The recent pullback and rotation in the major indices this week has produced a tricky environment for anyone without a systematic process to help them navigate. If over the weekend you are asked ‘What did the market do this week?’ it would be fair to respond ‘Which one?’ The NASDAQ finished up 0.7%, the Dow fell 1%, and the S&P was barely changed. While that might help feed the media narrative of the market hating uncertainty, given the backdrop of a government shutdown and debt ceiling negotiations, if one is able to remove themselves from the noise and just concentrate on price action alone, this rotation in the context of a lengthy bull market should still be considered constructive until proven otherwise.
I’ve seen many instances of stocks that have pulled back from their highs, bounced without retaking them, and are now somewhere inbetween. In such cases it’s often possible for them to cross below their MA’s without invalidating their uptrends. This is why I often stress that while the 50-day MA can be useful to quickly eyeball a trend, or as supporting evidence if it coincides with a stop at a key price level or pivot point, a break of the 50-day alone isn’t enough to conclude a trend is over. You’ll see examples of this as we go through this week’s review.
We had two signals this week; exiting $EMC for a loss of 0.6%, and receiving an exit signal for $TASR which will be executed at Monday’s open. As this report is always for positions as at Friday’s close and we don’t yet have an exit price for $TASR it will still be shown as an open position here.
Here’s the summary of all our positions lifted from our performance tab:-
SUMMARY AS OF 10/4/13
OPEN POSITIONS:- Total 33: 28 winners, 5 losers. Average win +26.8%, average loss -1.9%.
CLOSED POSITIONS:- Total 53: 21 winners, 32 losers. Average win +14.1%, average loss -8.6%.
ALL POSITIONS SINCE INCEPTION (1/27/13):-
Total 86: 49 winners, 37 losers (57% win). The average win is +21.4%, the average loss -7.7%.
Let’s list our losers first, then go on to the winners. Here are our 5 losers:-
Green Mountain Coffee ($GMCR) -3.1%
$GMCR has been below its 50-day for 2 weeks now but it’s still hanging in above our stop after briefly threatening it on Monday before rallying strongly and closing higher. A clean break and close below $73.93 sees us exit.
CIGNA Corp ($CI) -1.3%
$CI sank lower Monday and looked to be taking out the low closes of July and August that marked our stop but recovered well to reclaim its 50-day. A close below Monday’s close of $76.86 now becomes our stop.
Iconix Brand Grp ($ICON) -2.3%
Apache Corp ($APA) -0.9%
Suncor Energy ($SU) -2.0%
Here are our 28 winners:-
Valeant Pharma ($VRX) +67.1%
Another great move for $VRX, stretching away and posting a 6% gain on the week.
On Assignment ($ASGN) +31.6%
Fifth & Pacific ($FNP) +39.5%
Microchip Tech ($MCHP) +10.0%
Packaging Corp ($PKG) +36.7%
Michael Kors ($KORS) +30.7%
$KORS put in a solid performance this week following through on its bounce from first support to finish just shy of all time highs. That $73.18 level now becomes our stop and should soon have the 50-day for company too.
C.R. Bard ($BCR) +11.4%
Tesla ($TSLA) +78.2%
One thing is for sure with $TSLA, it’s always entertaining to watch the news and commentary on its price action. This week it was amateur footage of a car on fire after an accident. It happens. What was particularly impressive was the company’s reaction, swiftly giving a clear and detailed response which only further highlighted its aplomb in such situations as opposed to the head in the sand denial we are used to seeing from corporate giants. But what really matters here? Let’s look at price. It was the first decent test of the 20-day since the steep decline of 7/16 (which we detailed here) and led to a swift resumption higher. So far, this looks no different. Our stop is a meaningful close below the 9/9 level of $160.70, which currently coincides with the 50-day and an ATR trail.
SS&C Technologies ($SSNC) +18.1%
Qihoo 360 ($QIHU) +91.9%
$QIHU finished with a small gain on the week and looks to be setting up for higher prices again having traced out a relative narrow consolidation over 3-4 weeks after a huge run. The ascending trendline, the 50-day, and our current price stop of $77.93 are all in close proximity making this an excellent risk/reward position from here.
GNC Holdings ($GNC) +22.0%
$GNC briefly broke out to all time highs this week, possibly a lack of volume made it look less than convincing as it eased back again later in the week, but the longer term uptrend is clear. Our stop is currently at $50.87, but if the stock can edge higher again we should be able to move that up to $52.71.
Lockheed Martin ($LMT) +15.8%
$LMT continued its decline from the September high, slicing through the 50-day and briefly threatening to take out our $122.34 stop. An exit signal looked assured with further weakness on Friday until a late rally materialized.
Illumina ($ILMN) +12.8%
LinkedIn ($LNKD) +29.7%
Actavis ($ACT) +17.3%
Under Armour ($UA) +33.1%
Netflix ($NFLX) +39.2%
$NFLX continued its advance to all time highs, gaining 5% on the week. For now our stop remains at the 8/30 close of $283.91 which currently coincides with the 50-day, but we should be able to move that up to the 9/17 close of $299.55 (let’s call it a clean break of $300) on any further advance from here.
3D Systems ($DDD) +10.6%
FEI Company ($FEIC) +13.7%
McKesson ($MCK) +12.0%
Evercore Partners ($EVR) +14.5%
FleetCor ($FLT) +28.6%
Proto Labs ($PRLB) +25.3%
$PRLB was another stock that staged a strong reversal on Monday, following through strongly throughout the week to finish at all time highs, up 5% on the week, and up 10% from Monday’s lows.
Dunkin’ Brands ($DNKN) +0.7%
Nucor Corp ($NUE) +4.5%
Apple ($AAPL) +3.9%
TASER Intl ($TASR) +50.4%
We got an exit signal in $TASR at the end of a tumultuous week that triggered an ATR stop. As per my comments in our exit post “…this could possibly be my favorite because of the many lessons it contained and underlined; the placement of a stop, taking an entry after a big breakout move, being prepared to let a winner turn into a loser by not moving our stop up too quickly, continuing to run a winner in the face of severe skepticism and extreme overbought conditions in a market that was weakening, and finally, being able to recognize when it’s over and take that exit with as much discipline and conviction as you entered.” You can read the full post here.
Total SA ($TOT) +1.5%