This Week’s Intermediate-Term Report
Multi-year highs
were once again forged in both the S&P500 and Nasdaq Composite,
but this ‘cautious bull’ still feels confident that playing it tight to the vest
has been the best policy during the past couple weeks. Fractional, fresh highs
were established, but it’s what lies beneath the surface, that has kept us on
our toes–and hopefully most of our gains in our accounts during a bullish ride
that has become more and more volatile for our particular brand of growth stock
investing.
The churn at the latest top, if
that’s what you can call it (well, I will at least) was quite benign if one only
looks at the closing weekly prices of our two major indices, but this past week
was not nearly so kind (in many cases) for those that were attempting breakouts
without strict money management tactics in mind, at this late juncture within
the latest leg of the market’s confirmed rally. Our own list showed more and
more reason to keep it tight, and take some off the table when given the
opportunity, rather than waiting for an official pullback within the broader
indices. Names such as Packeteer (PKTR), ADTRAN (ADTRN), Ceradyne (CRDN),
American Pharmaceutical (APPX), and Mercury Interactive (MERQ) are prime
examples of why money management, is a skill to not be taken lightly, and more
importantly–to be emphasized even more in one’s trading plan, after an extended
run with nary a pullback worthy of technical acknowledgement on these pages. The
triggers and gains in these quality, growth stock issues were both there for the
taking–but the taking was fleeting in most all of the fore mentioned suspects.
I personally believe this to be a case of outright exhaustion after a feeding
frenzy with no proper digestive period as of yet. It’s kind of like taking that
last delicious bite on the dinner plate, to only suffer the consequences shortly
thereafter.
Reiterating from last week, ‘as a
‘cautious bull’, I will at times not participate in ‘upside’ action with fresh
trades. Rather, my attention becomes more attuned to managing existing trades,
instead of the initiating process. If fresh entries are made, most likely they
are given a much tighter leash–kind of a ‘show me the money’ attitude when I
feel less confident about the immediate action within an existing bull market.
In general, I consider the high-probability times to be pullbacks within the
existing trend (into technical awareness zones) for my style of position
trading.’ We have yet to see this type action in the broader
averages–thus far, only the semiconductor sector (SMH) has this ‘cautious bull’
eyeing bovine opportunity in the coming days. Even with stressing caution during the past two weeks, as the indices
have gained ground–is the fact that the environment for trading quality growth
stock issues has indeed become more fraught with risk and difficulty. The
triggers have become much more about knowing how to book quick profits, rather
than being confident that this pivot entry will become the next Microsoft or
Dell. Look at some of some of the outsized gains from this report that triggered
only three, or four weeks ago, and then look at those that have been targeted
more recently. I think the results speak for themselves, and most definitely
convince this cautious bull that just ’cause we wear the horns, we must also
realize that we gotta ‘hide’ too.
As far as technical levels are
concerned, much remains the same as there has been little in the way of testing,
aside from the fore mentioned semiconductor sector. For the S&P500 and Nasdaq
Composite, my own personal set of horns would be raised if we were able to test
the 20-Day EMAs in both indices. This would amount to a 2.5% and 3.5% pullback
from recent highs, respectively. Below those supports, more serious bovine
levels come into play, such as Fibonacci levels off the 12/10 and 12/17 pivot
lows, as well as the long forgotten 50-day MAs. Will we reach these levels? I
don’t know quite honestly, but I can prepare in advance for when opportunity
does arise. If it becomes a situation where the technical dust has settled, but
as The Stones said, ‘you can’t always get what you want’–maybe I’ll have to
acknowledge Jack instead, and know it’s ‘as good as it gets.’ My personal lists
for classic breakouts have grown somewhat thinner as we enter Monday’s trade (as
it should after five to six weeks of upside), but many recent growth stock
breakouts have done a fairly good job of consolidating, while holding pivot
levels, or above the benchmark mercy point of 7%. While some recent breakout
candidates have given it all back, and then some–the one’s that are still in
good position, might be considered strong candidates for second entries,
possibly better than stocks that have yet to break out at this point in time.
Names such as ANSS, ATRS, FARO, MTLG, OTEX, AMHC, WBSN, YHOO, and SEAC are some
of the issues that have done a fair job of consolidating near prior levels
during the past couple of weeks, and might merit some extra investigation on
your part.
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. For myself, as the game becomes extended, even if they
the trades are still working–I personally tend to emphasize caution in any
attempts at breakouts (i.e. current market). 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 |
| China.com | ( CHINA | Quote | Chart | News | PowerRating) |
87 | 11.48 | 12.20 | Right Side of Base (RSB) consolidation b/o 18% below 52-week highs |
| Aquantive Inc | ( AQNT | Quote | Chart | News | PowerRating) |
87 | 12.20 | 13.20 – 13.65 | 3-Month Cup & Handle triggers |
| Marvell Technology | ( MRVL | Quote | Chart | News | PowerRating) |
70 | 41.90 | 44.74 | 4-Month base w/ RSB consolidation entry |
| Aeropostale | ( ARO | Quote | Chart | News | PowerRating) |
72 | 29.96 | 30.20 | 3.5-Month Base w/ 13% RSB consolidation entry |
| Cytyc | ( CYTC | Quote | Chart | News | PowerRating) |
39 | 14.85 | 15.20 | 4-Month Cup w/ handle trigger |
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) |
57 | 22.56 | 4.5-Month lateral base | 1,894 | 24.66 |
| Verint Systems | ( VRNT | Quote | Chart | News | PowerRating) |
44 | 24.99 | 7.5-Month lateral base | 116 | 27.55 |
| Abaxis | ( ABAX | Quote | Chart | News | PowerRating) |
97 | 20.03 | 3.5-Month lateral base | 357 | 22.02 |
Stocks Forming A Handle
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| Sohu.Com | ( SOHU | Quote | Chart | News | PowerRating) |
87 | 37.29 | 4-Month Cup w/ 11% handle trigger | 2,803 | 38.68 |
| Central European Distributors | ( CEDC | Quote | Chart | News | PowerRating) |
71 | 34.16 | 2.5-Month Cup w/ 15% handle trigger | 239 | 35.80 |
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, regardless of price at that time.
| Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day in 000’s |
Pivot | 52-Week High |
| Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
75 | 27.27 | 12,334 | 15.85 | 29.37 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
71 | 108.93 | 1,429 | 59.80 & 79.52 |
113.08 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
70 | 82.74 | 2,452 | 59.16 | 84.43 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
43 | 68.75 | 718 | 56.34 | 71.83 |
| Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
88 | 34.28 | 923 | 26.05/30.16 | 35.30 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
75 | 34.41 | 340 | 27.85 | 34.93 |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
64 | 54.88 | 581 | 46.85 | 59.47 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
62 | 66.77 | 362 | 56.18 | 67.87 |
| St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
46 | 64.80 | 1,292 | 58.89 | 67.30 |
| Aaipharma | ( AAII | Quote | Chart | News | PowerRating) |
86 | 28.55 | 626 | 20.15 | 31.85 |
| Biolase Technology | ( BLTI | Quote | Chart | News | PowerRating) |
88 | 21.14 | 760 | 16.13 | 21.39 |
| Petrokazakstan | ( PKZ | Quote | Chart | News | PowerRating) |
83 | 24.95 | 357 | 23.31 | 26 |
| Cognizant Technology | ( CTSH | Quote | Chart | News | PowerRating) |
90 | 56.66 | 1,225 | 49.69 | 57.19 |
| NII Holdings | ( NIHD | Quote | Chart | News | PowerRating) |
95 | 102 | 354 | 80.70 | 102.50 |
| Magma Designs | ( LAVA | Quote | Chart | News | PowerRating) |
86 | 26.35 | 564 | 24.03 | 27.50 |
| Chicago Bridge & Iron | ( CBI | Quote | Chart | News | PowerRating) |
67 | 30.65 | 220 | 28.60 | 31.34 |
| Eresearch | ( ERES | Quote | Chart | News | PowerRating) |
95 | 34.90 | 1,596 | 33.83 | 37.40 |
| Sina.com | ( SINA | Quote | Chart | News | PowerRating) |
96 | 47.08 | 6,560 | 42.04 | 49.44 |
| Altiris | ( ATRS | Quote | Chart | News | PowerRating) |
87 | 37.40 | 269 | 36.15 | 39.20 |
| Quality Systems | ( QSII | Quote | Chart | News | PowerRating) |
86 | 60 | 71 | 49.85 | 60.74 |
| Sonic Solutions | ( SNIC | Quote | Chart | News | PowerRating) |
93 | 20.96 | 497 | 20.18 | 21.55 |
| Ceradyne | ( CRDN | Quote | Chart | News | PowerRating) |
95 | 44.99 | 626 | 43.60 | 49.77 |
| Mobile Telesys | ( MBT | Quote | Chart | News | PowerRating) |
83 | 98.70 | 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 |
| Comtech Telecommunications | ( CMTL | Quote | Chart | News | PowerRating) |
93 | 33.30 | 442 | 35.10 | 39.52 |