Tuesday’s big decline, and were down about $2 dollars a barrel heading toward the U.S. stock market open, with benchmark crude prices around $126.50. The decline in energy levels was tied to ideas that Hurricane Dolly would not threaten a large portion of production in the Gulf of Mexico.

The downdraft in energy prices this week has been accompanied by a resurgent U.S. dollar, which was up about 0.2% against the euro and 0.4% vs. the yen just in front of the stock market open.

On the earnings front, McDonald’s Corp. (MCD) topped the forecast, was up about 2% in after-hours trading and should provide a lift to large-cap index products. Pfizer Inc. (PFE) was up about 3% after solid results, but Washington Mutual (WM) was off about 3% before the opening bell after sloppy quarterly results. Also, wholesaler Costco Wholesale Corp. (COST) was down some 6% overnight after the firm warned it would miss Street projections.

From a technical analysis standpoint, the Russell 2000 should open into, or even through an important resistance test at 717.50. Sustained action above that point puts the next resistance points to watch at 720, then at 726. If the market starts to falter today, then support is at 707.50 and 701. Some intraday momentum studies are actually a little bit overbought, which could stall upside progress, the as you move out in time frame the market clearly has a way to go before hitting overdone levels. It’s worth noting that now the market has hurdled above the 20-, 50- and even 100-day moving averages. The last time the Russell 2000 popped back above the 100-day moving average off a bear market bottom in March, it helped validate signs that a major upside push was underway.

Top Buys

Buy AFAM (prev close $30.50) - Almost Family provides home health care services.

The company operates in one of the strongest emerging industries. The stock has been moving nicely throughout the sell off and we believe more gains are ahead for AFAM.

Buy EBS (prev close $12.77) - Emergent BioSolutions, Inc.is a biopharmaceutical company that develops immunobiotics. Biotechnology is moving its way into the top industry category. EBS has recently broken through $11 resistance on higher than average volume and is still considered a buy at these levels.

Buy LSR (prev close $30.67) - Life Sciences Research, Inc. offers pre-clinical and non-clinical contract research worldwide. Alongside of being part of a strong industry, the stocks technicals and institutional sponsorship are solid. The stock had broken past a buy point, but then retraced and showed support at its old resistance level of $27. It is near its breakout point at $30 and is a strong buy anywhere past that level.

Buy FORR (prev close $33) - Forrester Research provides advice to business and technology customers worldwide. The stock has both strong fundamentals and technicals on its side.

Buy PPO (prev close $28.26) - Polypore International engages in the development of specialized microporous membranes used in separation and filtration processes. Chemicals is not the greatest industry to invest in right now, but the strong technicals shown by PPO give us reason to buy this stock.

Top Shorts

Short CCRT (prev close $7.29) - CompuCredit Corporation provides credit and related financial services and products to the underserved consumer credit market.

Short DTG (prev close $3.48) - Dollar Thrifty Automotive rents and leases vehicles.

ShortCRRC (prev close $16.38) - Courier Corporation engages in printing, publishing, and selling books.

Short LAD (prev close $4.28) - Lithia Motors engages in retailing new and used vehicles and services.

Short MRLN (prev close $6.31) - Marlin Business Services Corp. provides equipment leasing solutions primarily to small businesses in the United States.

TRIGR employs the same methodology to uncover top shorts as used in deriving the top longs, but with a focus on finding the stocks most likely to sell off. A confluence of factors including, but not limited to, shaky fundamentals, institutional withdrawal, and a technical breakdown contribute to a firm making TRIGR’s short list.

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