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Grinding higher

Posted on 11/26/2013
It is a slow grind higher with selective action. It is not a broad based up move. Rotation out of momentum leaders is a daily theme. QIHU was example of that yesterday.

But the selling is well contained and rotation in to new names is leading to slow  grinding higher move. Follow through on breakouts is not significant in most cases, so smaller profit targets are working. Biotech sector is clearly the leader at this stage.

Some of the good breakouts from yesterday are: BLMN PTIE IMUC






Good setups are showing up

Posted on 11/25/2013
The market has recovered from a brief pullback and is on way to establish new high.

The momentum stock continue to suffer setbacks and reversals. LL being the latest example of that.

However this is rotational market and new stocks are emerging to take on leadership role. Number of breakouts from stocks that were range bound or consolidating for few months is where money is flowing in to.

Some of the good breakouts are CHTR, PCP, WETF, and GST.






Two large momentum leaders that are setting up for possible breakouts are GOOG and NFLX .



Under the hood

Posted on 11/21/2013
The indexes are hiding the correction in momo leaders. If you just look at the indexes you will feel like market is having a just mild pullback. But the stocks that were up most in last one year or six month do not show that good a picture.

If you go and look at the Stockbee 50 data from few months you will see most top ranked stocks have reversed and some are down 30% plus in few weeks. This clearly shows rotation out of high relative strength stocks.

That is how momentum works. Stocks go up for long period of time with mild  and orderly corrections. At some sage late stage and euphoric buyers start bidding up shares to unsustainable levels. People start believing all kinds of rosy scenarios. If you see the action in 3D sector, it shows classic case study in this effect. Any thing and everything in that sector was going vertical for few weeks and now reversed hard.

The other speculative sector getting hit hard is recent IPO's. Many of them doubled on day one and now are steadily giving up gains. This is one of the reason why one should not buy IPO's on first day in post market. But when speculative sentiments are extremely bullish this happens again and again. Companies and merchant bankers exploit the excessive bullishness to push out as many IPO's as possible.

While the momentum leaders are getting hit, it is a not a broad based selling. Number of stocks continue to hold up well and there are signs of sector rotation. If you look at expanded set of stocks with confirmed momentum on yearly or 65 days basis, you will see large number of them are holding up well and many are having series of narrow range days. That kind of action can be hint of further gains ahead for those stocks.

Sentiments continue to be at very bullish levels and that might act as a damper on further big gains till year end . A muddled choppy range looks likely scenario. Which is not bad for being selective in picking your setups.


One of the setups showing up in Stockbee Trend Intensity Breakout scan yesterday was CBOE. Stock has confirmed momentum on 65 days and one year time frame. Had high volume breakout from a multi week range. Stocks in the sector are rallying and confirm this sector move. 

One setup and one day at a time

Posted on 11/19/2013
The market continues to move higher. Yesterday there was a bit of fade after 2:30. The sudden reversal on many momentum stocks is in line with rotational market.

Most of the momentum leaders are fading after breakouts. Some are already in correction mode. Some are down 20% plus in few weeks. A narrower set of stocks are leading the advance.

In this environment you have to look at specific setups and keep profit objective in line with market conditions.

As of now breakout continue to work and also shorts are having follow through. No follow through on shorts was a theme for many months, that has clearly changed as number of stocks pullback.


GOOG: A swing setup

Posted on 11/14/2013



Google (GOOG) was something I was watching for few days for swing entry. It offered good low risk entry for 50 to 100 dollar potential swing.

GOOG is recent earnings breakout. After earnings it offered a 50 point trade. After that it pulled back and setup again. The trend intensity on GOOG is 111%. It is in confirmed uptrend and this is a classic swing setup.

Some other stocks setting up well like GOOG for possible breakout are:

PCP

UCBI

FNSR

NXST

UEPS

ALGN

CRR

ARWR

ZHNE

Chop chop chop

Posted on 11/13/2013
Every time the market has rebounded from corrections in last one year, it has had V shaped recovery.

It reverses and just keeps heading high for 2 to 3 weeks before running out of gas. But this time rebound is not leading to follow through. So we have settled in to choppiness.

The choppiness is leading to wide ranges being formed on number of momentum stocks. Wide ranges do not tend to lead to successful breakout. A orderly pullback is good, but when large number of stocks show choppiness it is not a good sign. Next market advance will if it happens will be lead by even narrower set of stocks.

Fading of strength and breakdowns near recent high continues to be the theme. For tactical short swing trades those offer some opportunities.

Signs of distribution are clearly spreading in more stocks , DFS, TRV, CB, ACE, and ICE shown below are good examples of that.






High volume selling near recent high is what I see on many stocks. They may not follow through immediately, but after few days, they will at least revisit their range lows.

At this stage I am defensively positioned. Couple of stocks like GOOG, AAPL, and PCP are in good pullback mode and I am watching them for possible long plays in year end rally.

Stocks likely to breakout soon

Posted on 11/12/2013
We will know today  if the market an continue its bounce. There has been widespread selling in momentum names but this market has shown tendency to quickly recover from such selling in last 18 months.

Not many stocks are setting up for breakout in momentum universe. After looking at over 500 stocks with confirmed momentum , I found these 4 as possible candidates to watch.


MKTX
ALGN
ZLC
SID

On the short side one possible good setup is JOY. The stock has lagged the market and sector is also lagging. 


A bounce but will it follow through

Posted on 11/11/2013
The few days of oversold reading on index resulted in a bounce on Friday. That has been the pattern in this market . V shaped recovering after few days of selling.

However underlying stock action in momentum stock does not show high probability of continuation. Most of the momentum leaders are in retreat or range bound. There are very few orderly pullbacks.

That means one need to look at the new leaders. Banks were clearly the new leaders yesterday with several of them having breakouts on Friday. If they follow through then they will offer swing opportunities. 

Wide spread deterioration

Posted on 11/08/2013
Market witnessed a big breadth deterioration yesterday. But it was not at all surprising if you were tracking breadth trends.

Breadth was deteriorating for last 2 weeks. There was continuous deterioration. If you have been tracking the Stockbee Market Monitor  you would have seen it clearly. We were positioned in cash for the drop in anticipation of this for sometime. And did some quick short trades for nice profit yesterday.


The T2108 Worden indicator that tracks number of stocks above 40 day moving average was also showing same thing. It reached a high of 80 few weeks ago, that kind of extremely bullish breadth tends to attract pullbacks and especially in extended bull  market attracts profit taking.


This market is like a cat with nine lives , it has repeatedly bounced back from such selling. So task is now once again cut out for dip buyers. If they fail to show up then we might have a 5 to 8% correction.

The sentiments have become extremely bullish with record number of advisers and money managers bullish with expectation of year end rally. Plus money flow in to fund is at record as retail pile on in to stock. That backdrop is not a good sign for the market in short term. Markets climbing wall of worry is better than a market which is wildly bullish.

Top 50 momentum stocks for swing traders

Posted on 11/06/2013
The market continues to show breadth deterioration, but no major breakdown in indexes. A sideways moves of few wees, might result in continuation setup.

Markets have shown tendency to bounce back vigorously from pullbacks but struggled to make new high. After making marginal high they have tended to pullback. So we have settled in to a zig zag up move.

Many stocks with momentum are reflecting the same pattern seen in indexes. That means you either buy a pullback or be selective on breakout setups. There are still some good breakouts setups.

ICON is a good example of that kind of breakout setup that has worked. Stock had a high volume breakout 6 days ago. It showed up in Range expansion scan. Since then stock has had a nice up move. But ICON kind setups have been few.


While there are many earnings related breakouts happening, many of them are just one day affair with no follow through.

The momentum stock universe continues to show good consolidation in many names and around 12 to 15 stocks are setting up very well for possible breakout.

Top 50 Momentum stocks

CSIQ
ACAD
ZHNE
RSOL
IDRA
CSUN
SPWR
JKS
TSL
VIPS
OXBT
GENT
HSOL
RVLT
GST
GALT
LCI
TSLA
KERX
MTG
EVC
IQNT
RAD
FOE
YGE
HIMX
NXST
GTN
BCRX
STP
SUNE
ZLTQ
ADUS
LIN
ROIAK
CLDX
NFLX
PLUG
SOL
CLVS
BEAT
EDMC
III
FDML
NOAH
ABFS
YELP
ANAC
AEGR
ARWR


As a swing trader momentum stocks offer you the best choice of fast movers in the market. 

Slow deterioration in breadth

Posted on 11/04/2013
Market is showing signs of underlying selling. But the pace of selling is slow. This market has had history of rebounding strongly from any minor pullbacks so bullish side still looks attractive.

However number of momentum stocks which have lead the advance are now faltering and many have failed breakouts. The stocks which are missing earnings are getting punished severely , with several gap downs of 20% plus.

New leadership at this stage is not having much success putting together back to back multi day rallies. Many stocks that have broken out in last one month have struggled to follow through. In many cases they had big gaps but no follow through.

All in all a selective bull move is what is happening. Finding right stock becomes more critical.