Monday’s Intermediate-Term Report
It seems
appropriate that a farm products company makes the grade this week–’cause
this cautious bull feels like it might be the time once again for the ‘mooove’
into some quality growth names that are close to triggering out of weekly bases.
The past five sessions were negligible on a closing basis as far as the Nasdaq
Composite, with a fractional loss of .10%–while the broader S&P was able to
muster up a 1% gain. But, don’t let the numbers fool you–because with a solid
technical pullback in place, it’s time for cautious bulls everywhere to be ready
to trade within the market’s ‘confirmed rally.’
We might not get it–that is,
triggers in the growth stock names that are on our watch lists, as well as the
all-important cooperation from Mr. Market, but all we can do ahead of time is be
prepared for the possibility of the high-probability trade materializing in
coming days. Without preparation there can be no high-probability trade.
Whether or not we end up taking a trade, because market conditions may not
ultimately cooperate–is another story that goes beyond our individual control.
At present, with a corrective move to the tune of 6.5% in the Nasdaq
during the two-week pullback from highs in place, it’s our job to be especially
ready to take any high-probability trades that are offered. The lows of the
correction, well inside the 10% defined healthy market threshold for pullbacks,
were also within a solid zone of daily technical supports as evidenced by price,
Fibonacci, and Moving Average analysis. The accumulation/distribution statistics
during the latest 15-day period are in favor of distribution by a 4:1 margin.
While seemingly ominous, this figure is still considered constructive, and (in
one man’s opinion) is actually more of a reason to be excited for a
potential move higher in both our favorite growth issues, and the broader
indices.
My personal interpretation of the
downward move in price on relatively heavy volume was mentioned in last week’s
column. I stated, ‘The past week the market, with its technical pullback did
something akin to releasing the pressure from a balloon ready to explode–it
released the very dangerous raging bull element within the necessary
accumulation mix.’ That statement of course came a week early as we did push
into a lower, stronger area of technical support. During this period though,
with very few growth stocks even looking remotely similar to classic triggers,
preparation did not translate into reckless kamikaze-type trading, but something
more akin to a ‘no harm, no foul’ environment, as the powder should have
remained essentially dry. With more excess taken out of the market in a
constructive manner during this past week—next week holds the promise of
delivering some high-probability trading once again for cautious bulls.
With Friday’s 2% rally off technical
lows in the Nasdaq on lower, below-average volume, and right back into technical
resistance in the form of the 20-Day EMA, the inclination might be for traders
to believe that there is plenty of time to watch for signs that institutional
support for the 10-month confirmed rally is still alive. Remember though, it
doesn’t take much to get the market going after a healthy corrective move.
Indeed, all it would take is one FTD or ‘Follow-Thru-Day’ by institutional
investors to have ‘cautious bulls’ handsomely rewarded for being patient and
remaining vigilant for triggers as they occur in a healthy market environment.
It is our own personal risk
tolerance levels within the market waves that ultimately dictate how well we
fare during both the great investing climates, as well as those that will be
considered less-than-perfect ‘sailing conditions. When the breakouts stop triggering
consistently–it’s time to focus your energies on existing positions. Bottom
line–as technicians, we know where we like to make adjustments, either adding
to, or decreasing our portfolio, but it doesn’t mean that the decision is the
same for every trader. While the markets are sailing high,
we realize that between the peaks, troughs do exist, and it’s always in our best
interest to stay prepared for whatever comes our way. When the time comes that
the indices are ‘precariously’ testing levels of support once again, as they
always do–many of the stocks we watch, will actually be breaking out to fresh
highs, or ready to, from solid weekly basing patterns. All that we can do to
take advantage of the high-probability trade is continue to keep ready, and dare
to prepare for the next quality breakout within the market’s ongoing ‘confirmed
rally.’
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.
| Company Name |
Symbol | 12 Month RS |
Price | Pivot +.10 |
Technical Perspective |
| Cache | ( CACH | Quote | Chart | News | PowerRating) |
83 | 26.66 | 27.43 | 3-Month high level base |
| Guitar Center | ( GTRC | Quote | Chart | News | PowerRating) |
63 | 34.30 | 35.05 | 3-Month Cup & Handle |
| Safenet | ( SFNT | Quote | Chart | News | PowerRating) |
50 | 38.19 | 41.90 | 3-Month base w/ gap pivot entry |
| Silicon Labs | ( SLAB | Quote | Chart | News | PowerRating) |
73 | 50.97 | 55.55 | 3-Month base w/ gap pivot entry |
| Cal-Maine Foods | ( CALM | Quote | Chart | News | PowerRating) |
99 | 37.80 | 41.09 | 6-Week Cup w/ handle entry |
| Thor Industries | ( THO | Quote | Chart | News | PowerRating) |
73 | 30.77 | 32.30 | 3-Month Cup w/ handle entry |
| Skywest | ( SKYW | Quote | Chart | News | PowerRating) |
67 | 20.12 | 20.80 | 4.5-Month Cup w/ handle entry |
| California Amplifier | ( CAMP | Quote | Chart | News | PowerRating) |
97 | 14.80 | 16.97 | 6-Week bullish gap lateral base |
| Integrated Silicon | ( ISSI | Quote | Chart | News | PowerRating) |
97 | 17.63 | 19.97 | 3-Month high level base |
| Arrythmia Research | ( HRT | Quote | Chart | News | PowerRating) |
99 | 36.05 | 38.80 | 5.5-Week triangle w/ pivot entry |
| Dendrite Intl. | ( DRTE | Quote | Chart | News | PowerRating) |
64 | 26.45 | 17.58 | 3-Month Cup w/ gap handle |
| D.R.Horton | ( DHI | Quote | Chart | News | PowerRating) |
79 | 30 | 30.36 | 2-Month lateral base |
| Kensey Nash | ( KNSY | Quote | Chart | News | PowerRating) |
49 | 26.56 | 28.15 | 6-Month Cup w/ handle |
IT Watch List Action:
As always, the search goes on for top stocks meeting our fundamental and
technical criteria, but issues may still show ‘flaws.’ The most common ‘flaw’
being ROE, according to strict IBD-style investing . Always do your own
homework before entering a trade .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 in 000’s |
Pivot |
| Verint Systems | ( VRNT | Quote | Chart | News | PowerRating) |
55 | 25.65 | 7-Month lateral base | 116 | 27.55 |
| Integra Life Services | ( IART | Quote | Chart | News | PowerRating) |
59 | 33.23 | 3-Month lateral base | 269 | 35.09 |
| Closure Medical | ( CLSR | Quote | Chart | News | PowerRating) |
89 | 37.19 | 9-week lateral base | 90 | 39.69 |
Stocks Forming A Handle
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| Marvell Technology | ( MRVL | Quote | Chart | News | PowerRating) |
67 | 42.64 | 3-Month Cup and Handle | 3,091 | 44.74 |
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Recent Breakouts From “Base & Handle”
Lists
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. Due to
additional ‘fresh’ candidates making the grade–stocks on the breakout list will
be dropped after six months or a pullback of greater than 25% from highs.
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| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day in 000’s |
Pivot | 52-Week High |
| Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
78 | 26.94 | 12,334 | 15.85 | 29.37 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
73 | 98.91 | 1,429 | 59.80 & 79.52 |
113.08 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
77 | 85.84 | 2,452 | 59.16 | 88.89 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
63 | 71.75 | 718 | 56.34 | 72.74 |
| Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
84 | 31.58 | 923 | 26.05/30.16 | 35.30 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
85 | 39.88 | 340 | 27.85 | 39.92 |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
52 | 51.51 | 581 | 46.85 | 59.47 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
63 | 65 | 362 | 56.18 | 68.95 |
| St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
69 | 74.29 | 1,292 | 58.89 | 75.30 |
| Biolase Technology | ( BLTI | Quote | Chart | News | PowerRating) |
87 | 19.35 | 760 | 16.13 | 21.39 |
| Cognizant Technology | ( CTSH | Quote | Chart | News | PowerRating) |
88 | 53 | 1,225 | 49.69 | 57.19 |
| NII Holdings | ( NIHD | Quote | Chart | News | PowerRating) |
94 | 95.94 | 354 | 80.70 | 106.48 |
| Magma Designs | ( LAVA | Quote | Chart | News | PowerRating) |
87 | 27.91 | 564 | 24.03 | 28.88 |
| Chicago Bridge & Iron | ( CBI | Quote | Chart | News | PowerRating) |
61 | 30.05 | 220 | 28.60 | 32.50 |
| Mobile Telesys | ( MBT | Quote | Chart | News | PowerRating) |
84 | 99 | 240 | 87.60 | 100.50 |
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 pull backs 36% 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-50 Day |
Pivot | 52-Week High |
| Pacific Sunwear | ( PSUN | Quote | Chart | News | PowerRating) |
70 | 24.60 | 1,645 | 24.66 | 24.99 |
| Sina Corp | ( SINA | Quote | Chart | News | PowerRating) |
95 | 42.51 | 6,003 | 42.04 | 49.50 |