Why I like RWB daily charts–$HRI, $OLLI and $NKTR

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My RWB daily charts provide me with an extraordinary way to visualize a stock’s pattern and to choose entries and exits. You will recall that an RWB chart has 13 daily exponential moving averages plotted on a white background. The six red lines represent the shorter term averages and the six blue lines represent the longer term averages. The 13th average is a gray dotted line with an average=1 and represents each daily close.

In an advance, the dotted line, or daily closes mostly are above all of the rising red lines. The red lines are rising above the blue lines and there is a white space between them–this is an RWB (red/white and blue) up-trend. Strong stocks can remain in this pattern for weeks and even months. The key for me is to buy a RWB pattern stock when it bounces up from support. One way of defining a bounce is to find an RWB up-trend where the stock has recently closed below 5 or 6 of the rising red lines and then closes back above all of the red lines. I have created a scan that is available free to all TC2000 users in the Dr. Wish club. That scan, 12252017BounceRWBdaily, identifies all US stocks with the pattern I just described. One stock that this scan found this weekend is HRI.

Note that for most of November and December HRI was in a perfect RWB daily up-trend closing almost every day above all of the red line averages. In mid-November, HRI consolidated, evidenced by the convergence of all of the declining red lines. This is a base. The key is to buy the stock if and when it emerges up from its base. Clearly, at the end of last week, HRI started to advance again, and closed above all of the red lines after having closed recently below all of the red lines. This is the pattern that this scan searches for. In addition, note that HRI is near its highest price ever, as indicated that it is above its recent green line break-out (GLB) to an all-time high. Note on the top line of the chart that HRI’s recent quarterly earnings were up +309%. I like good fundamentals as well as technicals.

I have no idea whether HRI will keep advancing out of this base. However, the beauty of this approach is that I know in advance how to define a failed break-out. If a stock closes back below all of its red lines for 1 or 2 days, I consider the break-out to have failed and I exit.  The nice thing about this strategy is that before I purchase I can look at the value of the lowest red line (the 15 day exponential average in an up-trend) which is posted on my chart, here= 63.13. HRI closed 2.49 above this value and the difference represents the probable loss if I bought around 65.62 on Monday and had to sell just below the red lines. Thus this strategy enables me to estimate and limit my losses in advance.

My biggest problem is selling a rising stock too soon. I get scared out when it or the market zigs down and I am afraid of relinquishing my profit.  Using this buying strategy, I try to hold on until the stock closes below all of its red lines for 2 days. An analysis of my recent sales shows that this technique would have served me well and kept me in stocks that kept rising.

Some other stocks that came up on this scan are:  ATRO, SGMO, SRPT, OLLI, NKTR and ROG. Check them out! Here is OLLI:

And NKTR:

The GMI remains at 6 (of 6):

 

Monthly RWB chart of $SPY shows no end to this bull

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This monthly RWB chart of the SPY since 1994 shows what the 2000 and 2007 bull market tops looked like. It is clear that the market remains in a strong up-trend until the red lines (shorter averages) decline and the RWB pattern disappears. The current market, as measured by the SPY, remains in a clear RWB monthly up-trend. Stay tuned….

The GMI remains at 6 (of 6):


Coal is hot!! So are steel, copper and aluminum: $BTU; Wounded leaders: $NVDA $AAPL $FB $NFLX $SQ

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We growth stock investors are so focused on the innovative tech stocks that we often overlook the strongest non-tech stocks. For the month of December, 2017, the top 5 industries and their stocks hitting yearly highs on Friday were:

  1. Copper (+19.4%)  FCX, SCCO
  2. Aluminum (+18.4%) KALU, AA
  3. Coal (+11.2%) BTU, ARCH
  4. Industrial metals and minerals (+9.8%) BBL, BHP, RIO, VALE, NEXA
  5. Steel (+8.6%) STLD

In comparison, semiconductors were up just +0.12% and internet content and information +2.9%. So maybe the US or the world is going to go on an infrastructure buying binge in 2018? Look at the beautiful RWB daily up-trend in BTU as an example of how nice and consistent move up it has had. It even had a green line break-out (GLB) to an all-time high in November.

 

Meanwhile the tech stocks, as measured by QQQ, are in a short term decline. Note that the index has now closed (dotted line=closes) below all of its red line shorter term averages for the first time since early December.  As long as it closes above the blue line averages I am not too concerned. However, the QQQ needs to close back above all of the red lines to resume the up-trend, as it did in October and December. The RWB pattern also needs to endure with all of the red lines above the blue lines with a white space between them. My blog glossary explains these technical patterns.

The SPY is somewhat stronger, perhaps reflecting its non-tech stock components. But it closed above only 2 red lines (see red 2 at top of chart).

Nevertheless, we should heed the fact that both indexes have receded from their peaks reached in mid-December. I become concerned when many of the market leaders look wounded like these:

AMZN and GOOGL are holding up better (into shown). But are the others forming their bull market tops? Also, is SQ  hibernating or topping?

I don’t wait around holding declining stocks. Buy and hope is not my style. Once a stock closes 2 days below its red lines I like to exit. As the great William O’Neil has written, all stocks are bad, unless they are rising.

Meanwhile the GMI is at 6 (of 6) but the more sensitive GMI-2 is getting weak, at 4 (of 8).  The QQQ is trending down and has not yet reached the area of technical weakness where it typically bounces.