Tuesday’s Intermediate-Term Report
My attitude of
caution hasn’t changed, but that hasn’t spilled over into the broader indices
yet, as both our leading Nasdaq and S&P500 made fresh multi-year
highs. As of Friday’s closing prices,
the Naz’ finished up 2.5% on the week, while the S&P tacked on another .65%–on
more institutional accumulation statistics that has also produced double digit
gains for our leading Nasdaq Composite during the latest leg up in the market’s
ongoing ‘confirmed rally.’
Ongoing is right–it just keeps
going and going, and going…kind of like the Energizer Bunny. The action this
past week now has the latest leg ‘standing’ at 4-weeks for the Naz, and 5-weeks
for the S&P500, with gains of 11.25% and 7% respectively. I won’t go into the
accumulation/distribution statistics as they are still overwhelmingly in favor
of the bull camp, but seasonal factors such as 401k investing and presidential
election year bull biases don’t mean that it’s a ticket to forget hard fought
lessons and skills that have hopefully kept you out of trouble. Remember that
regardless of ‘why this time it’s different’, and ‘all the stars are aligned’,
you should remember to keep to your trading plan. Be prepared as always, to
keep what is yours, in your own pocket, when the time is technically correct for you
to do so.
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. The four days of
consolidation work this past week, before Friday’s thrust up, within the four to
five week rally, did not (in my own cautious orbs) really qualify as one of these ‘high-probability’
pullbacks. In the twenty to twenty-five sessions since our pivot lows, the
broader indices have yet to test the 20-Day EMA–and on a closing basis, neither
the Naz or the S&P has even put in a pullback of more than 1%. Yes, that is
bullish, but almost too bullish–at least for lil’ ol’ me. I know the crowd will
tell me differently, but then again, that’s how I like it. More importantly
though–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, difficulty, and are also
becoming harder to find as the market continues to extend itself. From my
personal watchlists, as well as the issues I put up in this report, I have seen much
more erratic behavior and difficulty around the classic pivots. Some stocks
have indeed gone up handily, but more and more have failed to follow through in
text book fashion, and have needed the extra day or two around the pivot levels,
before making the percentage move higher. Others have displayed enough volatility around our levels to
take us out of the stock by practicing our money management–only to reverse so
quickly, that a second entry may have been all but impossible…and that my
friends, is not a high-probability environment that I care to play aggressively.
When the breakouts stop triggering
consistently–it’s time to focus your energies on existing positions. Within the
past week and a half (in my universe of stocks), the triggers have, on average
still
worked–some quite well, but most (as mentioned above) have needed more than one or two sessions for
the results to solidify gains comfortably above the pivot entry. All the while,
the market continues to extend itself with nary a pullback. For me, this is
enough reason to stay aggressive with trade management as we enter a price realm
that extends beyond what I am personally comfortable with. 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). So, as we enter a new trading week and quality
issues continue to set up within the existing bull run–I
consider the triggers to be more prone to not fulfilling our goal of
high-probability investing until an inevitable ebbing process takes place.
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. We have to
remember, that when the next round of classic triggers does emerge out of our
leading growth stock candidates–they will be doing just that…leading. While
the indices are ‘precariously’ testing levels of support, many of the
stocks we watch, will actually be breaking out to fresh highs, 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 |
| American Pharmaceutical | ( APPX | Quote | Chart | News | PowerRating) |
87 | 36.80 | 39.40 | 8-Week lateral consolidation |
| Digene | ( DIGE | Quote | Chart | News | PowerRating) |
89 | 43.29 | 44.34 | 3.5-Month High level Base w/ handle |
| Gilead Sciences | ( GILD | Quote | Chart | News | PowerRating) |
51 | 63.39 | 64 | Handle w/in 6-month high level base |
| Intersil | ( ISIL | Quote | Chart | News | PowerRating) |
66 | 28.64 | 29.39 | 4-month W Formation w/ handle |
| Jb Hunt Transport | ( JBHT | Quote | Chart | News | PowerRating) |
65 | 27.67 | 28.84 | 3-Month cup and handle |
| Mercury Interactive | ( MERQ | Quote | Chart | News | PowerRating) |
53 | 51.70 | 52.53 | 4.5-Month high level base |
| Network Appliance | ( NTAP | Quote | Chart | News | PowerRating) |
65 | 23.57 | 24.29 | 2-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 |
| ADTRAN | ( ADTN | Quote | Chart | News | PowerRating) |
62 | 37.18 | 4-Month lateral base | 1,591 | 37.83 |
| Packeteer | ( PKTR | Quote | Chart | News | PowerRating) |
80 | 20.77 | 11-Week lateral base | 472 | 21.82 |
| Pacific Sunwear | ( PSUN | Quote | Chart | News | PowerRating) |
57 | 22.56 | 4.5-Month lateral base | 1,894 | 24.66 |
| Sonic Solutions | ( SNIC | Quote | Chart | News | PowerRating) |
90 | 18.35 | 3.5-Month lateral base | 467 | 20.18 |
Stocks Forming A Handle
| Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
| Ceradyne | ( CRDN | Quote | Chart | News | PowerRating) |
94 | 39.94 | 3-Month High level base w/ handle | 578 | 43.60 |
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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, 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) |
76 | 26.50 | 12,334 | 15.85 | 29.37 |
| Centex | ( CTX | Quote | Chart | News | PowerRating) |
70 | 101.03 | 1,429 | 59.80 & 79.52 |
113.08 |
| Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
67 | 74.36 | 2,452 | 59.16 | 81.81 |
| Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
54 | 69.92 | 718 | 56.34 | 71.83 |
| Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
85 | 32.50 | 894 | 26.05/30.16 | 33.43 |
| Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
69 | 31.68 | 340 | 27.85 | 34.10 |
| Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
73 | 57.75 | 581 | 46.85 | 59.47 |
| Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
64 | 67.23 | 362 | 56.18 | 67.87 |
| St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
54 | 64.39 | 1,292 | 58.89 | 64.60 |
| Aaipharma | ( AAII | Quote | Chart | News | PowerRating) |
88 | 29.47 | 603 | 20.15 | 29.99 |
| Biolase Technology | ( BLTI | Quote | Chart | News | PowerRating) |
88 | 20.30 | 729 | 16.13 | 20.62 |
| Petrokazakstan | ( PKZ | Quote | Chart | News | PowerRating) |
84 | 24.52 | 401 | 23.31 | 25.78 |
| Cognizant Technology | ( CTSH | Quote | Chart | News | PowerRating) |
87 | 53.07 | 1,060 | 49.69 | 53.95 |
| NII Holdings | ( NIHD | Quote | Chart | News | PowerRating) |
95 | 94.92 | 360 | 80.70 | 100.91 |
| Magma Designs | ( LAVA | Quote | Chart | News | PowerRating) |
89 | 25.81 | 561 | 24.03 | 26.59 |
| Chicago Bridge & Iron | ( CBI | Quote | Chart | News | PowerRating) |
66 | 30.30 | 186 | 28.60 | 31.34 |
| Eresearch | ( ERES | Quote | Chart | News | PowerRating) |
96 | 35.58 | 1,596 | 33.83 | 35.71 |
| Sina.com | ( SINA | Quote | Chart | News | PowerRating) |
94 | 47.69 | 6,782 | 42.04 | 49 |
| Comtech Telecommunications | ( CMTL | Quote | Chart | News | PowerRating) |
95 | 37.22 | 407 | 35.10 | 38.70 |
| Altiris | ( ATRS | Quote | Chart | News | PowerRating) |
88 | 39.01 | 281 | 36.15 | 39.20 |
| Quality Systems | ( QSII | Quote | Chart | News | PowerRating) |
87 | 57.89 | 68 | 49.85 | 59.37 |
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 |
| Mobile Telesys | ( MBT | Quote | Chart | News | PowerRating) |
77 | 87.38 | 230 | 87.60 | 91 |