Market Monitor

  • After 4-5 days of great momentum we witnessed a mild correction yesterday.
  • We are at a zone where correction probabilities are high. We are closer to approaching 200 level on stocks down 25% or more 65 days.
  • One very good feature of this rally has been orderly buying and orderly pullbacks. Every time the market is about to get in to frothy territory ( as indicated by 50% plus in a month going beyond 20), it has pullback. The correction plays itself out, new sector break out and the rally keeps broadening.
  • I would be worried if I see 3-4 , 300 plus down days in 5 to 10 days time. Till then this rally has legs in my book. I have seen 100% plus figures climb to 1000 plus in most good rallies, by comparison this rally still is at midway stage. Risk management is still important, but premature bearishness has many bears sitting out the rally since 2003.
  • A correction might offer further chance to buy dips. It will offer lower risk entries on many good stocks which have started rallying recently.
  • The other very good feature of this rally has been the leadership continues to come from companies with good earnings, unlike in later stage of rally when there is more speculative lower quality companies leading up.
  • The earning season is coming to end. But soon market will turn its attention to next earning season and I already see some stocks breaking out in anticipation of next earnings season.


Anonymous said...

hello Pradeep,
what's the difference between the IBD 200 scan and the Reuters' Accelerating EPS scan. It looks like Reuters are looking way back in time (3 years) in order to decrease the noise, but that approach may have the disadvantage of missing companies in their very beginnning stage of growth and this is the stage where the rising of the stock is faster. What are your thoughts regarding the subject?

QUIKTDR said...


These are PCF's that I am using to reflect your four points;

The factors used to narrow the list are:
1 30 days or 65 days growth less than 10%
2 Relative Strength >=65
3 Current price must be within 15% of 52 week high or within 15% of recent high in case of IPO
4 No 4% plus breakout in last 10 days

1) 100 * (C1 - C66) / C66 <.90

2) Relative Strength >=65
((((C - C63) / C63) * .4) + (((C - C126) / C126) * .2) + (((C - C189) / C189) * .2) + (((C - C252) / C252) * .2)) * 100 >65

3) Current Price within 15% of 52 week high C > MAXH250 *.85

4) No 4% plus breakout in last 10 days ((MAXH10-MAXH10.10)/ MAXH10 *100)<4

Are we on the same page?

Pradeep Bonde said...

Two different thing.
Reuters Accelerating EPS scan takes a reference point and compares current quarter earnings to see if there is acceleration.

IBD EPS rating is an earnings momentum indicator. It is basically a weighted average of several quarters of earnings with recent earnings given higher weightage. So it is something like
2* EPS this quarter+2* EPS 2 quarters ago. +EPS 3 quarters ago+EPS4 quarters ago+1/2 3 years EPS growth+1/2 5 years EPS growth
This is not the exact formula. But that is how conceptually it is calculated and stocks are ranked based on it.
The IBD 200 is different it combines several other things.

Pradeep Bonde said...

You are doing something completely different. The scan conditions and formula are wrong.

Pradeep Bonde said...

Correction :
2* EPS growth this quarter+2* EPS growth 2 quarters ago. +EPS growth 3 quarters ago+EPS4 growth quarters ago+1/2 3 years EPS growth+1/2 5 years EPS growth

QUIKTDR said...

I hate to be a pain-in-the-...

but could you direct me to my errors because I obviously misunderstood your previous directions.

Pradeep Bonde said...

After market close I will do it. All your formula and logic needs to be corrected.

Pradeep Bonde said...

1 Take all stocks which satisfy this condition
( 100 * (C - C1) / C1) >= 4 AND V >= 1000 AND V > V1
Of 4% breakout
2 Find out out of them stocks with IBD 70 plus EPS. This is done by exporting he data from Telechart in to IBD lists and selecting the 70 plus rated stocks.
From the list only chose EPS 70 plus and relative Strength rating of 65 plus.
Now set up a watclist of them in Tc2007

From above watchlist select
30 days growth
100 * (C1 - C22) / C22
You have to chose those stocks with less than 10% growth
65 day growth
100 * (C1 - C66) / C66
You have to take stocks with less than 10% growth

3 For selected stocks take stock which are within 15% of 52 week high. This is done by sorting using Telechart scan" Price as % of 52 week high" and taking those with 85 or above value.
For IPO with less than 1 year trading history, you have to find this manually.

4 From the above list eliminate those which had 4% plus breakout in past 10 days not counting today.

Nashasa said...

Hi Pradeep,

Just wondering what is the importance and significance of the condition:
V >= 1000 AND V > V1. I think we might miss some low float stocks because of V >= 1000 condition.

Also, I think you mean 1 month growth as the formula suggests (100 * (C1 - C22) / C22) and not 30 "days" growth.

Thanks a lot for all your great work.

Pradeep Bonde said...

V>1000 means todays trading volume was above 100000. V>v1 means volume was greater than yesterdays volume.
While I like low float stock, they should have sufficient liquidity for trading purpose.

QUIKTDR said...


Thank you for your direction and sharing.I appreciate all of your succinct cerebral commentary.