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Blog Post: One of my favorite set-ups, ATHOSB, found one stock, $SQM, check it out and see the tutorial

@ 11:14 pm
GMI0/6
GMI-21/9
T210816%

I scanned over 700 stocks on my  IBD/MS watchlist and found only one that looks promising. This is one of my favorite set-ups. It scans for stocks that recently reached an all time high (ATH), then became oversold and now looks like it could bounce (OSB). The beauty of buying a strong stock that may be bouncing is that if the bounce fails it is immediately apparent and I can exit promptly with a small loss.  My measure of oversold is based on the daily 10.1, 10.4 and 10.4.4 stochastics indicators. See if you can figure out the signals. These signals are designated by the black and green dots on this chart. In a weak market most set-ups fail, so it will be interesting to see if SQM works out. In a strong up-trending market this is a powerful set-up.

SQM has great fundamentals. MarketSmith indicates that this lithium producer is expected to grow earnings this year +353%, has a composite rating of 99 and ROE of 24%. Last quarter’s sales were up +282%. This is a CAN SLIM type stock. But can it climb in this market? Check out this chart. Note the prior oversold signals did not lead to a rise. I like the fact that SQM is just above its lower 2.15 Bollinger band and well below the upper band. A bounce could therefore extend to $111. My stop loss would be around $90.29. I do not own it. This is just an example for educational purposes only. You can find a tutorial created by my late co-instructor, David McCandlish, that shows how to add the dots to your chart here.

 

 

Blog Post: 1,032 new lows among US stocks 83 fewer than Monday; Nasdaq 100 stocks are very oversold and primed to bounce? See data on Bollinger bands.

@ 6:42 pm
GMI0/6
GMI-21/9
T210813%

I track after the close the percentage of Nasdaq100 stocks that traded intraday below their lower 2.15 Bollinger bands. Such a reading is extremely oversold and where stocks often find support. The past 3 days 86-94% of the Nasdaq 100 stocks were that oversold. The last time such a run occurred was at the bottom of the Covid rout on March 12,13 and 16, 2020, (89-96%). In fact, QQQ itself traded below its lower 2.15 daily BB on Monday and Tuesday. This suggests to me the market is primed to bounce on Wednesday if the Fed’s announcement is well accepted. Here are the stats for the Nasdaq 100 stocks from 4/14 until 6/14. (I know I missed 4/26.)

 

Blog Post: GMI= 0, was 6 for 24 days at market top; 1,115 US stocks at new lows Monday; I am waiting for T2108 to signal a likely bottom, see monthly chart and rationale

@ 6:44 pm
GMI0/6
GMI-21/9
T210814%

On May 12, we had 1,625 US stocks at new lows. So today’s number of 1,115 is not as extreme. The GMI is now =0. It is so much easier to make money buying stocks when the GMI is Green and =6. The last time the GMI= 6 was November 18, near the market top! It had registered 6 for 24 straight days.

However, the indicator I find most useful in discerning a bottom is the Worden T2108 indicator. It can be found daily on TC2000 or created manually on other charting programs. I post T2108 every day on this blog. T2108 measures the percentage of NYSE stocks that are above their simple 40 day moving average. This monthly chart shows that T2108 is extremely low when it reaches single digits, below the green line. It closed today at 14% and dipped intraday to 9.2%  at the bounce on May 12.

Every year I tell my class that one should back up the truck and buy some SPY, not an individual stock, the next time T2108 is below 10%. I tell these aspiring undergraduates to use a very small percentage of their account and then to accumulate more only as SPY moves up and the bottom is in. However, each time T2108 gets that low I am usually too scared to buy SPY. That is because in order for stocks to become so oversold, the news is usually very scary. Since I went to cash in November, I promise that this time I will buy SPY,  I hope…..