Daily Stock Pick of the Day - Tues., Oct 12, 2010

Stocks closed flat today, but the Dow did make it back above 11,000 after dropping late into the day. Volume was light ahead of a big week of earnings announcements.  The Dow rose only 2 points, or 0.02%, to close at 11,008. Friday marked a psychologically important day when the Dow closed above the 11,000-level for the first time since early May.   The S&P 500 fell 0.1points, or 0.01%, to 1,165, while the Nasdaq rose 0.4 points, or 0.02%, to 2,402. The CBOE Volatility Index, also fell about 8%, below 20.

Most of the S&P 500 sectors fell.  Leading decliners included stocks in the telecom, consumer staples and consumer discretionary stocks.  Among the commodities, oil prices fell just below $83 per barrel.  Gold made it's way towards $1,350/oz as the dollar continued its decline against other major currencies.

The stock I'm looking at today is Auxilium Pharmaceuticals (AUXL).  They are a specialty biopharm company that focuses on developing and marketing products to a specialized audience (urologists, endocrinologists, targeted primary-care physicians to name a few).  I like this stock because the chart doesn't look overheated.  I think it is sitting at a natural resistance point here at $25.95, but this is right on the 50-day moving average.  Even if we get a small pullback here on low volume, I'd like to see it bounce off the 50-day and return to this range -- and then I think it would make a good entry point.  The MACD and the Stochastics look like this pullback might just occur.  I'm going to keep this on my radar this week.  If it can clear $26, I think it has room to run to the $28 range.

Will the Dow be able to push past 11,000 and into it's next range of resistance at 11,250?  No one has a crystal ball, but I do believe that the upcoming earnings season will be a crucial factor in determining the future drive for stocks to climb higher.  Meeting expectations will simply not be enough -- many companies will have to exceed expectations to give traders and investors alike a reason to park their money in equities. A lot of talk is going on in regards to the possibility of further "quantitative easing" by the Fed.  This is especially important given last Friday's job numbers, but I'm thinking that this expectation is already "baked in" to the market's mentality at this time.  I'm not sure that confirmation by the Fed will spark much in the move upward. 

As always, stay cautious.  In the meantime, have some fun for free at Wall Street Survivor below.  Enjoy!

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