How I buy rocket stocks bouncing up off of support (BOS): Examples: $HII and $AWK

GMI6
GMI-28
T210877%

After tradings stocks for over 50 years my trading strategy continues to evolve. I used to ignore indicators like stochastics and Bollinger Bands because I mistakenly believed that such concepts as overbought or oversold were useless. I fortunately  began to re-analyze some of my trades using these indicators and found these indicators to be extremely valuable.

The biggest problem faced by me and my students is buying great stocks that then turn out to be “extended.” These stocks promptly turn around and decline right after what we thought was a perfectly timed purchase. Sound familiar? After listening to some of the expert traders who come to lecture to my students I decided that rather than buying stocks that break to new highs, I should buy strong stocks that have rested and become oversold and then start up again. I do like buying green line break-outs (GLB) but maybe should wait to buy them after the break-out when they subsequently become oversold. The GLB is just evidence of a strong stock that has broken out to an all-time high after a rest of 3 months or more. At the moment of break-out they are rarely over-sold!

I prefer to buy  strong oversold stocks that are bouncing off of support (BOS) and to place a sell stop just below where they have bounced. This means that if the bounce fails I am sold out quickly with a small loss. Since a lot of my purchases will likely fail, it is critical to have very small losses when my trades go awry. When the bounce holds, I can then ride the stock and even add more to my position  so that my relatively few large profits make up for my many small losses. There is nothing more freeing emotionally than to buy a stock and place an immediate GTC stop loss order to sell with a very small loss. My mantra is that each small loss brings me closer to the next big gain–no ego allowed.

I have written a number of scans in TC2000 that can detect strong rising stocks that have become oversold and that are bouncing off of support  (BOS). My primary measure of oversold is a bounce up from the lower  15.2 daily Bollinger Band. Once I find a list of bouncing stocks I  investigate such things as their trading volume, fundamentals, market trend and anything else that can help me decide which stock to buy. But these additional  analyses really do not matter much because in the end it  is impossible to reliably predict which stock’s bounce will hold. By the way, I have used this strategy successfully with all types of stocks and ETFs.

Below is a chart of a BOS stock that bounced on Friday, HII. Each previous bounce from its lower BB is shown with a “B.” The 2 magenta lines show when the major market indexes’ recent mini-corrections ended. Note that even though the decline to Bottom 2, the Grexit decline, was lower and steeper than the decline to Bottom 1, HII managed to show incredible relative strength and resist the declines. HII was actually trading higher at Bottom 2 than Bottom 1! Will HII’s Friday bounce hold? I do not know. But if I wanted to trade it I would buy it on strength (if it trades above Friday’s high) on Monday and place my sell stop below the bounce, perhaps around 167.19. I am presenting this only as an educational example of my technique. I do not own HII.

HIIbouncesWhile I am not showing its chart, my favorite water stock, AWK, showed a similar BOS on Friday.

During the trading day, when TC2000 alerts me to a BOS, I often tweet the symbol to the world. You can receive my tweets intraday at @WishingWealth. Just keep in mind that I tweet only to teach people and to enable them to evaluate any of these stocks using their own criteria. I do not trade all of the stocks I tweet about. I am looking forward to fall semester when I will teach a class of 180 freshmen what I wish someone had taught me at their age.

The GMI remains at 6 (of 6).

GMI07222016

 

No tags for this post.

The stealth bull market in water–$AWK, $CWT; all my market indicators positive

GMI6
GMI-28
T210879%

In the credits at the end  of the movie The Big Short, it says that the speculator who profited big time from predicting the housing collapse was now investing in water. Since the beginning of the year, the water utilities index has climbed +35%, 10th best performance of 146 indexes. Here is the monthly chart of the water index. Note the green line break-out (GLB) to an all-time high last January. (The 3 pink vertical lines mark short term market decline bottoms and clearly show that this water index climbed throughout the storms.)

Screen Shot 2016-07-17 at 12.17.37 PMSo what are some of the water stocks  behind this tide? See this weekly chart of AWK (+35%):

Screen Shot 2016-07-17 at 12.20.34 PMAnd CWT (+38%):

Screen Shot 2016-07-17 at 12.21.45 PMThese stocks have now backed off a little and on Friday had over-sold daily stochastic 10.4 readings (<20).  I therefore am looking for a low risk entry after each of these stocks bounces up from support. I will then place a sell stop below the bounce. Maybe the fact that clean water is becoming scarce around the world and in California bodes well for these stocks? These investments may never be under water……

While this market is extended with the T2108 at 79%, all of my GMI market indicators remain positive. After all, it is earnings season…

GMI07152016

 

 

 

 

 

 

 

No tags for this post.

Flying on instruments; GLB: $ROCK

GMI6
GMI-27
T210865%

With the GMI at 6 (of 6) and the QQQ short term trend now up, I must grit my teeth and wade back into this market. I have to heed my indicators and not my emotions. Perhaps good 2nd quarter earnings will propel a lot of stocks higher. I am monitoring stocks with green line break-outs (GLB) to all-time highs. Check out ROCK, which last Friday broke through a top last reached in May, 2006:

Screen Shot 2016-07-10 at 9.49.28 PM

GMI07082016

 

No tags for this post.

GMI back to Buy, but $QQQ short term down-trend intact; ugly charts: $GS, $BAC, $AAPL, except $GLD

GMI5
GMI-27
T210860%

It has been a wild ride with the GMI signals reversing quickly from Sell to Buy. I like to give my signals a few days after a change  before I act on them.  So I will watch mainly from the sidelines for a while. I am very concerned about the down-trends in many bank stocks. Look at this “naked” chart of the 4,10, and 30 week (red line) averages for GS, a leader in the financial area. The gray solid line is the weekly close, currently leading the other averages lower.

Screen Shot 2016-07-04 at 12.25.06 PM

Most of the major banks have emerging down-trends like GS. Here is BAC.

Screen Shot 2016-07-04 at 12.26.47 PMAnd then there is the ugly AAPL chart.

Screen Shot 2016-07-04 at 12.27.41 PMOnce charts top out, one never knows where the bottom will be. At least for now, these charts indicate to me stormy weather ahead for this market and maybe the economy. And then there is strengthening gold, GLD, perhaps reflecting fear and a weakening dollar.

Screen Shot 2016-07-04 at 12.35.27 PMHere is the dollar ETF, UUP. Its 30 week average has topped out.

Screen Shot 2016-07-04 at 12.46.12 PM

And  the GMI is now 5 (of 6) and signalling  Buy!?

GMI07012016

 

No tags for this post.

Bloody Fridays lead to bloody Mondays; GMI on verge of Sell but markets very over-sold

GMI2
GMI-22
T210840%

It is at times like these when it helps me to look at longer term charts for perspective. This monthly chart of the QQQ back to 2000 shows that the current market is not yet showing signs of a major decline. (The DIA and SPY charts look similar.)

QQQmonthly09262016The QQQ would have to decline below recent support levels reached last February, around 94, to make me think this might turn into a bear. (I dismiss the prior “flash crash” low of August, 2015 as a man-made, contrived  aberration without technical significance.)

There are a few things making me think this market could bounce later this week. Bloody Fridays often lead to bloody Mondays as people look at their declining account balances over the weekend and sell stocks in a panic at the open. But three other signs make me think we may get a strong bounce: 1) the put/call ratio is at 1.17, a level denoting option traders’ extreme fear, which occurs typically at bounces/bottoms; 2) this week is end of quarter mutual fund window dressing when funds buy up the stronger stocks so their quarterly portfolio reports look good; and 3) on last Friday the most NASDAQ 100 stocks (66) traded at or below their lower 15.2 daily Bollinger Bands since the market bottom of last February.  Do these indicators guarantee a strong bounce next week? No, but I would not start selling Monday morning…………

The GMI is now at 2 (of 6) and will issue a Sell signal at Monday’s close unless the markets strengthen.

GMI06242016

No tags for this post.

$Z, $ATVI, $QQQ short term up-trend in jeopardy

GMI2
GMI-22
T210852%

Now that I have returned from CA,  I want to review two stocks I have tweeted  about, Z and ATVI. This daily chart of Z shows that it broke through its green line top (GLB)  on Friday, on higher than average trading volume. Arrows show high volume, likely fund buying.

ZGLBdaily

This monthly chart shows that the green line was drawn at the peak reached in October, 2015. A recent IPO (initial public offering) that forms a top, consolidates for months and then breaks out to an all-time high can prove to be a rocket stock (For example, FB did a GLB at $45 at month 17). It is critical, however, that the break-out hold and that Z not fall back below its green line.  If it does, I will sell and then monitor the stock for support back above the green line. I like to re-enter a stock that rises after a failed break-out.

Screen Shot 2016-06-18 at 1.32.35 PM

Another stock that I tweeted about was ATVI. This daily chart shows that ATVI  failed its recent attempt at a GLB and found support at its lower 15.2 Bollinger Band and 30 day average (red line). With the weak market on Friday, ATVI closed below its 30 day average. I will exit if it closes below its lower Bollinger Band, around 37.

Screen Shot 2016-06-18 at 1.37.49 PM

Meanwhile this market is getting very weak. Without a strong up day Monday, the QQQ short term trend (U-17) will turn down and the GMI may issue a Sell signal. The only thing keeping me in this market is my expectation for a strong end of month and end of quarter rally with mutual fund window dressing. Also, the market indexes look very short term oversold to me. However, we may have to first get through the vote in Great Britain and that may totally destroy the chances for any end of quarter rally. So this is time for me to be very vigilant and to have an exit strategy in place.

GMI06172016

No tags for this post.

Modified Guppy charts for $SPY and $QQQ different; 2nd quarter mutual fund window dressing

GMI6
GMI-26
T210862%

While my short and long term market trend indicators show an up-trend, my modified Guppy charts of the SPY and QQQ paint somewhat different pictures. My modified Guppy chart plots 6 shorter term and 6 longer term weekly exponential moving averages plus a dotted line showing each weekly close. This weekly chart of the SPY shows a clearly developed RWB up-trend. All shorter averages (red lines) are well above rising longer term averages (blue lines) with a white space separating them.

SPYguppy06102016The  chart of the QQQ is weaker, without a well defined RWB up-trend. The question remains, which index will lead the other?

Screen Shot 2016-06-11 at 11.12.44 AM

Nevertheless, the GMI remains at 6 (of 6).  The current decline may be setting up for a nice snap back rally as we get end of quarter mutual fund window dressing at the end of June. And then on to 2nd quarter earnings. So I am watching the popular growth stocks  for good entries and will tweet about stocks I think are bouncing on support (BOS). However, I will not post on this blog again until  Wednesday night.

GMI06102016

 

 

No tags for this post.