This Week’s Intermediate-Term Report
In the past week
more signs of price deterioration in both the Nasdaq and S&P500 has done little
to help the bullish case for a market that is still technically in a corrective
pattern. While keeping ready, and looking
for the potential for potential growth stock breakouts to emerge–further price
testing and more signs of distribution has kept cautious bulls in the pen, as we
continue to stalk quality issues that remain technically constructive in an ever
fragile market environment.
Fresh lows this week put the Nasdaq
fractionally over the 10% benchmark that many technicians use as a benchmark for
normal corrective activity in a bull market. I personally don’t subscribe to the
set in stone type benchmarks to acknowledge bull or bear markets–but that in of
itself is compelling evidence to remain essentially sidelined with cash
preservation the mantra, and trailing stops on any existing profitable
positions. This has been stressed in this column long before the latest broader
market activity, as we’ve had ample evidence over the last few weeks to batten
down the hatches as most of our leading candidates slipped further into their
weekly bases, and the issues that had persevered–were too far extended to
consider for fresh purchases.
Now with yet another week of testing
in the averages, and last week’s words still very much relevant to our goal of
successful growth stock investing: ‘the most difficult part at this
stage, but not really, might be having to use more patience. To be honest, we
could be doing more of the proverbial sitting on thumbs routine for an
undetermined amount of time. With technical lows in place though, it’s the
vigilant eye, that, if opportunity does appear, will ultimately be the first to
seize the high-probability trade. While we have remained sidelined with most of
what is ours, still in our own pockets–the fact remains that now more than
anytime in the past two months, that our list of leading stocks shows even the
majority of these issues deeply entrenched in basing patterns. When the broader
markets correct, like that which we have just witnessed, growth issues that are
still qualified as technically sound, might in fact drop by as much as 35% from
their respective highs. If you held something like a growth stock as it ‘pulls
back’ by a percentage like 35%–well, to be honest–that’s no fun. Technically
speaking though, it does potentially put the issue in a fresh basing pattern
from which it might ultimately break out from, sometime down the road–and that
folks is how this cautious bull views the landscape for the time being. There
are still many leading issues out there that have held this benchmark, but from
my own scans of the cream of the crop, most look to need more base development
before a healthy breakout can occur. We also must look for the market to firm up
at a minimum, before getting aggressive with any fresh purchases. By firming up,
I mean that with the damage inflicted upon the Nasdaq already, we need to see
these pivot lows hold without more signs of distribution. On a move off of these
levels, a Follow-Thru-Day or FTD would also be strongly advised
before taking any classic triggers with the intention of using the typical 7% to
8% stop loss. My own philosophy on approaching trades at this juncture, before a
possible FTD, but with the current lows still confirmed–would be to take the
trade if the stock is demonstrating classic signs of a legitimate breakout, but
tighten up one’s protective stop and/or decrease position size…but that’s just
one cautious bull’s opinion.’
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 |
| Guitar Center | ( GTRC | Quote | Chart | News | PowerRating) |
50 | 34.15 | 37 – 37.20 | 3.5-month Cup and Handle All-Time-Highs |
| Safenet | ( SFNT | Quote | Chart | News | PowerRating) |
68 | 37.87 | 41.90 | 3.5-Month base w/ 6-week right side of base consolidation trigger |
| Amdocs | ( DOX | Quote | Chart | News | PowerRating) |
71 | 27.30 | 29.84 | 7-week lateral base |
| Arthrocare | ( ARTC | Quote | Chart | News | PowerRating) |
72 | 24.75 | 27.58 – 27.67 | 9-week cup and handle |
| Celgene | ( CELG | Quote | Chart | News | PowerRating) |
66 | 47.26 | 48.98 | 6-month lateral base |
| Hovnanian | ( HOV | Quote | Chart | News | PowerRating) |
74 | 85.94 | 92.70 | 4-Month Cup w/ handle entry |
| Natl Fin. Partners | ( NFP | Quote | Chart | News | PowerRating) |
48 | 31.06 | 34.09 | 9-week basing pattern |
| Bankrate Inc | ( RATE | Quote | Chart | News | PowerRating) |
93 | 17.37 | 19.95 | 6-month Cup b/o |
| Kroll | ( KROL | Quote | Chart | News | PowerRating) |
30 | 25.09 | 27.45 | 2-Month high level base |
| Michaels Stores | ( MIK | Quote | Chart | News | PowerRating) |
61 | 47.71 | 49.62 | 4-Month Cup w/handle triggers |
| Amerigroup | ( AGP | Quote | Chart | News | PowerRating) |
45 | 43.62 | 44.28 | 5-Month Cup w/handle triggers |
| UCBH Holdings | ( UCBH | Quote | Chart | News | PowerRating) |
66 | 39.69 | 41.60 | 8-Week lateral base |
| Gen-Probe | ( GPRO | Quote | Chart | News | PowerRating) |
84 | 35.06 | 37.54 | 9-Week lateral base w/ right side pivot entry |
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 |
| Marvell Technology | ( MRVL | Quote | Chart | News | PowerRating) |
68 | 41.55 | 4.5-Month high level lateral base | 2,512 | 46.73 |
| Dendrite | ( DRTE | Quote | Chart | News | PowerRating) |
50 | 15.71 | 4-Month high level lateral base | 229 | 17.85 |
| Abaxis | ( ABAX | Quote | Chart | News | PowerRating) |
96 | 20.11 | 8-Week high level base | 364 | 23.55 |
Stocks Forming A Handle
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| Silicon Labs | ( SLAB | Quote | Chart | News | PowerRating) |
78 | 51.35 | 4.5 Month Cup w/ High Handle entry | 1,603 | 60.02 |
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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 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
80 | 54.34 | 3,200 | 29.90 and 39.76 | 58.40 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
83 | 91.36 | 2,666 | 59.16 | 97.30 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
68 | 76.74 | 687 | 56.34 | 79.24 |
| Noble | ( NOBL | Quote | Chart | News | PowerRating) |
97 | 28.40 | 126 | 28 | 30.25 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
70 | 33.90 | 364 | 27.85 | 39.92 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
66 | 69.17 | 348 | 56.18 | 72.84 |
| St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
66 | 73.71 | 1,659 | 58.89 | 79.03 |
| Serologicals | ( SERO | Quote | Chart | News | PowerRating) |
82 | 20.62 | 489 | 19.07/19.39 | 21.17 |
| NII Holdings | ( NIHD | Quote | Chart | News | PowerRating) |
95 | 102.39 | 398 | 80.70 | 111 |
| Mobile Telesys | ( MBT | Quote | Chart | News | PowerRating) |
91 | 117.16 | 255 | 87.60 | 118.52 |
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 |
| NA | NA | NA | NA | NA | NA | NA |