Jun 25

Long Ford ($F)

Long Ford ($F)

Ford has been on my watch list for some time, and for shorter timeframes and less stringent criteria it could easily have triggered an entry prior to this, but it now has all the conditions for what I believe is a very favorable risk/reward trade. Today’s close marked an 8-month high, continuing a trend of higher highs and higher lows, and with the 20, 50, and 200-day MA’s now stacked beneath and rising. An initial stop around the $16 level gives us a relatively comfortable safety barrier and if breached would be enough to confirm the uptrend from the February lows may be in danger and a more complex correction is underway.

AlphaCapture

It’s also worth looking at the bigger context here. To understand the length and depth of the consolidation Ford has been navigating, here’s the weekly chart of the last two years. You can see the 10-wk and 40-wk cross that’s taking place now and the implications of a full resumption higher of the longer term trend.

AlphaCapture

 

 

 

 

 

Jun 25

Exit Long $ORCL

Exit Long $ORCL 5/13 -3.7%

Oracle has been flirting with our trailing stop since last week’s post-earnings slump. It initially survived by the slimmest of margins and had a very marginal break of our level on Tuesday which prompted a discretionary one day’s grace for today’s session, but again it failed to make any progress and it’s time to say goodbye. It may well recover from this point as it has done following previous earnings disappointments, but we don’t need to play those kind of waiting games when there are better opportunities elsewhere.

AlphaCapture

 

 

 

 

 

Jun 25

Futures Update – Long NASDAQ

Long NASDAQ ($NQ_F) 6/26

The NASDAQ has given us a belated long signal. I say belated because I have other systems that have triggered before this, and ordinarily one might have expected to see even a longer-term system trigger an entry signal when we first took out the March highs on 5/29, but it’s likely a function of an additional trend filter, and the steepness of the pullback that followed our previous exit for a small loss, that has meant it hasn’t triggered until now. The initial stop needs a little room down to 3668.75, but in a relatively short space of time we could ratchet that up to the breakout area around 3710. In any event the risk is commensurate with previous signals of which there have only been 4 in the last 18 months, with the 2 winners averaging twice as much as the 2 losers.

AlphaCapture

 

Existing signals are as follows:-

Long 30yr ($ZB_F) 2/3 +$5,000.00 per contract

Long Live Cattle ($LE_F) 3/28 +$4,470.00 per contract

Long S&P ($ES_F) 5/13 +$3,162.50 per contract

Long Yen ($6J_F) 5/21 -$637.50 per contract

 

 

 

 

Jun 13

Exit Long $RAD

Exit Long $RAD 2/14 +20.6%

$RAD slipped back below our trailing stop and this time closed there, triggering an exit. This is one of those situations where given it’s a trailing stop, not an initial one, it’s possible to exercise some discretion on what is a very marginal break, but I’m very happy to take the exit here and step aside. The reason being although it’s tempting to utilize some recency bias and look at the last time a 50-day break occurred and think something similar could happen here, there are enough additional factors to suggest otherwise. The last two days decline reversed what had looked like a very strong bounce midweek, with today’s break taking out a previous support/resistance level to post a lower low. It’s also notable this was on an otherwise positive day for the broader market, highlighting the relative weakness $RAD has shown recently may have further to run. This is also a fundamental story I like longer term so if we do see it reverse and consolidate from here I will be happy to re-enter, but as always, only if it also meets the criteria for an attractive risk/reward setup as it did here in February.

AlphaCapture

 

 

 

 

 

Jun 12

Exit Long $FCX

Exit Long $FCX 4/30 -1.7%

$FCX was the one casualty from today’s market sell-off, breaching its trailing stop level to trigger an exit signal. It could be argued this move so far still looks countertrend in nature, but when you consider the move the market had to fresh highs then $FCX has struggled of late, and we don’t need to hang around to find out if it can be successful on another attempt at establishing a stronger uptrend. We’ve got more than enough here; lower highs, lower lows, a break of previous support as well as the 50-day MA. Should it consolidate further and re-emerge stronger with another entry signal we’ll have every opportunity to return to it then.

AlphaCapture

 

 

 

 

 

Jun 10

Long Activision Blizzard ($ATVI)

Long Activision Blizzard ($ATVI)

There’s a lot to like here. The first thing to observe is the big gap from earnings in early February which was followed by a move to all time highs. We then saw a reasonable pullback below the 50-day which was reversed in another big earnings move in early May. It subsequently consolidated that fairly tightly, but the really impressive part was how it also absorbed a stock offering in the middle of the month only to resume the uptrend and make fresh all time highs on increased volume. There are several potential stops here depending on your risk level. Yesterday’s close was enough to trigger an entry using the last swing low around $19 from 4/11. I’ve waited another day, effectively demanding more out of the trend, to see if it could follow through knowing that I can happily use the $19.31 level as an initial stop if it did. The other reason was we were already being fairly cautious here using either of those stops, as more aggressive players could easily use the $20.08 level from 5/15, just below the 50-day MA, something which will obviously be our first trailing stop level should we continue to move higher from here. In any event whatever your risk tolerance or respective stop levels used, the trend here is clear and this trade looks like an attractive proposition with readily identifiable risk parameters.

AlphaCapture

 

 

 

 

Jun 09

A Quick Look At Financials

I’m not going to go into any deep analysis here, just point out the obvious that the financials are suddenly looking very strong and highlight a few names. Why does it matter? Well whether it’s based on evidence or simply bias, traders and investors do tend to like seeing the banks play a prominent role in any ongoing rally. In their minds it gives it some kind of confirmation rather than if sectors like consumer staples or utilities are leading. If they had to choose one sector they’d like to see lead a rally it’s financials. These days I try not to make that my thinking or worry too much about it, I like to think I’m an equal-opportunities employer when it comes to stock selection and take what the market gives me, you will see even now we still have two utilities on the books from when those were the only signals we were getting, and they’re still making fresh highs.

Here’s the Financials ETF $XLF, take a look at the current 8-day winning streak, volume is picking up a little too:-

AlphaCapture

We had already seen signals in $AIG from 4/25, and $WFC from 5/23, long before the rest of the sector got its act together, and both are still leading:-

AlphaCapture

AlphaCapture

Today though we also saw a lot of the smaller money center banks and regionals breakout. Three that particularly caught my eye were $HCBK, $MTB, and $PNC. You don’t need me to point out the trade here, all look good, these are classic breakout formations, it’s just a case of aligning the stop with your risk tolerance and timeframe.

AlphaCapture

AlphaCapture

AlphaCapture

 

 

 

 

 

Jun 07

Random Thoughts

It’s nearly 9 years since I moved from the UK to the US and I’m still adjusting to the American way of life. The other day I had a VeryBritishProblems moment, being filled with abject terror when a cashier at the grocery store started talking to me, and not just the redundant ‘Did you find everything ok?’, I mean a real conversation. I had briefly forgotten you do that here and they totally caught me unawares. You start fumbling around or saying totally ridiculous things after you’ve exhausted your arsenal of one-liners designed to end a conversation, but the questions just keep on coming. Haven’t felt fear like that in a long time. Basically you turn into a Hugh Grant typecast, and in a desperate attempt not to appear awkward you completely and utterly fail.  If you want to see a seemingly unflappable Brit get flustered just wait until they look like they don’t want to be bothered and start talking to them. Works every time.

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This week we were reminded of the superior role price should play in your process. Hertz discovered accounting errors from 2011 and will restate its 2011 statements and correct 2012 and 2013 also. Financial statements for 2011 “should no longer be relied upon” they said. We also had a debacle with the ISM release changing the number back and forth which was ironic as it’s apparently the only economic data series that isn’t subsequently revised. And then there was the monthly circus around the jobs report, where revisions are the norm.  I always find it amusing when people talk about technical analysis in broad generalizations as being backward looking, that it uses past data to predict the future. What, pray tell, are fundamental analysts using? Not only do they also use data from the past to make estimates, but their data is subject to revision. Price and volume aren’t. People will say in the case of Hertz ‘Yes, but price fairly reflected the information available at the time.’ Yes it did. But that information has now changed, it was wrong. The price from that same point hasn’t. Does that mean price was wrong? Shouldn’t that mean we go back and adjust the price now too? Oh that’s right, we can’t. We can’t reverse those transactions. For those who only use price to identify and follow trends (note follow, not predict), nothing changed. Their analysis remains valid, their wins or losses unaltered. Price is the only thing that remains true. This is not to say fundamentals are of no use, I’m really not a partisan ‘technicals vs fundamentals’ guy, I believe a combination of the two can actually be very effective, but no matter what your methodology, price alone is the final arbiter in all we do, and even the most ardent fundamentals-based trader has to concede that. You will never see prices from months or years previous restated or hear that price “should no longer be relied upon.”

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Looking at the IBD50 this weekend I see again not one of our 21 names is in there. You may recall in the middle of last year when we consistently had over 30 names it wasn’t unusual for somewhere between 10-15 of them to be IBD names. Since then momentum names have been through a sharp pullback that wasn’t felt anywhere near as harshly elsewhere and I believe led to much of the disparity we see in the sentiment surveys today as the broader market continues to hit all time highs. Many of the traditional momentum names are only now beginning to find their feet, and although many of them are starting to appear on my watchlist, in most cases they still have a lot of work ahead of them to be anywhere near as attractive as our existing names, the majority of which featured on a much more important list – that of the 52-week highs. Being flexible in where our ideas come from but resolute in our process, ensured we still had exposure to a market rewarding those that stay with a trend until it’s over, and defying the expectations of those that use subjective opinion.

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Uber was in the news again this week, completing another round of financing that now values it at $17bn or so. There seems to be a mixture of incredulity, revulsion, and marveling at this number. I have no way to run the numbers or value the company (I’m not sure those that think the valuation is ridiculous do either) but for my own part I assume people who have a problem with the valuation haven’t used the service or talked to the drivers. You see the usual hackneyed responses from people with zero edge give a laundry list of companies that it’s now surpassed in value, as if that somehow proves the valuation can’t be right. It’s funny, but virtually all the companies listed are ones I use far less or have no relevance to me compared to Uber. I remember first being introduced to it at Howard Lindzon’s Stocktoberfest last year when the company was worth $3.5bn. If you haven’t already used it I strongly suggest you do. It’s a gamechanger. It’s one of those services that once you’ve tried it you will never go back to what you did before. That’s powerful, and it’s the same experience being felt slowly but surely the world over as it overcomes the union-based resistance of every major city that would rather cling on to their inefficient existing system that serves them, not the customer. If they would open their minds they’d also find it’s better for the drivers. This week, with no regular Uber cars available for a very early morning trip to the airport, my wife used UberX. On the journey the driver told her his experience so far of being an UberX driver. This is something he does part time using his own car to supplement his income. He makes himself available for a few hours every weekday morning and on Friday and Saturday nights. After the 20% that Uber takes he is taking home $800 a week. And he loves it. Not bad for a second income. Now multiply the effect in each city, in each country the world over. Use the service, talk to the drivers, and you will get it. $17bn? It’s in an uptrend and it’s making new highs. I’d buy it in a heartbeat. In fact if it were listed I’d already be long from months previous. The customer wins, the drivers win, the union bureaucrats lose. That’s a win-win-win.

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