Monday’s Intermediate-Term Report
Raging ‘bull’
looked more like a lamb going to slaughter during the past week of trade since
our last report. Fractional fresh highs
were established for both the S&P500 and Nasdaq Composite in Monday’s
trade–extending the multi-week rally and the anguish for those that failed to
participate early on in the high-probability trading that started over six weeks
ago as the latest leg within the market’s ongoing ‘confirmed rally’ first poked
its bovine head from a solid technical pullback. The next four sessions began a
history lesson that always ‘bears’ repeating–even during bull markets–the
high-probability pullback (yes, even during presidential election years and even
when institutional money goes wild with unbridled enthusiasm). With the Nasdaq
Composite and S&P500 now having qualified as potential pullbacks within the
established trend, a new kind of bull–that of the technical, cautious bovine
type–can once again go about his business of looking for high-probability
triggers in a much stronger market environment.
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. The Nasdaq Composite put in a solid 5.2% pullback
that pierced the 20-Day EMA, putting in a high-volume pivot low that is
sandwiched between two daily chart Fibonacci zones, and still above both 50-Day
MAs. This action occurred on net distribution days for the week, as well as
putting in the 15-day count in favor of sellers for the first time since our
last latest leg began in earnest back in the first part of December. The
institutional distribution statistics might be of some concern–but in the
scheme of the recent buying binge, and with price ultimately taking precedence
over volume– we are now technically in a much stronger position to move higher.
As growth stock traders we must focus on our lists of potential growth stock set
ups that will once again be breaking out in the coming days, if indeed the
market does maintain its technical composure as a pullback within the
established, confirmed rally.
Personally speaking, this humble,
cautious bull feels we have put in a solid low from which to start looking for
triggers within our list of growth stocks that are in position to move higher
out of weekly bases. The S&P500 has also confirmed the Nasdaq’s pullback with a
2.8% retracement from its own recent highs. We normally expect the pullbacks
within this broader index to be less severe–and that happens to be the case as
of the close of trade. The S&P found technical support on a closing basis above
the its 20-Day EMA while still showing a slight institutional bias towards
accumulation during the latest 15-day period. Coupled with the Nasdaq’s steeper,
but technically sound correction in place–the cards are once again stacked in
our favor, and it’s time to approach the table once again. Putting in a
potential tradable low within the established uptrend is just that. Tomorrow
could change the picture if we were to trade lower–but we can only anticipate
at this time and look for technical lows for which to hang our horns on. If the
market heads lower, and/or potential stocks aren’t triggering–then we wait
until the dust settles, so to speak. No harm, no foul–but you should be
prepared to trade any quality breakouts that may come your way–if we follow
thru to the upside, either tomorrow, or in the coming days.
Other factors that weigh in on my
opinion that a solid low has been established are: 1. The semiconductor sector
put in a 10% pullback from highs that has it closing slightly below both 50-Day
MAs, while finding lows above the 89-Day EMA, and between two Fibonacci zones. I
personally favor this type of hard corrective action, as its the type that is
just a notch too severe for most, as we closed the past three sessions below the
much touted 50-Day MA. Part of the ‘art’ of buying pullbacks is knowing when the
majority have thrown in the towel, while we are technically, and realistically
in better position to move higher. The semiconductor sector, represented by the
(SMH) or the ‘SMASH’ with its inside bar close below the 50’s is setting up in a
potential ‘as good as it gets situation’—in my humble opinion (imho). 2. A
second factor that is telling me to keep my horns up for any potential
opportunities is the fact that the past couple of weeks have on average been
treacherous for growth stock investors–all during a time when the media was as
giddy as a school girl. Some issues from my lists that have ultimately fallen
more than 7% thru their respective b/o pivots (although all did put in healthy
gains initially) include: CRDN, ERES,SNIC, and CMTL. My opinion is
that most of the fault on individual failure to follow thru lies not in the
individual issues–but that each was the result, more or less of market froth.
To those who read this column, it’s been an ongoing message for the past couple
of weeks that ‘bears’ no repeating, and kept ‘cautious bull’ out of harm’s way
and some very nasty claws in many individual cases. Looking ahead though–in a
contrarian sort of way, this action clears the way as the raging bull carcass is
removed from the pavement of Wall Street.
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 |
| AdvancePCS | ( ADVP | Quote | Chart | News | PowerRating) |
75 | 56.90 | 58.75 | 2-Month high level base |
| Cache | ( CACH | Quote | Chart | News | PowerRating) |
81 | 24.84 | 27.43 | 3-Month high level base |
| Captiva Software | ( CPTV | Quote | Chart | News | PowerRating) |
96 | 12 | 13.74 | 2-Month high level base |
| Guitar Center | ( GTRC | Quote | Chart | News | PowerRating) |
57 | 34.36 | 35.05 | 3-Month Cup & Handle |
| Safenet | ( SFNT | Quote | Chart | News | PowerRating) |
64 | 39.65 | 41.90 | 3-Month base w/ gap pivot entry |
| Silicon Labs | ( SLAB | Quote | Chart | News | PowerRating) |
69 | 51.25 | 55.55 | 3-Month base w/ gap pivot entry |
| Ulticom | ( ULTI | Quote | Chart | News | PowerRating) |
84 | 11.10 | 11.66 | 2-Month Cup w/ daily handle |
| Ultra Petroleum | ( UPL | Quote | Chart | News | PowerRating) |
88 | 24.36 | 26.59 | 2-Month Ascending Triangle Base |
| Urban Outfitters | ( URBN | Quote | Chart | News | PowerRating) |
92 | 40.49 | 42.10 | 9-Week high level base |
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 |
| Pacific Sunwear | ( PSUN | Quote | Chart | News | PowerRating) |
59 | 23.05 | 5-Month lateral base | 1,894 | 24.66 |
| Verint Systems | ( VRNT | Quote | Chart | News | PowerRating) |
39 | 24.60 | 7-Month lateral base | 116 | 27.55 |
| Integra Life Services | ( IART | Quote | Chart | News | PowerRating) |
59 | 32.53 | 3-Month lateral base | 269 | 35.09 |
| Usana Health | ( USNA | Quote | Chart | News | PowerRating) |
91 | 34.18 | 3-Month lateral base | 359 | 39.59 |
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) |
68 | 41.60 | 3-Month Cup and Handle | 3,091 | 44.74 |
| Polymedica | ( PLMD | Quote | Chart | News | PowerRating) |
57 | 26.50 | 2.5-Month Cup and Handle | 478 | 28.17 |
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.
| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day in 000’s |
Pivot | 52-Week High |
| Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
73 | 26.29 | 12,334 | 15.85 | 29.37 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
71 | 105.75 | 1,429 | 59.80 & 79.52 |
113.08 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
74 | 83.55 | 2,452 | 59.16 | 88.89 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
48 | 67.47 | 718 | 56.34 | 71.83 |
| Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
82 | 32.23 | 923 | 26.05/30.16 | 35.30 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
80 | 36.16 | 340 | 27.85 | 36.50 |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
55 | 53.14 | 581 | 46.85 | 59.47 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
59 | 64.60 | 362 | 56.18 | 68.95 |
| St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
66 | 71.85 | 1,292 | 58.89 | 72.15 |
| Aaipharma | ( AAII | Quote | Chart | News | PowerRating) |
88 | 28.33 | 626 | 20.15 | 31.85 |
| Biolase Technology | ( BLTI | Quote | Chart | News | PowerRating) |
85 | 19.30 | 760 | 16.13 | 21.39 |
| Cognizant Technology | ( CTSH | Quote | Chart | News | PowerRating) |
89 | 54.15 | 1,225 | 49.69 | 57.19 |
| NII Holdings | ( NIHD | Quote | Chart | News | PowerRating) |
94 | 95.23 | 354 | 80.70 | 106.48 |
| Magma Designs | ( LAVA | Quote | Chart | News | PowerRating) |
87 | 28.75 | 564 | 24.03 | 28.88 |
| Chicago Bridge & Iron | ( CBI | Quote | Chart | News | PowerRating) |
67 | 30.56 | 220 | 28.60 | 32.50 |
| Sina.com | ( SINA | Quote | Chart | News | PowerRating) |
95 | 45.69 | 6,560 | 42.04 | 49.50 |
| Quality Systems | ( QSII | Quote | Chart | News | PowerRating) |
80 | 56.65 | 71 | 49.85 | 61.60 |
| Mobile Telesys | ( MBT | Quote | Chart | News | PowerRating) |
85 | 96.82 | 240 | 87.60 | 99.76 |
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 |
| Petrokazakstan | ( PKZ | Quote | Chart | News | PowerRating) |
76 | 22.63 | 387 | 23.31 | 26 |
| Altiris | ( ATRS | Quote | Chart | News | PowerRating) |
85 | 36 | 261 | 36.15 | 39.20 |