This Week’s Intermediate-Term Report
The flags of
caution within the market’s ‘confirmed rally’ were there for a good reason.
After gapping lower in Monday’s trade our ETF
friends and their cash brethren have been effectively consolidating for the past
four sessions. On the week, as of Thursday’s close, that leaves the S&P and
Nasdaq Composite with losses of 1.5% and 2.5% respectively. On volume and price
action that is still not indicative of real institution distribution, these guys
are still anything but Rodney Dangerfield wannabees.
As stated last week, ‘The broader indices consolidations
have been contained by the 20-day EMA–that’s the good news. Now for the bad
news within the ongoing ‘confirmed rally.’ The Naz’ actually closed below this
benchmark for the first time in over two trading weeks. Some of the HOLDRs, such
as the SMH are waving caution flags that are not visible in the distribution of
our two leading indices. This particular sector, the semiconductors, is also
‘still’ stretched precariously above its 50-Day EMA, while other recent leaders
such as the Internets (HHH), and Software (SWH) sectors sit at this technical
benchmark–and now, like the Phoenix rising from the ashes, the much hated
Pharmies (PPH) is Wall Street’s newest darling (personally speaking, the
reversal player in me says it’s about time). Hmmm, so what does it all mean???
Well, let me also throw in my two cents on the ongoing VIX saga and some
unconventional (unproven) market psychobabble about how ‘everything’, at least
according to today’s analysts, is looking better than ever–and I’m putting my
money on ‘tight and light’ for yet another week…maybe. Translation please–I’m
keying off the 50-Day EMA in the majors, including the semiconductors for buy
side decisions. I would actually like to see these levels penetrated and find
support at various Fibonacci levels of support off the October pivot lows before
looking aggressively within the (yes, even after this long winded spiel)
market’s ‘confirmed rally.’ This decision of course, will be predicated on
leading stocks maintaining their composure during a market pullback’…thank you
mr. market.
With this weeks action being focused
on the 50-Day EMA, I guess it just goes to show, that the patient bull can get
exactly what they ask for. Every market, bull or bear for that matter, has its
ebbs and flows. As a cautious bull, especially well into our market’s ‘confirmed
rally’, I don’t mind missing the occasional breakout when the market seems to be
flaking out–and it’s no secret that, that has been my personal philosophy
during the past two weeks. No ‘hiding’ for this bull, just trying to preserve
the ol’ hide for a time when the conditions merit a higher probability entry.
Wake up folks. Worry is in the air,
the media is starting to play up ‘the concern bit’, prices have pulled
back….and guess what, it’s fast becoming our favorite time to do our
high-probability business of trading growth stocks out of classic weekly
patterns, as the market gives us an opportunity within it’s ‘confirmed rally.’
With the leading Nasdaq off its recent highs by approximately 5.5%, and the
broader S&P500 down by 3% we are in better position for triggers out of the
market’s leading issues, than we have been for nearly three weeks. This isn’t a
‘call to arms’, but it is time to be ready as price and volume are still very
much healthy. After the market’s most recent action, there is a slight edge in
favor of distribution on the Nasdaq. But, what must be remembered is that the
distribution has been happening as we pullback in a very constructive manner. We
are at, or near technical levels that keep the rally alive, while at the same
time, shake out the ‘weak hands.’ Ideally, we would like to see an actual
Follow-Thru-Day at the same time in which our breakouts are triggering. This may
or may not happen. The reality of it is that leading stocks lead, and not the
other way around. Chances are that stock that you’ve been stalking for weeks,
will trigger before you read about a possible FTD over a cup of brew the next
morning. If we start to go lower, that’s fine–as long as the ‘confirmed rally’
remains constructive. This means that leading stocks maintain their composure
within their weekly bases, while the markets continue to pull back less than 10%
from their recent highs and volume continues to say ‘A-O.K.’ as the ‘ebbing’
cycle takes place. Volume, price, and pattern within a healthy market
environment is what we wait for. With price just below the 50-Day EMA on volume
and ‘headlines’ that keep me on my toes, and ready to take the trade within our
market’s ‘still confirmed rally’–I’m ready to do the CNBC thing, and ‘Profit it
from it.’
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.’
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 |
| Alliance Data | ( ADS | Quote | Chart | News | PowerRating) |
57 | 28.22 | 29.84 | 19-Week lateral base |
| Shuffle Master | ( SHFL | Quote | Chart | News | PowerRating) |
64 | 29.90 | 31.75 or 32.91 | 14-week cup and handle w/ handle and 52-week cup triggers |
| KVH Industries | ( KVHI | Quote | Chart | News | PowerRating) |
91 | 28.98 | 31.56, 32 or 32.80 | 2-month cup and handle w/multiple pivots |
| Hot Topic | ( HOTT | Quote | Chart | News | PowerRating) |
77 | 28.61 | 29.97 | 6-Week lateral base |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
76 | 52.91 | 54.18 | 4-Week High-Level handle entry |
| Raven Industries | ( RAVN | Quote | Chart | News | PowerRating) |
67 | 26.98 | 27.56 | 3-Month High Level base |
| K-Swiss | ( KSWS | Quote | Chart | News | PowerRating) |
79 | 44.11 | 45.05 | 4-Week High Level base |
| Mid-Atlantic Medical | ( MME | Quote | Chart | News | PowerRating) |
74 | 58.70 | 60.80-60.84 | 3.5 Month Cup & 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 |
| Axcan Pharma | ( AXCA | Quote | Chart | News | PowerRating) |
40 | 14.50 | 5-Month high level base | 199 | 14.86 |
*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 |
| San Juan Basin | ( SJT | Quote | Chart | News | PowerRating) |
47 | 19.21 | 4.5 Month cup and handle | 165 | 20.12 |
| UTI Worldwide | ( UTIW | Quote | Chart | News | PowerRating) |
61 | 35.98 | 2-Month cup and handle | 126 | 38.10 to 38.50 |
| Odyssey Healthcare | ( ODSY | Quote | Chart | News | PowerRating) |
80 | 32.22 | 2.5 Month cup and handle | 489 | 33.52 or 36.13 |
*UTI Worldwide ROE is 12%
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) |
55 | 64.86 | 1883 | 46.89
|
69.42 |
| Career Education |
( CECO | Quote | Chart | News | PowerRating) |
85 | 48.80 | 1400 | 27.20 | 56.20 |
| Coach Inc. |
( COH | Quote | Chart | News | PowerRating) |
86 | 34.70 | 1,641 | 14.18 | 38.73 |
| Boston Scientific |
( BSX | Quote | Chart | News | PowerRating) |
69 | 35.14 | 7,297 | 23.83 | 36.01 |
| International Game Technology |
( IGT | Quote | Chart | News | PowerRating) |
76 | 32.58 | 2,735 | 18.71 | 34.75 |
| UCBH Holdings |
( UCBH | Quote | Chart | News | PowerRating) |
72 | 36.83 | 250 | 22.60 | 37.62 |
| Corinthian Colleges |
( COCO | Quote | Chart | News | PowerRating) |
66 | 60.28 | 805 | 43.09 | 65 |
| Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
79 | 23.11 | 17,208 | 15.85 | 24.60 |
| Gtech Holdings |
( GTK | Quote | Chart | News | PowerRating) |
75 | 46.98 | 597 | 37.05 or 40.80 |
49.09 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
80 | 102.41 | 1,188 | 59.80 & 79.52 |
101.11 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
81 | 99.75 | 2,641 | 78..84 | 108 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
49 | 63.91 | 710 | 56.34 | 65.40 |
| Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
91 | 30.30 | 953 | 26.05 | 31.95 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
75 | 29.99 | 327 | 27.85 | 32.70 |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
72 | 52.91 | 502 | 46.85 | 54.10 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
58 | 60.08 | 545 | 56.18 | 61.25 |
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 |
| St.Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
49 | 59.37 | 1,694 | 58.89 | 63.60 |
| Constellation Brands | ( STZ | Quote | Chart | News | PowerRating) |
45 | 31.55 | 2,500 | 31.90 to 32.10 | 32.23 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
75 | 29.99 | 327 | 31.25 | 32.70 |
| Gevity HR | ( GVHR | Quote | Chart | News | PowerRating) |
94 | 20.73 | 345 | 20.05 | 21.18 |
| San Juan Basin | ( SJT | Quote | Chart | News | PowerRating) |
47 | 19.21 | 165 | 19.18 | 20.02 |
| Invitrogen | ( IVGN | Quote | Chart | News | PowerRating) |
83 | 64.61 | 943 | 63.15 | 66.18 |