COST has a GLB to an all-time high.
As did NTES.
Will AMZN be next?
The GMI table:
I created a scan in TC2000 that looks for strong stocks hitting a 100 day high that did not hit a 100 day high the prior day (I want a stock to be just breaking out), that is up significantly from a year ago and that traded an above average number of shares that day. This scan identified 19 stocks, of which PJC is one.
I like the the technicals and fundamentals of PJC. It also has a Composite Rating in IBD=95. You can access this scan in my TC2000 Club at www.wishingwealthblog.com/club. The scan is also described in my blog’s glossary above. I use the results of my scans as a starting point to identify strong stocks that I must then research for other technical and fundamental attributes. I like to run this scan during the last hour of the trading day (I do not want a stock that breaks out early only to reverse by the end of the day) to find stocks breaking out on above average volume. If I find one I like, I might buy an initial position and place a sell stop below the day’s low. Here are some charts on PJC. This weekly chart indicates a GLB (Green Line Break-out to an all-time high, see Glossary for definition).
The daily chart shows the increased volume on Friday. This might be also be considered a cup with handle break-out.
The weekly chart shows an established RWB rocket pattern and a break-out from a base.
The GMI remains at 6 (of 6).
I have noticed over the years that when many of the rocket stocks I follow all move up together the market is often near the end of a move. This happened last week. Also, after earnings season is over, many stocks rest or go into a decline until the next quarter’s earnings come out. Furthermore, the FANG stocks(FB,AMZN,NFLX,GOOGL) have performed poorly after earnings came out, even after a beat. So I am taking action to make sure I do not lose much of my recent profits. I am also not holding anything through earnings and I am raising my sell stops on all of my positions…
GKOS, one of the GLB stocks I have tweeted about has been strong. After a false start, a GLB occurred with high volume and the stock has not looked back, but it has now gone vertical. Note that the first GLB in January failed and was followed by a successful one.This is a common occurrence. I often buy back stocks I have been shaken out of which then go on to produce a profitable trade. GKOS is also a possible cup with handle break-out.
One of the scans (01292017ATHhipast40daysBLBB, see this blog’s glossary for a definition) I released in my TC2000 Club (wishingwealthblog.com/club) identified a recent GLB stock, HQY, in my ATH watchlist that has just bounced off its 15.2 daily lower Bollinger Band. I am watching to see if this stock gains momentum this week. But earnings are due on 2/6. Note the successful GLB in November, followed by a consolidation in December, a rise in January and another consolidation. This is how a growth stock should behave, building base upon base. My strategy is to buy on a bounce off of support or at a break-out from a base on high volume. HQY came public in 2014 and has more than doubled over the past year.
As many of you know, my stock buddy, Judy, has a great ability to pick winners. She has been talking to me about EXEL for some time and I have started monitoring it. While it is not near its ATH ($50.50, the green line below is from an earlier peak) it is showing promising technical strength. Note the series of base break-outs at A,B,C. Judy is a “concept” focused technical analyst and likes to find stocks that she thinks have great products or are in industries of the future. Someone else apparently agrees with her and is apparently accumulating EXEL…..
All of the GMI and GMI-2 components are positive. Friday was the 39th day (U-39) of the current QQQ short term up-trend. Since the first day of that up-trend on 12/8, QQQ is up +6% and the TQQQ is +19.3%. In that time, GKOS is up +29.9%. HQY +14.7% and EXEL +19.8%.
One of my favorite stock gurus, David Ryan, William O’Neil’s protege, when asked about the types of set-ups he looks for, said:
“I basically simplify it down to two, breakouts and pullbacks. Don’t get confused by all the different formations. You don’t really have to look for cup with handles, or saucers, or “W” formations. You just have to draw a line across the top of where most of the stock’s trading has taken place. Then you buy as it moves through that line. It is as simple as that. I always like to see a very tight price pattern before the stock breaks to new highs. Buying pullbacks are a bit more complicated but offer another entry point to get aboard a leading stock.”
Momentum Masters, Mark Minervini, David Ryan, Dan Zanger and Marl Ritchie II, 2015, p. 72.
Momentum Masters compares answers to a series of questions asked of four of the best stock traders ever. I highly recommend it. By the way, David Ryan is doing a webcast for IBD on his current take of the market this week. Click the link or go to investors.com for information to register.
Ryan’s quote above really fits in well with my trading strategy. I draw a green line at a stock’s all time high that has not been surpassed for at least 3 months. I then look for a break above that line (Green Line Break-out, GLB). I set an alert in TC2000 to tell me when the GLB occurs and when it does I then inspect the stock for signs of unusual break-out volume and good fundamentals. Alternatively, and more often, I look for a stock near or just above a recent GLB that has pulled back and become over-sold and started to rise. If I buy it, I place my sell stop close, just below the recent bounce/support. I never know if a bounce will work out, but if it fails, I exit with a small loss. That is the key to this game–a few large gains and many small losses. Many successful traders say they are right on fewer than 50% of their trades.
This weekend I created a new TC2000 scan that you can run yourself when you get TC2000 (See $25 coupon offer at top of this page). All of the students in my new honors class will learn how to use TC2000. Once on TC2000, join my Club and select this scan: 01292017ATHhipast40daysBLBB. All of my publicly available free scans are described in the Glossary tab for this blog. This new scan looks at all stocks in my ongoing WatchList of about 800 stocks that have recently hit an all-time high (ATH). It finds the subset of them that hit a new high in the past 40 days and that is now bouncing from up from its lower Bollinger Band. In simple words, the scan finds rocket stocks trading near their ATH that have recently hit their peak and that have since pulled back and started up. I next look to see if the stock is above its last GLB. Many stocks rise after their GLB and then pull back and resume their advance. PLAY is one of the 15 stocks that came up in this scan, which I give as an example.
PLAY gapped up on unusually high volume in December and then traded sideways since. Last Friday it bounced off of its lower 15.2 daily BB and closed near its high of the day. Is this the beginning of a resumption of its rise? No one knows, but it might be. If on Monday PLAY trades higher than Friday’s high of 54.88, I might get interested enough to buy some. Unlike a break-out, a bounce does not require higher volume. The low trading volume is a sign that the selling has dried up. Note from the line at the top of this chart that PLAY is due to report earnings on 4/4 and last quarter’s earnings were up +127% according to stats in TC2000. It has a recent short ratio of 7.2 and is up 47% over the past year. It is also on the current IBD50 list with a COMP rating of 93 and EPS rating of 99–not too shabby….
Meanwhile the GMI remains at 6 (of 6).
I spent some time this weekend entering descriptive information about my WatchLists and scans in the glossary from this blog. Those of you who have TC2000 can join my Club and access several WatchLists and EasyScans that I have published (access my club in your library tab). For example, I have a WatchList called Alltimehighs. You can now access this WatchList to monitor or run some of the scans I have developed that search this list for promising stocks. My Darvas scan, described in the glossary , identified 53 stocks this weekend. One of these, IRBT looks interesting to me. It had a GLB to an all time high in late October, then rose to around $60. It then entered a 5 week consolidation. IRBT showed signs of renewed strength last week. IRBT reports earnings on 2/8. I have a small position.
IRBT has a maximum RWBCount of 12 (of 12). All of the weekly moving averages line up properly.
In early January, I tweeted intraday that a recent GLB stock, ANET, looked like it was moving up on above average volume. Seven days afterwards ANET gapped down on huge volume on some bad legal news. I saw no technical indicator that warned me in advance about this significant decline except for the fact that the stock traded back below its 30 day average (red line) a few days later, but it bounced. Also, the fact that the rise I wrote about only lasted for another day and the Bollinger Band expansion failed to continue were other signs of possible weakness. Technical signals can give me an edge, but they are not perfect. That is why I take small initial positions and only add to them if they prove themselves. If I owned ANET I would not sell now unless it fails to hold the recent support it had below its lower Bollinger Band, around 87.50.
The GMI remains at 5 (of 6) and on a Green signal. The QQQ short term up-trend has now lasted 29 days (U-29).
I wanted to examine how the index ETFs have performed since the GMI (my General Market Index) turned green on 11/10/2016. The GMI components mainly measure momentum in the QQQ so its signals should probably work better for nonfinancial growth and tech stocks contained in the NASDAQ 100 index (measured by the QQQ).
This table shows that between 11/10 and last Friday (1/13) the QQQ rose +6.4%, the SPY +4.7% and the DIA +5.6%. Note also, by definition, the leveraged ETFs for the QQQ rose much more, the QLD rose +13.3% and the TQQQ +20.2%. The really interesting finding in the table is that these leveraged ETF far outperformed most of the individual stocks in these indexes. For example, only 12% of the NASDAQ 100 stocks, 10% of the Dow stocks, and 13% of the S&P500 stocks rose more than 13%. In other words, the QLD did better than 87-90% of the stocks in these indexes. The triple leveraged ETF, TQQQ, beat about 96% of the individual stocks in these three indexes! So I again come to the conclusion that if I can pick in advance the 4% of stocks that can beat the TQQQ, then I should do so. However, for most of us mortals, one only has to ride the TQQQ during an up-trend (GMI=green) to beat the pants off of most individual stocks, and it is so much easier to monitor one index ETF than to manage a portfolio of individual stocks……..(I have been accumulating the TQQQ since the GMI flashed green.)
The GMI remains green with 5 (of 6) components positive.
The GMI is at only 5 (of 6) because my 10 day successful new high indicator was negative. Only one third of the stocks that hit a new high 10 days ago closed higher than they did 10 days ago. When stocks that hit a new high do not continue to rise, it is one sign of potential weakness I track. The QQQ has closed above its 10 week average for 5 weeks but the SPY has done so for 9 weeks. As you know, the tech stocks measured by the QQQ, have just recently revived. In fact, the QQQ last week broke above its high of 120.50 reached in April 2000. The QQQ closed the week at 121.93. So those persons who say they never take a loss because the market eventually comes back are vindicated–if they held on for 16 years! (I wonder how many of them started out as buy and hope types but panicked and sold out as the QQQ bottomed at 19.76 in October, 2002 or again at the 2008 bottom at 25.05?)
The fact that the QQQ did close the week above 120.50 is a sign of strength. However, there are a few things about this rally that concern me. I track many statistics each evening after the markets close. I noticed that only 138 of almost 5,000 stocks hit a new high on Friday. This is far below the numbers seen in much of December. On December 5-12, the number of stocks hitting new highs each day ranged from 430-908. The last 5 days the range was 88-306. So while the QQQ may trade at an all-time high, new highs are not keeping up. On Friday, only 39% of all stocks rose, compared to about two thirds of the Nasdaq 100 stocks reflected in the QQQ. So there is tremendous heterogeneity in the way stocks are performing. Maybe, as I wrote last week, it is time for the tech stocks to rally as the other stocks rest. People have made some money and may be more willing to increase their risk to buy the FANG stocks (FB,AMZN,NFLX,GOOGL). Regardless, I must ride the trend until it ends. You know better than to ask me (or anyone else) to predict when that will be. As they say, bull markets are like sex, they feel best just before they end……
Last week a TC2000 alert I had set went off but I did not notice it until this weekend. SHOP convincingly broke above its green line (GLB) to an all-time high, after consolidating about 4 months around its green line. This chart shows a wonderful high volume break-out last week in SHOP, an IPO from 2015. SHOP is probably worth looking into as it connects with Amazon. If I bought it I would exit if it returns below its green line.
Here is the GMI table: