10th day of $QQQ short term down-trend

GMI

1/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

17%

SPY and DIA have both closed below their critical 30 week averages. Is QQQ next to fall?

9th day of $QQQ short term down-trend

GMI

1/6

GMI-2

4/8

What is the GMI?
 

WORDEN T2108

25%

IBD stills sees market in correction and the GMI remains on a Sell signal. I did close out my position in calls on QID on Wednesday.

8th day of $QQQ short term down-trend; riding the inverse QQQ ETF, $QID

GMI

1/6

GMI-2

1/8

What is the GMI?
 

WORDEN T2108

17%

My call options on QID rose on Tuesday, making my entire account rise.  I am mainly in cash in my trading accounts with a few small longs that are hedged by my call options. For those of you new to the inverse ETF’s, QID is designed to rise 2X more than the QQQ declines.  Thus QQQ declined -1.4% and QID rose +2.9%.  My call options on QID give me leverage and reduce my risk because I can only lose the price of my options if I am wrong. This daily chart of QID illustrates how it has been rising lately with large black volume spikes.

QIDdaily10072014The chart of QID is the inverse (opposite) of its underlying index, QQQ.

QQQ10072014

 

7th day of $QQQ short term down-trend; $CMRX–I told you!

GMI

1/6

GMI-2

4/8

What is the GMI?
 

WORDEN T2108

21%

In Sunday night’s post I listed a number of biotech stocks that had had high volume green line break-outs. I said that some of them may be sitting on new cures.  Little did I know that CMRX would have a drug to fight Ebola. Technical analysis works!

Screen shot 2014-10-06 at 8.26.52 PM

6th day of $QQQ short term down-trend; 11 Biotechs with green line break-outs: $ARDX,$VRTX,$AGIO,$UTHR,$RCPT,$ESPR,$OVAS,$PTCT,$CMRX,$BSTC,$TTPH

GMI

1/6

GMI-2

2/8

What is the GMI?
 

WORDEN T2108

21%

The GMI remains on a Sell signal and I remain largely in cash and hedged.  I do hold a few biotech stocks, see discussion below. This market is rebounding from a high volume decline. It remains to be seen whether this rebound will retake prior peaks or falter somewhere before. This week is very critical for determining the significance of this bounce. I would want to see the QQQ close the week above 99.30.  The QQQ is now below its 10 week average and I cannot make money on the long side when this is so.  There were 50 52-week highs and 134 new lows on Friday.  One possible sign of a meaningful bounce was the fact that the Worden T2108 hit an intraday low of 13% on Thursday.  That is a very oversold level. Put/call ratios were also over 1.0, signalling extreme bearishness among option traders. IBD sees the market in a correction. However, it is just impossible to know in advance whether we have a “dead cat bounce” or a meaningful bottom. I will start to buy the TQQQ when and if the QQQ short term trend turns up….

GMI10032014

Meanwhile, my readers know that I have been focusing on the bio-tech area.  There are so many discoveries occurring in  drug research that this is one area that can buck the market trend. I have been scanning bio-techs each day for high volume break-outs.  I then look at monthly charts to see whether each is near a “green line break-out” to an all-time high. When a stock breaks above a high multi-month (at least 3 month) base, it often means something important is occurring within the company. Here are some weekly graphs of biotech stocks that have come to my attention.  Somewhere among these may be a company with the next new cure for a major disease. These companies are worthy of further research ( a review of recent news stories often explains why the stock surged) and monitoring for possible purchase. If any of these decline below their green line, I  become less interested in them. One approach I like is to buy a few shares (up to 25) of each just to keep them on my radar screen.  I  then slowly add more to those that prove themselves and exit those that fail. I am looking for multi-month or year long moves, not for a short bounce. Click on a chart to enlarge.

ARDXwkly VRTXwkly AGIOwkly UTHRwkly RCPTwkly ESPRwkly OVASwkly PTCTwkly CMRXwkly BSTCwkly TTPHwkly

When a stock breaks out of a monthly, green line top to an all-time high it can be the beginning of a huge move.  As an example, look at this monthly chart of AMGN in 2012. Note also what happened after a failed green line break-out in 2006. When a stock comes back below its green line, it is a sign for caution. But a stock can fail, find support at the break-out, and then resume its rise.

AMGNmonthly

 

 

5th day of $QQQ short term down-trend

GMI

1/6

GMI-2

2/8

What is the GMI?
 

WORDEN T2108

17%

I am mainly short and in cash.

4th day of $QQQ short term down-trend; IBD sees market correction

GMI

1/6

GMI-2

2/8

What is the GMI?
 

WORDEN T2108

18%

My trading account increased on Wednesday due to my call options on QID.  QID is designed to rise  2x as much as the QQQ falls and the call options bet that QID will rise and give me leverage, while minimizing risk.  When one buys options, the most that one can lose is the purchase price of the options. QID rose +3.2% on Wednesday as QQQ declined -1.6%.  Based on short term down-trends since 2006, if the current one last 5 days, it has a 78% chance of continuing for 11 or more days and a 41% chance of lasting 20 or more days.  IBD has now called the market in a correction.

3rd day of $QQQ short term down-trend

GMI

1/6

GMI-2

4/8

What is the GMI?
 

WORDEN T2108

23%

This market is teetering on the edge.  I have a few long positions which I have hedged with some call options on QID, just in case the QQQ falls off the cliff. This daily chart of SPY (S&P 500 index ETF) shows a lot of technical weakness.  Note the high volume down days illustrated by the red spikes. SPY is now below its critical 50 day average. Six of the last eight trading days have shown declines.

SPYdaily09302014

I counted 63 new highs and 318 new lows among all U.S. stocks on Tuesday.  Only 29% of all stocks rose. And now we are in that wonderful month of October! With Ebola on the horizon, this market could get sick.

2nd day of $QQQ short term down-trend; $BSTC,$ESPR: green line break-out

GMI

1/6

GMI-2

4/8

What is the GMI?
 

WORDEN T2108

24%

I am still not clear whether this new down-trend will last.  If it gets past 5 days, I will be more confident. Almost one half (41%) of the new short term down-trends since 2006 have lasted 5 days or less. Bio-techs remain strong, however. Here is a bio-tech, BSTC, that came to my attention when it broke its green line top on unusually high volume.  I have a small position in BSTC. Check out its daily chart. BSTC has held its own through all of the recent market volatility.

BSTCdaily

I also nibbled at ESPR. ESPR will likely consolidate after this huge beak-out.

ESPRdaily

Both of these stocks came to my attention through my TC2000 high volume up bio-tech scan.

This market is not out of the woods; Finding bio-tech stars like $AGIO and $VRTX

GMI

1/6

GMI-2

3/8

What is the GMI?
 

WORDEN T2108

25%

The GMI now registers 1 and flashed a Sell signal as of Friday’s close and my QQQ short term trend  has turned down.  Sometimes these changes in short term trend do not persist for more than a day or two, so I watch the market action very closely.   There are a lot of other technical indicators that make me very cautious this week.  The QQQ is sitting on its 10 week average.  A weekly close below it (about 98) would be a significant sign of a weakening in the  longer term trend. Failure of the bounce back above its daily 15.2 BB would be a serious sign of short term weakness. Both of these areas of support remain around 97.80-98.  I always look for a close below important support levels before I act.  I therefore restrict most of my daily trading to around 3:45 PM when I can estimate where things will close.  If I trade earlier in the day I am often whipsawed by the action. IBD still sees the up-trend under pressure, another sign for me to be cautious. There were 46 new highs and 214 new lows on Friday, the opposite of what I would expect from a healthy rising market. Again, the action was different for tech stocks versus other stocks:  63% of all stocks rose Friday compared with 91% of the Nasdaq 100 non-financial tech stocks. On the plus side, the T2108 is now at 25%, closer to where bounces occur and the put/call ratios have been above 1 for two days……..

Four Nasdaq 100 stocks have a 15.4 daily stochastic above 80, representing recent price strength. They are VRTX, SIAL, FB, EBAY. While a reading above 80 is often considered over bought, strong stocks can remain at this level for long periods. The signal I watch for is a decline in the stochastic below 80 after being above for a number of days.

I don’t often nail a break-out, but did you see what AGIO did on Friday after I had posted about it Thursday night?

AGIOtakesoff

I had no inside information. I just let the technical indicators and the news alert me that something was up. I learned from my stock buddy, Judy, who picks a lot of biotech winners, that one can learn a lot by reading news reports about drug companies’ promising clinical trials and scheduled presentations.  Being in the research field, I know that one schedules public presentations to highlight good research results. The astute reader might have read last week that AGIO has a big presentation coming up about their research on new drugs they are developing. And while it pains me to say it, Jim Cramer has been crowing about AGIO.

I run a TC2000 scan every night for bio-tech stocks that have advanced that day on unusually high volume. Then Judy goes to work researching them to uncover the gems. The unusual trading volume is a clue to finding bio-tech  gems like AGIO and even VRTX before they take off. The exciting money to be made is in the revolution occurring in drug development.

VRTXcluesNow, I know that some of you are going to write me to request the stocks that came up in my bio-tech scan from last night. If I listed the stocks, I suspect some people would just buy them and not do the due diligence to uncover the probable winners. And this, even though the market up-trend is in doubt!  The scan did uncover 7 stocks (XXXX, XXXX, XXXX, XXXX, XXXX, XXXX, XXXX). You will just have to stay tuned to see if I write about them–after doing the necessary research. I maintain a growing watch list of all stocks that have recently been detected by this bio-tech scan. I monitor them over time for signs of strength and news….

This week is critical for telling me the market’s probable trend. So I am unlikely to buy anything right now. Will Friday’s rebound hold???

GMI09262015rev

 

 



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