New $QQQ short term down-trend; $NFLX breaking out? TC2000 scan results: 7 rocket stocks

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Friday marked the first day of a new QQQ short term down-trend. Note, however, that many (about 40%) QQQ short term down-trends end in under 5 days. Both the QQQ, SPY and DIA remain in longer term Stage II up-trends.  The QQQ, however, has now closed back below its 10 week average. These weekly charts of SPY and QQQ show important differences. SPY is climbing its 4 week average (red dotted line) which is above its 10wk (blue dotted) and 30 wk average (red line).  SPY broke out of a multi-week counter-trend decline (purple line) 4 weeks ago.

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In contrast, the QQQ is now below its 4wk and 10wk averages. I can even see signs of a possible head and shoulders top forming. A close below its 30 week average (near 114) would be a sign of major weakness. The disparity between the SPY, DIA and the QQQ is likely caused by the Trump rally’s focus mainly on the infrastructure and financial stocks, not dominant in the QQQ. Once the euphoria of anticipation under-pinning this rally comes up against the reality of Democratic governing, we could face major market weakness beginning in January. The QQQ will likely rally towards the end of December when mutual funds spruce up their portfolios for end of quarter/year reports to their shareholders. Such a rally may be a great time to exit positions or raise stops….

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On Friday I tweeted intraday (@wishingwealth) that NFLX looked like it was breaking out of a consolidation, following its huge high volume spike in the third week of October after it released earnings. A close back below the declining trend line (purple), around 115, would indicate to me a possible failure of the break-out and a reason to exit the trade.

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For those of you who signed up last week to access my Club on TC2000, I just published the scan that produced these 7 rocket stocks (all are above their last green line tops) this weekend. These are stocks with recent EPS change of at least + 90% that  have advanced a lot this year and rose last week on above average weekly trading volume. See if your scan yields these too. (This scan will only yield stocks towards the end of a week because of its requirement for above average weekly volume.)

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The GMI remains at 5 (of 6). The more sensitive GMI-2 is at 1 (of 8), reflecting the short term weakness in the QQQ. Note the huge decline to only 35% of NASDAQ 100 stocks above their daily 12.26.9 MACD signal lines. Time to be especially vigilant.

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New TC2000 Scan yields 4 break-outs from consolidation: $WB, $SINA $HPP $ARCW

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I wrote a post last week about the benefits of focusing on weekly charts. Weekly charts, unlike daily charts,  more clearly show me the trend and are less likely to make me exit a strong stock too soon. I spent some time this weekend trying to write a scan for TC2000 that would bring up growth stocks emerging from a multi-week consolidation. The scan required a minimum amount of weekly volume and the stock must have shown above average weekly trading volume on the week of the break-out. The company must also have shown an increase in the latest quarterly earnings of at least  +50%. Four stocks out of approximately 4900 US stocks were selected by this scan.  Given the strong market environment, many stocks have already broken out. After running a scan like this  I can then research the stocks for possible entry, looking at both technicals and fundamentals.

This weekly chart of one of the four stocks,  WB, is fully annotated so you can see how I have set up my charts to quickly show other critical information contained in the TC2000 database. Arrow A shows that WB had  latest quarterly earnings up 500%.  Arrow B shows the latest short interest ratio was 3.6 (This means that it would take about 3.6 days to cover all of the shares speculators have sold short, at the stock’s recent average daily trading volume. The higher the number, the greater the buying pressure from a break-out.) Arrow C shows that the stock price is currently 2.64 times its price 250 days ago. (I like to buy stocks that have already doubled in the past year. Stocks, like people, tend to repeat their past behavior.) Arrow D shows WB’s projected next earnings reporting date, a new feature in Version 16 of TC2000. The green oval shows last week’s break-out above a declining trend (purple line) on above average weekly volume. In fact, this was the highest weekly volume for WB since September 2014! It could signify the resumption of the up-trend or it could mean nothing….

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Another stock that came out of this scan was SINA. I did not annotate the remaining stocks. If you have read this far I know you can interpret the remaining weekly charts using the above example.

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And HPP.

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And ARCW.

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I do not know if any of these stocks will keep rising. But the market has been strong and many stocks have already broken out to new highs. Only WB and HPP are flirting with their all-time highs, a valuable characteristic. Both are above recent Green Line Break-outs (GLB). I like to buy stocks that have advanced a lot, then rested for a few weeks, and then break out of their consolidation on unusually high volume.

If you have TC2000, I have started making some of my scans and watchlists available to my students  in a TC2000 library (Club, Dr. Wish). If you want access to my library, provide your name and email below and receive the free link in your email.

Current TC2000 Users, Join my club:

If you do not already subscribe to TC2000, you can get a $25 discount (new subscribers only) by clicking here or going to: http://www.tc2000.com/bonus/WWB  (Additionally, your sign-up will generate a small commission for us to keep the lights on, so, thank you.)

You might also attend one of the many Worden TC2000 free training workshops when they come to a city near you. Ask them for a schedule at support@worden.com. That is how I began learning how to use TC2000 the past 20+ years. They also now post many video TC2000 tutorials on their site. If you follow me on Twitter I often tweet out interesting stocks intraday: @wishingwealth  (no guarantees, of course, stocks I tweet about are for readers’ own education, further research and consideration).

Meanwhile the market remains strong with the GMI at 6 (of 6) and the GMI-2 at 7 (of 8). And the new QQQ short term up-trend has now reached its critical 5th day.  According to my analysis of QQQ short term trends over the past 10 years, once a new up-trend lasts 5 days, it has a 75% chance of reaching 11-88 days. Take a look at the GLB tracker to the right of this page to see how well GLB stocks have been doing in this strong market up-trend. Nothing like a strong market to make everyone look like a genius!

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Short and long term trends now up; On using weekly charts to stay in a growth stock: $NTES

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The DIA, SPY and QQQ index ETFs are all above their 10 week averages again! Stocks are breaking out everywhere. But how to ride them to big proftis? If you are like me, you often hop on a growth stock, only to sell out prematurely on weakness that you spotted on a daily chart, and the stock continues to climb much higher without you. The great gurus I follow say that the key to making big money trading is that when the rare pick starts to really work out, stay with it until it shows genuine signs of weakening. Jesse Livermore, the consummate trader,  would often say that he hated to lose his position in a rising stock because he had sold out too quickly. In this new day of instant financial data feeds, I suspect one of the enemies of staying with a good stock (at least for swing traders)  is focusing on charts with daily and shorter time periods to signal an exit. I am told that the great William ONeil, founder of IBD, used only weekly charts because they more clearly revealed to him the meaningful stock trends. If I checked my blood pressure or cholesterol daily or hourly, I suspect I might see  a lot of noise and volatility that would make it harder to obtain a valid assessment of my longer term status.

As a solution to this problem, I have found it very helpful to focus on weekly charts using three simple moving averages: 4wk, 10wk and 30wk. An advancing growth stock will have a pattern of the 4wk>10wk>30wk for long periods of time, in addition to being near an all-time high. During a strong advance the stock will go many weeks without ever closing below its 4wk average. Once the stock closes below its 4wk it is a potential sign of weakening at which point I might raise my stops or sell a little. A weekly close below the 10week is a call for me to exit my position immediately. Growth stocks should not close the week below their 10 week average.

A weekly chart is worth a 1,000 words, so it will be easier to demonstrate this strategy with an example. NTES showed the 4>10>30 pattern from June, 2016 through November, or for about 21 weeks (4wk=red dotted line, 10wk=blue dotted, 3o wk=red solid). During that time the stock rose over 40%.  During this period, NTES closed  the week below its 4wk average only 3 times. I say closed the week because a stock often trades intraweek below its 4wk average only to find support and close the week back above it. This strategy therefore works well for part-time traders like me who are able to review their stocks over the weekend or near Friday’s close. I am looking for weekly closes below the 4wk after several weeks of closing above it and for any close below the 10 wk average. In early November, NTES closed below its 4wk and then its 10week, a clear signal for me to exit (if I had owned it). Note that NTES is still in a Stage 2 advance, above its rising 30 week average, and I would consider purchasing it with a weekly close back above the 10 week average.

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Note how this strategy would have kept one in NVDA: (I wish I had used it!)

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I often tell my students not to take what I teach them on faith, but to test everything for themselves. Go  out and look at the weekly charts of stocks you are trading and see if this method could have helped you. I have too many times been prematurely shaken out of a stock by focusing on its daily movements, only to see that a glance at its weekly chart could have given me the confidence to ride it higher.  This method slows down my selling. I described this strategy in greater detail  in a 2012 speech to the Houston Worden TC2000 Users group. A link to the archived webinar appears here and to the right of this page.

Meanwhile the GMI is back to 6 (of 6) and the QQQ short term trend is now up (U-1).

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$QQQ short term down-trend but GMI= Green; 16 GLB stocks: $OLLI $WOR $AOSL $COHR $PLNT $AMPH $IRBT $LMAT $VSAT $ASTE $WLDN $CC $ZAYO $HQY $MLM $MYRG

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This has been a schizoid market, with the leading tech stocks in the QQQ faltering, as the large cap growth stocks and biotechs took off. The FANG stocks (FB, AMZN, NFLX, GOOGL) sold off, as banks and large caps, defense stocks and construction stocks soared. Clearly someone has played the Trump card and built the proverbial WALL of worry for stocks (and would-be immigrants)  to scale. One must never fight the tape, and many stocks are breaking out, just not the ones I normally focus on. On Friday, there were 540 new 52 week highs and only 51 new lows in my universe of  4,900 US stocks.

The best performing S&P sectors last week were: XLF, +11% (financials), XLI,+8% (industrials) and XLV, +6% (health care). XLU, -4% (utilities) were tossed overboard along with climate change stocks (check out the sinking solar ETF, TAN).  TLT, the ETF representing 20+ year US treasuries, declined -7% reflecting fears of HUGE government projects, inflation and higher interest rates. Defense stocks flew high with NOC (+9.9%), RTN (+11.5%) and LMT (+9.7%).  The Trump-ets are proclaiming a rise in defense spending and build-up. And maybe we will rebuild our roads and airports with CAT (+13%) ASTE (+16.8%) and X (+29.5%). No longer fearing having to swallow a bitter pill offered by a “nasty woman”, the biotechs rebounded last week, but most still remain well below their prior peaks.

Unfortunately, as a trader of growth stocks, I was not in the above stocks last week in my trading accounts, although I hope the mutual funds in my university pensions plans were. For those of us hiding in the index ETFs, we profited last week with SPY (+7.9%) and the DIA (+5.5%) but not with QQQ (+1.9%). For quite a while I had observed that the QQQ was outperforming these other two indexes–but last week reversed everything! It remains to be seen whether the growth stocks in the NASDAQ 100 will regain the lead–but in which direction?

Still, a lot of stocks broke out to new highs last week. I detected a lot of GLB (Green Line Break-outs to all time highs), and with nice increases in trading volume. Among them were: OLLI, WOR, AOSL, COHR, PLNT, AMPH, IRBT, LMAT, VSAT, ASTE, WLDN, CC, ZAYO, HQY, MLM, MYRG. (Some of these broke through their green line tops a few days earlier.) I do not know much about these stocks but they will remain in a special watchlist to monitor. One exception is OLLI, whose weekly chart appears below. OLLI doubled in a large advance and entered a nice 7 month consolidation from which it broke out to new highs on Friday. I must confess I bought some  OLLI on Friday. I will exit if the break out above the green line fails. I always know in advance the price action that will tell me that  my purchase is wrong and where I must exit. When a stock fails to behave as I anticipated I get out with a small loss and move on to the next winner. I do not marry a stock. As William O’Neil has written, all stocks are bad, unless they are going up! 

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And HQY caught my attention, (Note support at 30 week avg–red line, and unusually high weekly volume–and it has already doubled from its lows!):

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Below is the schizoid GMI table. The QQQ remains in the 11th day of a short term down-trend (D-11) while the GMI remains on a Green signal. The QQQ remains below its 10 week average even as the SPY has been above its 10 week average for 10 weeks!

I will tweet intraday this week if the short term trend reverses up. I also tweet about GLBs that I discover, so you can follow my tweets: @wishingwealtth (Remember, I write to teach people my methods and none of the above constitutes recommendations. One must always research stocks before buying and take into consideration your financial situation and tolerance for risk.

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GMI signals applied to $QQQ

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Below is a chart of the GMI signals applied to the QQQ since 2006, when I started it.  It has kept me out of the major declines and back in afterwards, although not at the exact bottom. This is a trend following tool. The GMI signals are computed differently than my short term trend count for the QQQ, currently at D-6.

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Here is just the past 3 years.
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The GMI is currently 1 (of 6) and on a Red signal since October 12. I am very defensive for now.  Thank you to my co-instructor, David McCandlish, for creating the charts above.

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New $QQQ short term down-trend–How long do down-trends last?

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I updated  my analysis from 2013 of how long QQQ short term trends last. The findings are remarkably similar: (To see the results from 2013 click here.)

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It is clear that short term up-trends last longer than down-trends. In fact, 41% of down-trends ended within 5 days, compared to 21% of up-trends. But 63% of up-trends and 56% of down-trends lasted from 6-47 days.  Up-trends were 5x more likely than down-trends (16% vs. 3%) to reach 50+ days. Thus, while Friday was the first day of a new short term QQQ down-trend, I will not wager much on it (by buying SQQQ) until it reaches beyond 5 days. Keep in mind that any move might last longer than those in the table if they have a few brief trend changes in the middle. For example, 25 days up, 3 days down and another 20 days up. In the past, I have found success buying TQQQ when the short term trend turns up. I often follow this strategy using the GMI signals, which are different from the short term trend signals. I have shown that that strategy outperformed about 95% of individual stocks. (It is hardest psychologically to buy when the trend or GMI first changes to up because one is often licking his wounds and gun shy from the prior down-trend.)

Meanwhile, the major indexes are looking weak. The SPY has closed below its critical 10 week average for 8 straight weeks and the QQQ has now closed below its 10 week average. I found in the past that I was unlikely to make money going long growth stocks when the QQQ was below its 10 week average. And the GMI is 1 and RED, with only the Weekly QQQ component positive. This component means the QQQ remains in a Stage 2 up-trend. But the remaining critical indicators in the GMI are all negative. The IBD Mutual Fund Index is below its 50 day average, indicating that the pros cannot trade growth stocks profitably. No wonder it has been difficult for me to successfully trade growth stocks recently. As William O’Neil and Nicolas Darvas urged, it s much safer to trade consistent with the trend of the major market averages. I do not fight the general market’s trend.

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Watching for Halloween rally; $AAPL supporting $QQQ; Interest rates $TLT and the dollar $UUP rise and gold $GLD falls

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I am mainly in cash in my trading accounts but holding a small position in SQQQ. If the short term down-trend continues a few more days I will add more SQQQ (the inverse 3x leveraged bearish QQQ ETF). The T2108 is at 31% and would have to fall closer to 10% to suggest a very over-sold market where significant declines end. The 10.4 daily stochastic is at 25, low, but still not in extremely oversold territory. And the QQQ has just had an oversold bounce from its lower 15.2 Bollinger Band but it looks like this support level could fail to hold. The daily 12/26/9 MACD histograms are negative and declining, showing downward momentum. The GMI signal recently flashed Red, but  this signal has recently coincided with short term bottoms rather than tops. Time for me to be extra careful and to conserve cash while Mr. Market makes up his mind which direction to go.

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However, Mark Hulbert’s recent post reminds me that this may be the time to return to the market according to  the “Sell in May” strategy. Mark has a perspicacious empirical approach to analyzing the market’s behavior. Coming up is the seasonally strongest time for the market, he writes,  and the current weakness may be setting us up for it. Scare everyone into selling out to stronger hands who will buy low and profit from the subsequent move up. Most advances begin after a decline. So I will reverse and go long if this market shows any signs of strength in the coming days………

One of the major reasons the QQQ is outperforming SPY and DIA is the technical strength shown by AAPL, which is heavily weighted in the computation of QQQ’s underlying index (NASDAQ 100). AAPL is defying gravity and may  be the last component to  decline before the current weakness in the QQQ ends? (When the bulls give up on AAPL, the end of the decline may be near.)

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A major factor behind the weakening of the indexes is falling long term government bonds, representing higher interest rates and leading to lower gold prices. I follow the 20+ year government bond ETF, TLT, as an indicator of how bond traders feel about long term interest rates. TLT is in  a swoon, leading to a higher dollar and lower gold prices.

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And the dollar rises, as shown by UUP.

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And gold falls, as shown by GLD. It all fits together like a jig saw puzzle–until it doesn’t…

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The GMI table below shows that the QQQ has just closed the week below its critical 10 week average while the SPY has done so for 6 straight weeks. Will there be a Halloween rally?

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