Intermediate Term Report
Personally,
I didn’t view it as a ‘best buy’….Nonetheless, since our last
report there have been some encouraging signs that the ‘IBD’ moniker might be
relieved of its ‘Investors Buying and Dumping’ status. As we close out trade in
Thursday’s session, our ETF friends have put pushed slightly higher within their
almost nine-week and counting trading ranges. The numbers themselves aren’t
terribly exciting, but during this period of consolidation work, it’s what we’re
beginning to see, that strikes our fancy as purveyors of growth stocks ready to
breakout.
From the past week’s action, I’m
finding the first signs that the consolidation work may be leading to an upside
resolution. After three weeks of seeing as many, if not more casualties during
our ‘trading range’ in the ETFs, fresh growth stocks are beginning to emerge out
of solid weekly consolidation patterns. The signs of distribution that were
ominously developing within the market’s consolidation has now faded as the
upper technical supports within our range have held (the July 1st lows). The
distressing institutional signs of non-support for the market have been replaced
by less-than-average trade. That part, as the indices have traded higher within
the consolidation isn’t perfect, but as we weave our way through another
earnings season, we’d rather see lateral, light volume work to bide the time
needed to digest prior gains, over a ‘more flawed’, high volume deterioration
within our ‘confirmed uptrend.’
As stated, new names and others
mentioned in reports past, have started to develop strong looking technical
patterns based on the weekly time frame. Coupled with only one fresh day, of
‘below average’ distribution during the past week in both the S&P 500 and
the Nasdaq Composite, as well as the more encouraging sign of quality stocks
either breaking out (or holding their own during this latest week of
consolidation, rather than breaking down), and we have the makings of something
more interesting than that of just taking profits on existing holdings. It looks
as though we getting much closer than we thought possible, just a week
ago, to the time where we can enjoy buying quality growth issues breaking out of
classic technical patterns.
Before we get too bullish, we have
to remember it’s still early in terms of price and volume. Technically, as
mentioned in the above, distribution is less evident, but if you look at the
leading Nasdaq Composite volume figures, technically there have been 5 days of
distribution during the past 15, qualifying the current environment as an
opportunity to look, but not touch. On that point, we still need to see a day
resembling a ‘follow-thru’ day in order to trigger proper entries. This could
all happen very quickly, or it may not. We don’t have a crystal ball, but when
we see charts starting to set up once again, like we are today, then all we can
do is be prepared for an opportunity, if it does indeed present itself to the
ready, anticipating growth stock trader. When the time is right, meaning a
follow thru day with Institutional style support backing it up, we’ll be ready
once again to participate in a healthy market climate with our stocks selected
for their outstanding growth characteristics, and their ability to weather any
storms that the market has thrown their way by demonstrating quality weekly
patterns within a market that is ‘still consolidating’ in its ‘confirmed uptrend.’
The
technical levels are still in place. For many, the July 1st lows will be the
definitive ‘line drawn in the sand’ for the bullish case, which for the Spyders
was also retested both the 5th and 6th of August. Personally, with my emphasis
on taking profits as the market provides them to us, and through the use of
trailing stops, I tend to gravitate towards a bit of a more creative approach. I
emphasize a blend of trendline analysis, percentage pullback/fibonacci
retracements, as well as what the current environment is for our leading growth
stocks. In my humble analysis, I’m looking towards the May 20th/21st pivot lows
as the technical uptrend supports for both the Diamonds and Spyders. This is
roughly a 10% pullback for both these market proxies, and between the 38 to 50%
Fibonacci supports from the March lows. For the stronger Q’s, I’m looking
towards the July 1st lows as the technical case for the uptrend to remain
intact. This level also approximates a 10% pullback from its highs, and is
confirmed by the 38% Fibonacci support.
As we begin trade on Friday, we will
wait for opportunities to present themselves to us in a healthy market
environment. It looks like we are headed on the right path towards our goal of
pursuing growth stocks out of quality set ups, but I can say with certainty that
this particular trading day will not be ‘the day’ that we’re looking for. With
the East Coast affected by a power outage, we might see more conducive price
action, but volume will definitely be lacking, and therefore today is one day
that we should just sit right back and enjoy the show.
New Category:
Swing Trade Setups: Potential
position plays that are expected to last 2 to 7 trading days, using key
technical levels for entry. These stocks do not necessarily meet all of our
stringent Intermediate Term requirements, but are demonstrating many of the same
strong criteria. Due diligence on the individual traders part is an absolute
requirement!!! Proper money management rules are emphasized in scaling out of
profitable positions, as is, the setting of prudent stop losses, on the
establishment of any positions taken. The list is not maintained on a weekly
basis as trades are considered, at time of entry, short term in nature.
None Today.
| Company Name |
Symbol | 12 Month RS |
Price | Pivot +.10 |
Technical Perspective |
| F5 Networks |
( FFIV | Quote | Chart | News | PowerRating) |
58 | 17.74 | 19.34 | 11 week basing pattern |
| Talk America |
( TALK | Quote | Chart | News | PowerRating) |
89 | 11.62 | 12.55 or 13.53 |
10 week handle consolidation |
| BEA Systems |
( BEAS | Quote | Chart | News | PowerRating) |
81 | 12.63 | 13.88 – 14.08 |
7-Month Saucer pattern |
| Scientific Games |
( SGMS | Quote | Chart | News | PowerRating) |
72 | 9.19 | 10.07 – 10.31 |
17-Month Cup and Handle |
| Manhattan Associates |
( MANH | Quote | Chart | News | PowerRating) |
56 | 27.95 | 29.25 | 13-Week triangle pattern |
| Websense | ( WBSN | Quote | Chart | News | PowerRating) |
73 | 19.99 | 21.46 | 9-Month cup w/ 5-week handle |
Watch List Action:
As always, the search goes on for top stocks meeting our fundamental and
technical criteria. Stocks forming bases or handles are monitored, and put on
our watchlist, and then moved to our position list of recent breakouts, on price
triggers above resistance pivots.
Stocks Building A Base
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume |
Pivot |
Stocks Forming A Handle
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume |
Pivot |
| Kronos | ( KRON | Quote | Chart | News | PowerRating) |
77 | 54.86 | 18-month Cup w/ 6-week handle |
150k | 59.60 or 60.50 |
| Digital Insight |
( DGIN | Quote | Chart | News | PowerRating) |
78 | 21.36 | 16-month Cup w/ 6-week handle |
350k | 22.38 |
Recent Breakouts
We monitor the action of Recent Breakouts as an
indicator of the market health for IT traders. When breakouts are acting well,
this is a good sign for the likelihood of further sustainable breakouts. When
breakouts are failing, IT traders should be even more cautious.
| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-65 Day |
Pivot | 52-Week High |
| Apollo Group |
( APOL | Quote | Chart | News | PowerRating) |
67 | 62.50 | 2,019m | 46.89 | 67.30 |
| Career Education |
( CECO | Quote | Chart | News | PowerRating) |
85 | 87.80 | 855k | 54.40 | 89.69 |
| Coach Inc. |
( COH | Quote | Chart | News | PowerRating) |
80 | 54.70 | 913k | 28.35 | 57 |
| Boston Scientific |
( BSX | Quote | Chart | News | PowerRating) |
84 | 63.50 | 3,861m | 47.65 | 65.98 |
| International Game Technology |
( IGT | Quote | Chart | News | PowerRating) |
68 | 24.44 | 1,356m | 18.71 | 27.11 |
| UCBH Holdings |
( UCBH | Quote | Chart | News | PowerRating) |
61 | 30.44 | 360k | 22.60 | 31.50 |
| Corinthian Colleges |
( COCO | Quote | Chart | News | PowerRating) |
75 | 55.36 | 775k | 43.09 | 56.10 |
| Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
92 | 17.55 | 20,463m | 15.85 | 20.53 |
| Gtech Holdings |
( GTK | Quote | Chart | News | PowerRating) |
81 | 41.33 | 649K | 37.05 or 40.80 |
41.58 |
Breakouts that may
require extra diligence. Those issues that are near pivot entries or 15%
or more, from established highs.
This list accounts for those issues that have performed strongly, but may
require position management due to deteriorating technical condition before
pivot price is reached. If an issue pullbacks 30% or more from highs, the stock
will be removed from our lT lists, so we can make room for more compelling trade
candidates.
| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-65 Day |
Pivot | 52-Week High |
| Endo Pharmaceutical |
( ENDP | Quote | Chart | News | PowerRating) |
79 | 15.23 | 1,025m | 14.98 | 19.45 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
63 | 74.59 | 1,639m | 59.80 | 87.50 |