Ultimately, new 52 week highs are coming to the S&P 500 within two weeks. Right now with all the fear out there, many people would find this hard to believe. However, it will happen, and shortly. The debt ceiling issues are in the eyes of every politician, media outlet and individual investor. Shorts have loaded the boat. What most people are not aware of, is that the President can raise the debt ceiling on his own if he must. It will not get to that but that is a fall back plan. The U.S. will not go into default soon and within a week there will be a 200 point up day on the Dow Jones Industrial Average when the debt ceiling has been raised.
Having said that, the key is to look for stocks that are still low no the chart but have put in bottoms. Those will be the best plays when the next push higher comes. It appears the financial stocks are primed for a blast off. Bank of America Corporation (NYSE:BAC) becomes a buy if it pulls back into the $9.75 range. The reversal off of earnings was a clear indication of a bottom and any retrace can now be looked at as a buying opportunity in the short run.
Another stock that has put in a nice bottom and is hovering just off its 52 week lows is Cree, Inc. (NASDAQ:CREE). A pull back to $31.50 yields a nice risk to reward swing trade to the upside. This stock has been beaten and should see more upside when the debt ceiling issues subside.
Lastly, a small cap with explosive potential must be mentioned. The name of the stock is Motricity, Inc (NASDAQ:MOTR) and it is trading at $7.10 today. This stock is down from a 52 week high of $31.95. Over 20% of the float is short at this point and the forward price-to-earnings is around 7. This is setting up for a squeeze of the century. Anything in the low seven range looks cheap when the markets break to new 52 week highs.