How I use daily RWB charts to size up the market and individual stocks; run my new scan

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For many years I have been  a fan of Stan Weinstein’s Stage Analysis (see his book on this page). That approach looks at a stock’s price compared to its 30 week moving average. A lot of analysts use this technique. My students all know to only buy or hold stocks that are above a rising 30 week average,  or in a Weinstein Stage II. This is one of the six components I assess in my GMI (see table below).

Another approach I like to use is an adaptation of the 12 exponential moving averages that Australian technical analyst Daryl Guppy uses. His GMMA (Guppy multiple moving averages)  plots the following weekly moving averages (six short averages 3,5,8,10,12,15 and 6 longer term averages 30,35,40,45,50,60).

I have developed  a modified chart using the 12 exponential averages plus a simple average =1 which shows the close each period on the chart. The six shorter averages are red and the six longer term averages are blue. The dotted line on the chart is the close each period. The background is always white. The period depends on the time period of the chart shown.

I have been using the weekly charts to show a RWB (red/white/blue) up-trend when the red averages are rising above the rising blue averages such that there is a white space between them. A BWR down-trend is simply the reverse pattern.

I recently came to the conclusion that the weekly chart is good for showing the longer term trend but not very useful for timing entries and exits. It just takes too long for the weekly averages to show a change in trend. I have therefore decided to focus mainly on RWB daily charts. I also added a plot of the new single day average of the daily lows to show the low price of the equity each day (purple dots). These dots can aid in visualizing support and where to place stops.

This daily chart helps me to immediately determine the short term trend. An advancing equity will have a RWB pattern with the daily price (dotted line) above all 12 lines and leading all of the shorter term (red averages) averages higher. I now compute and show on each chart a count of the number of red averages that the equity is above (RLC or red line count). Thus an advancing equity will have a maximum value of 6 of 6. A value of 0 means the equity is below all of the red averages. This is a signal to me for caution. As long as the stock remains in an RWB pattern it is still advancing, but if the RLC is 0 I might raise my stop. I would definitely sell out my position  if the red lines converge with the blue lines so that the white space between them disappears.

It is much easier to demonstrate the above description with an equity. Here is the daily chart of QQQ.

 

The QQQ has been in an RWB up-trend since last December. There was one day, December 30, when the QQQ closed below its red lines and entered the blue lines. But the RWB pattern never disappeared. For most of the days since then the QQQ (dotted line) closed above all of the red lines. As of Friday, the QQQ closed above only 5 of the 6 red lines. Note the 5 at the end of  the top line of my chart. This is the red line count (RLC). What caught my attention was this daily chart of the SPY.

The RLC=0 for the SPY! While this is not a huge sign of weakness, it is the first time it has happened since January. In those cases the SPY rebounded right away. Will it do so on Monday? The RLC=2  for the DIA and is also showing an RLC rarely seen since this rally began. What really concerned me was this chart of the Dow Jones Transportation Average.

Not only is the RLC=0 but the RWB pattern is totally gone and the DJ-20 has now closed below all of the red and blue averages. This may be significant because one classic way of sizing up the market trend is the Dow Theory, which uses the Industrial and Transportation Indexes. A strong economy and market should show up in strong rails and airlines….

I also find the daily RWB charts very useful for analyzing individual stocks. I use TC2000 to scan for stocks in a steady RWB daily up-trend that have recently been oversold. The RWB chart shows me where I might place my sell stop if I make a purchase. I either want to sell if the stock returns below the lowest rising red line (which will be the 15 day exponential moving average) or if it breaks recent support. I can find these levels easily by looking at the pattern of daily lows (purple dots) or the values of the 15 day exponential average which appears on the second line of each chart in large digits. Here is an example of a stock that came up in my scan for daily RWB stocks that have been oversold and resumed their advance. This is not a recommendation for purchase and is for illustrative purposes only.

AZPN is a strong stock (up 70% this year) that is in an RWB pattern. The RLC=6, indicating that AZPN has closed back above all of its red lines. The value of its lowest red line is 58.51 (second line, big digits after next earnings date) and a conservative place for a sell stop might be just below this level. AZPN has rarely closed below all of its red lines.  However, the purple dots show that the daily lows of AZPN have recently been below all of the red lines. This is to be expected because this scan looks for stocks that were recently oversold (low stochastics). So a more liberal stop might be below its lowest recent daily low, somewhat less than 58. Note also the above average trading volume on Friday’s rise. One thing I do not like about AZPN is its low recent quarterly earnings, up only +9%.

I like this scan a lot. But I suspect that if the averages rest over the next few days, these set-ups will fail. We are approaching the end of first quarter period. Often times there is a brief decline that sets-up end of quarter window dressing by the mutual funds. So I am watching very carefully this week while I am out on spring break.

I ran this scan on my list of stocks that have hit an all-time high since I started informally aggregating them this year. The scan identified  59 stocks. If you want to run this scan, go to my TC2000 Club and access the scan from 03182017. This scan is further described in the glossary to this blog page. Let me know if it works well for you, please.

The GMI is at 5 (of 6)  and the GMI-2 is 6 (of 8), but note that the two negative components in the GMI-2 (stochastics and MACD) are the most sensitive ones and the first to weaken if the QQQ is ending its up-trend. My up-trend count is now U-68, closing in on the longest short term up-trend since 2006 (88 days).

 

$QQQ in a perfect up-trend; GMI and $QLD rock! GLB $SHOP $FUN $WIX resuming up-trends?

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This daily Guppy chart of the QQQ shows that all 12 moving averages are lined up perfectly with the closing prices (gray dotted line) leading them all higher. Note the GLB to an all-time high in January. As long as the RWB pattern persists it is still time for me to be long growth stocks. If you want to see how following the GMI to trade QLD beats all other strategies this year, click here.

SHOP recently resumed its up-trend and so I jumped on.

 

FUN may also be getting ready to resume its up-trend after consolidating post GLB.

And also WIX.

The GMI is back to 5 (of 6). The QQQ short term up-trend is now 63 days old.

58th day of $QQQ short term up-trend; GLB: $PEN $DERM $OLED $SHOP; $NVDA flashing market top? Thanks to SMT and recording

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I ran a scan (Scan: 11132016ATHweeklygainhivol available free at my TC2000 club) to look for stocks from my all-time high list that were up last week on above average  weekly volume and then looked among them for those that had a GLB last week. Both PEN and DERM met these criteria. DERM has good recent earnings (+85%) but PEN does not (-233%). But PEN was an IPO in September 2015 and has more than doubled since its lows. So someone thinks it  worthy of accumulating PEN. Note last week’s volume spikes in the weekly charts of each of these stocks. These stocks merit further research.

OLED had a GLB 2 weeks ago and looks very strong to me but may be too extended for me to buy right now. It is floating way above its 4 week average (red dotted line). I will wait patiently for an entry.

But SHOP had a GLB in the first week of January.  I missed seeing my TC2000 alert and thought I had missed the break-out. I should have bought it on one of the subsequent bounces off of its rising 4 week average.

The weakening of the market leader NVDA,is perhaps flashing a warning of a tired bull. Note the heavy volume down weeks (red spikes) and that for 6 of the last 10 weeks NVDA closed down. Double top?

The GMI is at 5 (of 6), because there were fewer than 100 new highs (87) on Friday. The GMI-2 is at 6 (of 8) with its two most sensitive components having turned negative. I am concerned that the analysts do not appear to fear a rate hike in March. When the pundits start to think that the Fed’s raising rates does not matter, the market often contradicts them.

 

Last Thursday I presented a lecture before the local Society of Market Technicians. A gentleman came up to me and gave me a gift for my webmaster son in gratitude for his helping me to run this site. While I, unfortunately, did not take his name, my son sends his warmest thanks. SMT will be posting a recording of my talk for members on their site.

 

Too many failed break-outs; GLB: $VAC $OLED $SP

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One of the signals of a possibly weakening market is that stocks that have broken out fail and return below their break-out points. Among the stocks that did so recently are PJC, AMZN, GS and WB. And while it was not a GLB to an ATH, TSLA also faltered last week. Sure there are still plenty of successful break-outs, but we need to heed when the leaders can’t surge higher. I also remain concerned that the major indexes are floating above their 4 week averages. This weekly chart of SPY provides an example. The red dotted line is the 4 week average. Usually the index will return to at least kiss its 4 wk average.

Nevertheless, among the stocks that came up in my scan for stocks up on high weekly volume and that also proved to be GLB, were VAC, OLED and SP. Check out these weekly charts and their unusually high volume. All have good recent earnings and may be worthy of further research. You can run this scan (11252016……) yourself by joining my TC2000 club: www.wishingwealthblog.com/club. But we must be vigilant for failed break-outs……

The GMI remains at 6 (of 6).

 

49th day of $QQQ short term up-trend; $QQQ in RWB up-trend; GLB: $COST $NTES $AMZN next?

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The QQQ (and SPY and DIA) remains in a strong RWB up-trend with all averages lined up perfectly. Maybe too perfect? Beware of likely post earnings release lull and the Fed…. Sell in MAY?

COST has a GLB to an all-time high.

As did NTES.

Will AMZN be next?

The GMI table:

 

New TC2000 Scan finds GLB and possible cup with handle break-out $PJC; next post Tuesday night

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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).

 

Market too hot? GLB stocks: $GKOS $HQY; A Judy’s pick: $EXEL

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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%.