Welcome to this week’s edition of The Growth Stock Report!

Traders,

The markets were hammered by sellers and we’re looking at a picture of a technical breakdown.

Our current position:

MARKET VULNERABLE TO FURTHER SELLING!

In this week’s edition you will find:

• Where We Are
• What We Like
• What Was Important About Last Week
• What We Are Watching For This Week
• This Week’s Scans
• A Word On Discipline

Where We Are:

Taking a look at the overall markets:

It’s earning season, and so far not even good news can inspire buyers. This is never a good sign.

We are currently in the hunt for short opportunities.

Technically speaking:

The Dow Industrial Average ($INDU), S&P 500 ($SPX) and Nasdaq ($COMPQ) broke long-term trend-lines on heavy volume for the week. This may just be the beginning.

The Nasdaq ($COMPQ) has led the action down and at 1408 it is currently at a key support level. If there is no reversal around the 1400 area we’re looking for a further drop to 1300.

Consumer Staples ($CMR) are showing relative strength while the Cyclicals ($CYC) have succumbed to heavy selling. Traditionally staples have been leaders of later stage bull markets, so if the markets gather footing and put in another upside leg we’ll expect money to be made here.

The U.S. Dollar Index ($DCX) is at a critical juncture as it tests a two-year trend-line. Inversely, Gold Miners ($XAU) have technically broken down.

Key chart action:

Charts courtesy of Stockcharts.com.

The Semiconductor Index ($SOX) is testing trend in that began in January of ’03. Again, we have felt the key to this market is in the semis, so look for leadership here.

The Banking Sector ($BKX) is trend down for the short-term. We have a support level at 92.33.

Retail ($RLX) has also broken down.

Healthcare ($HCX) and Drugs ($DRG) bucked the trend for the week. We’ve had our eyes on these sectors and are liking it even more now.

Homebuilders ($DJUSHB) have also been in decline. We cited a potential top here in an earlier report, though have been pressed to find an inviting technical entry. Patience pays, stay tuned.

Energy ($IXE) sold off with the rest of the market for the week, though we don’t see any indication of a major turn around here. We suspect we will see some more selling here before it gets better.

Volume indications continue to illustrate an environment of institutional selling.

Leadership: The top 10 industry groups from the 6 month RS screen are:

1. DEPARTMENT STORES
2. HOSPITALS
3. RESIDENTIAL CONSTRUCTI
4. HEALTH CARE PLANS
5. INTERNET INFO PROVIDER
6. GROCERY STORES
7. INVESTMNT BROKERAGE-RE
8. LONG-TERM CARE FACILIT
9. RUBBER PLASTICS
10. APPAREL STORES

New Highs: The number of New Highs made droped off for the week while New Lows spiked. The trend here has been bearish for the past few weeks.

What We Like:

Our energy positions continue to be in play. This sector appears ‘tired’. We anticipate more pullback or consolidation.

Healthcare and Drug stocks look attractive. We will be searching for buy candidates here.

Action from our open positions:

STO – sold off on heavy volume this week. This one could turn into a nail-biter. We’ve booked nearly a 20% profit on half a position, and will dump it if it hits our original buy-point of 15.81.

XTO – also sold off on heavy volume. We’ve already made a 20% profit, but will hold on for a loss of no more than 5% (which would be 26.04). We want to give this one a chance and believe a base test might be in store here.

MUSA – major sell-off here. We’re out at breakeven after locking in a 20% profit on half a positon.

As mentioned in last week’s report, we had our eye on Hydril Company (HYDL) which succumbed to heavy selling. Please don’t ever make the mistake of viewing any new names listed as “buys”. We cited a buy-point above 62.80. This one has much to prove before we pull the trigger.

We also mentioned Molina Healthcare, Inc. (MOH) as an ‘aggressive’ buy. Players we’re burned. We continue to like the stock and see a safer buy-point above 48.90.

Keep in mind trading is a numbers game. We want to do everything we can to put the odds in our favor. Aggressive money has it’s risk and reward as does safer money.

What Was Important About Last Week:

• Crude oil sold off to almost $50 per barrel. for the week after Goldman Sachs announce it would hit $105 a barrel.
• The trade gap between the U.S. and the rest of the world is at its biggest in history with the U.S. showing a $61 billion deficit.
• Apple Computer (AAPL) announce it had earned 34 cents a share for its fiscal second quarter, beating Wall Street estimates of 24 cents a share. The stock sold off heavily on the news.
• Leisure favorite Harley-Davidson (HDI) cut its forecasts for the year. The stock was slammed.
• Retail sales rose only 0.3% for March, which is less than half of what economists had anticipated.
• Drug giant Merck (MRK) increased its outlook for the first-quarter to 62 cents a share. Analysts have put estimates at 56 cents share.
• IBM (IBM) announced earnings earlier than scheduled, and reported a disappointing 85 cents a share to expectations of 90 cents a share.
• Jobless claims fell for the week, though the four-week moving average rose slightly.
• General Electric (GE) announced earnings up 25% for the quarter which has been the strongest in years. The company expects growth to continue. The stock was little changed for the week. The stock out in a modest gain, going against the selling trend of the overall market.
• Citigroup (C) said its net earning rose 3.2% due to strong retail banking.
• Factory output for March was lower for the first time in 6 months.

What We Are Watching For This Week:

Key earnings releases:

• MONDAY: Texas Instruments (TXN).
• TUESDAY: Boston Scientific (BSX), Kraft Foods (KFT), Taser Int’l (TASR), Coca-Cola (KO), Viacom (VIA).
• WEDNESDAY: Altria Group (MO), Caterpillar (CAT), Ford Motor (F), Motoroloa (MOT).
• THURSDAY: Amgen (AMGN), Valero Energy (VLO).
• FRIDAY: Halliburton (HAL).

  On the economic front we have potential market movers with:

• MONDAY: none
• TUESDAY: Housing Starts, Producer Price Index.
• WEDNESDAY: Beige Book, Consumer Price Index.
• THURSDAY: Leading Indicators, Jobless Claims, Phily Fed Index.
• FRIDAY: none

This Week’s Scans:

Soon to be updated!

RECENT BREAKOUTS:

SETUPS:

BASES:

This Week’s Word On Discipline:

“Ability is what you’re capable of doing. Motivation determines what you do. Attitude determines how well you do it.” — Raymond Chandler

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