General Market Index (GMI) table

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

@ 9:35 pm
GMI5/6
GMI-21/9
T210862%

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

@ 9:31 pm
GMI6/6
GMI-27/9
T210868%

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

    @ 8:19 pm
    GMI6/6
    GMI-27/9
    T210859%

    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!)

    screen-shot-2016-11-20-at-8-13-02-pm

     

    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).

    gmi11182016