This Week’s Intermediate-Term Report
Boy, what a
difference a week can make for those that saw what their favorite growth stocks
and ETF friends were really doing a week ago within the ‘confirmed rally.’
Of course I’m talking about the solid rally out
of the market’s latest pullback. For the week, the S&P and Nasdaq gained
over 2% and 3.5% respectively and just shy of their 52-week highs. For those who
were prepared to trade off the clues gathered via price, volume, and market
leadership from the prior week–it was just what the doctor ordered after the
latest market ‘ebb.’
It wasn’t too easy if you were
listening to the ‘boob tube’ instead of the market. But, if you were properly
focused on the reality of the latest pullback you might have seriously
considered some of the following excerpt from last week: ‘Besides the fore
mentioned price action, volume for the past 3 weeks of trade looks to be saying
that the ‘confirmed rally’ is indeed still with us. Absolute numbers of
accumulation and distribution show a 5:3 ratio in favor of the bulls, for the
leading Naz’, while the S&P comes in at a
respectable 4:2. For the record, I don’t go with official numbers as I look at
price action for the day in question as well. For example in today’s trade the
Naz’ flashed a day of distribution, but if you look at the price action you’ll
see that this ‘so-called’ distribution has occurred while price has established
a ‘hammer low’, after reversing off the 38% (August), 62% (Sept) Fibonacci
levels, and the 50-Day EMA (for the S&P the test was the 38%,50%, 50-Day EMA).
I don’t know about you, but for me this comprises a very major support zone and
pricing decision for the technical traders of the world. And if that doesn’t
work for you, I’ll just throw in a little bit pseudo-psychology about how all of
a sudden bad and good news is getting punished, instead of the not so long ago,
‘everything is golden in the world’ school of investing. Personally, this only
adds confidence to the pullback theory within our ‘confirmed rally.’ I went on
with ‘…with seven of the last 10 sessions resembling a staircase down, and
price pulling back by 7% in the Naz’, and over 3% in the S&P–the horns are
getting primed once again to do some business.’ And last but not least, ‘…
price action has done some solid testing, and confirmed those levels of support
successfully, as evidenced by both price and volume. I personally think these
levels should hold. We might do a little back testing or pullback into Friday’s
range, but that’s conjecture at best right now. What isn’t prone to investors’
whims, panics, and hallucinations is that with price and volume still intact,
and hopefully your portfolio too–that we have another high-probability area of
entry in our ‘confirmed-rally’–thank you Mr. Market, because the goods were
delivered in spades.
Unfortunately, now the market looks
to be entering a less-than-perfect environment for breakouts. My hope is that
you took advantage of some of the high-probability action while the getting was
good, because personally speaking my own horns are lowered as I look to take a
break from some fantastic grazing opportunities that triggered earlier in the
week. By Thursday and Friday’s trade, when all the ‘easy money’ wanted in, just
as we were once again approaching prior highs and significant resistance
levels–the gig was pretty much done. In my humble opinion the wool has once
again been pulled over some investors heads as we say goodbye and thank you to
those growth stocks and market action that let us participate in the
high-probability upside action. A few factors weigh on my short term perspective
within the confirmed rally. 1. Failure to reach new highs and gain ground within
the markets established resistance. 2. Good news during the last couple of
sessions not being embraced by investors. 3. The market has made it out of the
October ‘doom and gloom’ in very good style, suggesting that we’re still due for
a good strong market-style ‘BOO!!’ 4. Volume and Breadth statistics at neutral
levels with the week highs flashing real distribution by institutions–if I have
you all scared…good. It is Halloween after all.
If I didn’t scare you off,
congratulations, because the environment is still conducive to our style of
growth stock trading, and you should still stay prepared to trade the solid
setups that appear–just be aware that after a week in which most breakouts
worked quite well, that consistently strong results from potential triggers this
week, may be harder to come by as the market appears to be on the verge of yet
another ebb within the confirmed rally. If you do see the edge setting up before
you, by all means take it, as technically the action is still within a healthy
market. In my opinion though, the caution flag is raised a bit higher– but we
are not showing a stop signal as of yet. Unfortunately if you are just getting
those horns primed it should prove to be somewhat more difficult after a
plethora of successful triggers out of our favorite growth stock issues. 5. With
much fewer names setting up after last week’s action, chances are that more of
what you will see during the next week will resemble being ‘set up’, rather than
the classic setups that we continue to love and trust in a healthy market
climate. Technically, healthy breakouts can and should be played if an available
and proper trigger is there for the taking, but I would suggest to do it in a
‘lighter and tighter’ style of trade, as the chances for breakdowns increase
after the market’s latest top in our otherwise confirmed rally.
Within our own list of potential and
ongoing prospects there were two casualties within an otherwise excellent week
for trading the leading growth stocks of the day. Resmed (RMD), which had
already been on our list of those under supervision (naughty stock) did end up
triggering a stop loss of over 7% below the weekly trigger levels. Guitar Center
(GTRC) from our basing list also triggered this week, but failed to gain ground,
before hitting an ugly chord with investors. On a brighter note, as already
mentioned, many leading stocks broke out to the upside in high style. In our own
list of names, Garmin (GRMN), Sharper Image (SHRP), Dollar General (DG), and
Invitrogen (IVGN)–all triggered from our base and handle lists of weekly
candidates with the right combination of technicals and fundamentals. There was
also some exceptional upside from the swing list as well, especially in Kyphon (KYPH),
which triggered out of a mid-level handle formation before proceeding to gap
higher for gains of over 20%. Let’s continue to prepare as best as possible for
more quality triggers, but also make sure that our ongoing positions are managed
properly, so that we can keep that which is ours while the market tells us what
its next move will be within its confirmed rally.
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. While the markets are sailing
high, we also realize that between the peaks, troughs do exist, and it’s always
in our best interest to stay prepared for whatever comes our way within the
‘confirmed rally.’ With the most recent voyage back to the crest of the wave,
I’m personally showing less provisions than at the most recent leg of our recent
journey up. For myself, that means that although there still might be a little
bit of good sailing, it’s probably time to concern oneself with battening down
the hatches with proper money management as we look to enter yet another ebb
within the market’s perfect storm.
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 |
| BEA Systems | ( BEAS | Quote | Chart | News | PowerRating) |
48 | 13.90 | 14.27 | 9-Week Cup & Handle w/ handle pivot entry |
| Interactive Corp | ( IACI | Quote | Chart | News | PowerRating) |
46 | 36.81 | 39.30 | 17-Week High level base w/ mid-level handle |
| Rofin-Sinar | ( RSTI | Quote | Chart | News | PowerRating) |
92 | 23.75 | 28.05 | 9-Week high level base |
| Uti Worldwide | ( UTIW | Quote | Chart | News | PowerRating) |
50 | 34.47 | 35.69 | 9-Week Cup and handle |
| Christopher & Banks | ( CBK | Quote | Chart | News | PowerRating) |
79 | 29.20 | 31.22 | 9-Week Cup & Handle pattern |
| Alliance Data | ( ADS | Quote | Chart | News | PowerRating) |
51 | 27.78 | 29.84 | 16-Week lateral base |
| Hyperion Solutions | ( HYSL | Quote | Chart | News | PowerRating) |
42 | 33.49 | 35.60 | 16-week symmetrical triangle |
| Tuesday Morning | ( TUES | Quote | Chart | News | PowerRating) |
72 | 32.14 | 33.81 | 9-Week cup and 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 in 000’s |
Pivot |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
67 | 28.80 | 21-Week High Level base | 297 | 31.25 |
| Axcan Pharma | ( AXCA | Quote | Chart | News | PowerRating) |
26 | 13.15 | 5-Month high level base | 200 | 14.86 |
| Sohu.Com | ( SOHU | Quote | Chart | News | PowerRating) |
97 | 34.31 | 4-Month Ascending Triangle base | 5,021 | 43.50 |
| Gevity Hr Inc | ( GVHR | Quote | Chart | News | PowerRating) |
91 | 15.12 | 3-Month lateral base | 338 | 20.05 |
| Flagstar Bancorp | ( FBC | Quote | Chart | News | PowerRating) |
78 | 22.30 | 17-Week Cup w/ mid level weekly handle pivot | 499 | 23.70 |
| Saint Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
54 | 58.16 | 4-month high level base w/right side b/o entry | 1,694 | 58.89 |
*Axcan Pharmaceutical
ROE at 8% is lower than typical 15% to 17% threshold that many IT investors
accept.
Stocks Forming A Handle
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| Fresh DelMonte |
( FDP | Quote | Chart | News | PowerRating) |
24 | 25 | 11-Month Cup and Handle | 444 | 29.10 or 29.80 |
| Constellation Brands | ( STZ | Quote | Chart | News | PowerRating) |
47 | 31.37 | Double Cup & Handle: Weekly one year and 4-Month version |
597 | 31.90 to 32.10 |
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-50 Day in 000’s |
Pivot | 52-Week High |
| Apollo Group |
( APOL | Quote | Chart | News | PowerRating) |
50 | 63.52 | 2,000 | 46.89
|
69.42 |
| Career Education |
( CECO | Quote | Chart | News | PowerRating) |
87 | 53.55 | 1,400 | 27.20 | 56.20 |
| Coach Inc. |
( COH | Quote | Chart | News | PowerRating) |
85 | 35.47 | 1,641 | 14.18 | 36.75 |
| Boston Scientific |
( BSX | Quote | Chart | News | PowerRating) |
68 | 67.72 | 4,075 | 47.65 | 68.74 |
| International Game Technology |
( IGT | Quote | Chart | News | PowerRating) |
75 | 32.75 | 2,500 | 18.71 | 32.85 |
| UCBH Holdings |
( UCBH | Quote | Chart | News | PowerRating) |
71 | 35.70 | 250 | 22.60 | 36.28 |
| Corinthian Colleges |
( COCO | Quote | Chart | News | PowerRating) |
70 | 61.92 | 873 | 43.09 | 63.44 |
| Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
80 | 24.10 | 18,187 | 15.85 | 24.48 |
| Gtech Holdings |
( GTK | Quote | Chart | News | PowerRating) |
70 | 44.68 | 580 | 37.05 or 40.80 |
46.50 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
80 | 97.50 | 1,215 | 59.80 & 79.52 |
98.70 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
84 | 105.12 | 2,500 | 78..84 | 108 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
42 | 59.25 | 560 | 56.34 | 61.46 |
| Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
91 | 29.45 | 972 | 26.05 | 30.80 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
67 | 28.80 | 297 | 27.85 | 31.15 |
| Dollar General | ( DG | Quote | Chart | News | PowerRating) |
75 | 22.47 | 1,747 | 21.87 | 23.40 |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
78 | 50 | 472 | 46.85 | 54.08 |
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 |
| Aeropostale | ( ARO | Quote | Chart | News | PowerRating) |
88 | 30.55 | 895 | 30.52 | 34.70 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
59 | 56.65 | 403 | 56.18 | 58.94 |
| Invitrogen | ( IVGN | Quote | Chart | News | PowerRating) |
84 | 63.59 | 1,017 | 63.15 | 64.77 |
| American Healthways | ( AMHC | Quote | Chart | News | PowerRating) |
83 | 41.45 | 300 | 40.95 | 46.61 |