Feb 25 Continuation Market Update and Stock Scan

So far, today’s session followed the “opening gap weakness, intervention bullish strength rally later” pattern.

The trigger-break above 2,110 caused bulls to become more aggressive as sellers triggered stop-losses again.

We’ll update our key simple levels and note trending stocks today:

The breakout above 2,100 resulted in a short-squeeze where bears (short-sellers) unwillingly helped propel the market higher as they covered their losses with stops triggered above 2,100.

Yesterday’s session closed at the high, though this morning saw a retracement back to the 2,112 pivot level.

I wanted to highlight the simple retracement patterns that continue to be effective for short-term traders to pinpoint entries into this short-squeezed rally.

Let’s see what our Breadth Chart reveals about current market strength (or weakness):

Today’s session gives a muted bullish signal in our Breadth Chart.

All sectors are near the 50% Breadth Level, except Consumer Discretionary (the strongest) and Utilities (weakest).

We have potential bullish trend continuation plays in the following stocks from our scan:

Verisk (VRSK), Nike (NKE), Markwest Energy (MWE), and Newfield Exploration (NFX)

Potential downtrending candidates exist in stocks showing relative weakness today:

Lumber Liquidators (LL), Hewlett-Packard (HPQ), Green Plains (GPRE), and YY

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

STTG Market Recap Feb 25, 2015

The NASDAQ barely broke it’s winning streak with a 0.02% loss Wednesday to end the consecutive up days at 10. The S&P 500 was down 0.08% but this is just consolidation at this point after a big run up. New U.S. single-family home sales in January fell a less-than-expected 0.2 percent to 481,000 and supply rose to its highest level since 2010, hopeful signs for the sluggish housing…

Read the full article at StockTradingToGo.com


Stock Trading To Go

It Was Hard Saying Goodbye to Ruby Tuesday

Written By: DragonFly Capital

I had to say goodbye to Ruby Tuesday last weekend too. Not quite the same as this classic Rolling Stones song, but I am missing her. For me it was the stock, and my long call options had expired. It happens all the time. You lose your dreams and then you lose your mind. Life can be unkind.

But the stock chart below gives me hope that she just can’t go to far away.

rt

Since the beginning of the year, Ruby Tuesday ($ RT) stock price has been building an ascending triangle. This price pattern often precedes a break out in the stock price higher as the selling supply at the top of the triangle dissipates. And when it does it creates a target move to 7.25. The momentum indicators are supportive of a break higher, with the RSI rising and heading toward the bullish zone and the MACD also rising.

The flat SMA’s at 7.00 above may give it a some trouble on the way higher, but a 50 cent move in a $ 6.50 stock is still a pretty good short term return. And with the April 7.5 Calls trading at 25 cents it is a low cost defined risk way to participate should it move.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

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Why you should never invest in a startup company

I was talking to some folks at an MIT spinoff company. They may need a cash infusion this summer. Why? They got a $ 1 million grant from the U.S. Navy. The money was supposed to start flowing last fall. But then the Navy installed a new computer system for managing these research grants and payments. It is now “chaos” in Washington, D.C. The Navy still wants them to do this research but the money won’t flow until this summer, roughly a 9-month delay.

This is a good illustration of why you never invest in a startup! It is impossible to predict all of the ways that things can go wrong and revenue can be delayed.

Philip Greenspun’s Weblog

Interviewing James Ross of HedgeChatter Tomorrow at 8:00 PM EST!

Tomorrow night (Feb 25th), 8 PM EST, on my Ticker.tv channel StockJunkie, I am going to have the pleasure of interviewing James Ross, Cofounder of HedgeChatter.com.HedgeChatter is a social media analysis group that provides trade signals based on social media analysis. The company has been around for close to six years and is used by 4,900 customers in 9 countries including TheStreet,…

Read the full article at StockTradingToGo.com


Stock Trading To Go

Frog by Mo Yan

The plague of snow here in Boston enabled me to read Frog by Mo Yan.  The book seems more accessible to a U.S. reader in its themes than the typical work of a non-American Nobelist. At the core of the story is an older infertile woman who attacks the fertility of younger women, i.e., in line with a lot of Western fairy tales. The “old witch” in Frog, however, attacks the younger women not with the aid of spells but through a “one-child policy” bureaucracy and the coercive power of the state.

The book opens with a discussion of traditional medicine being supplanted by modern techniques. We learn the philosophy of the wisest midwife in China circa 1950: “The melon will fall when it is ripe.” (Not something the American health care system generally agrees with, as noted in The Business of Being Born.)

The central section is the most familiar, covering the struggle between people who wanted to have at least two children and the state.

The last third of the novel covers the softening of the policy into cash fines, readily affordable for the successful but prohibitive for the poor. As in the U.S., the wealthy infertile also have access to surrogate mothers, though the medical bureaucracy is not as involved as here (think turkey baster!), and the surrogate mom is also the egg donor. Throughout the novel, but especially in the last third, there is a focus on the cash implications of children and child birth, what they cost parents and what has to be paid when things go wrong, e.g., a botched abortion that results in the death of the mother.

For people who’ve recently read The Son Also Rises (see below), Frog is interesting because it highlights how Chinese policy has shaped reproduction by social and educational class. In the early days of “one child” the government encouraged the least educated and economically successful people, i.e., peasant farmers, to have more children. More recently the “you can have as many kids as you want if you pay the fines” system encourages the most financially successful Chinese to have relatively more children. Frog should be interesting to Europeans because the Chinese have been working so hard in the opposite direction, i.e., to discourage fertility rather than encourage it. Frog should be interesting to American political thinkers (oxymoron to have those three words together?). Through immigration the U.S. will eventually get to the same levels of crowdedness as China did. What will we do then and what will it feel like to be a citizen living through it?

More: read Frog.

Related:

Philip Greenspun’s Weblog

Want to Short the US Market, Then Do it Against Germany

Written By: DragonFly Capital

The US stock markets are looking very bullish. In fact there have generally been bullish for 6 years. Yet there always seems to be someone who thinks that the top is in and markets are about to crash. If that has been you over all this time then I feel sorry for you. The signs have all pointed higher except for a few brief tenuous moments. I have learned a lot of things over the years, and one of them is that people have a hard time with change. So if you are one of there perma top callers I have an idea for you. A way for you to express your opinion with real money, without losing your shirt.

dax-spy

The chart above shows the German DAX against the S&P 500 in a ratio. And it holds the key to you betting against the US markets. The ratio has built a Deep Crab harmonic since late September. That completed in January and started to reverse. But look at the reversal. Not even to the 38.2% retracement before turning back up. This is a strong pair. And with it moving higher there is now a target on a Measured Move to 5.89. That is 11% higher than where it currently stands.

By buying the German DAX (or its proxy $ HEWG) and selling the S&P 500 ($ SPY) you can express your view while still making money as the ratio rises. Just watch for a move below a ratio of 5.15 as a stop out level, and dream on bears.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through February 2015 Expiry and sign up here

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My Favorite Trading (& Life) Motivational Tunes

We all have our favorite motivational tunes … here are my three favorites that help get the life and trading juices flowing at this end, with their corresponding videos.

I could – and have – watched these hundreds of times.

You Haven’t Seen the Last of Me – Cher
When the market humbles you and you need that encouragement to take the next step.  One of my favs as I re-enter the blogging & Twitter “spheres” with energy. Cher also reminds us we can get better with age!

The Glorious Unfolding – Steven Curtis Chapman
When you need to look to the unseen future … in your trade sequence, trading career, or life … with obvious larger overtones.

100 Years – Five For Fighting
My daily theme played every morning during the 2008-09 $ 1.6 million run.

Don Miller’s S&P Trading Tank

Pancakes, Glue and Technicals – The Story of PerkinsElmer

Written By: DragonFly Capital

peaceful_and_cold_by_qauz-d5uoida

Being a Market Technician has a lot of freedom. Because my trades are based off of price action I can look at any company in any sector any day for a possible trade. No boundaries. I know that is hard for many to understand. They think we are detached floating through space or something.

I hear things like (these are the clean ones) “How can you buy that stock, it has a forward PE of 60 and the industry average is only 33, plus its margins are sinking?” or ‘The economic environment shows a slowing in consumer spending so it is time to pump the brakes on stocks.” I have been around the sun a few times and also hold a CFA designation so I know what these people are talking about. And their thoughts and comment may play out eventually over time. But day to day they just do not matter.

One of the quirky things about being a Technician is that sometimes I have no idea what a company does when I am looking at a chart. Here is a good example, PerkinElmer, $ PKI. This stock could be the holding company for Perkin’s Pancake House, Elmer’s Glue, or anything else. So I often look them up to find out what they do. Here is what Yahoo Finance says about PerkinElmer:

Capture

Well that clears things up. So no pancakes or glue, but huh? Whatever. It is the price action that catches my attention anyway.

pki

The chart above shows the price action over the last year. 3 things are prominent in this chart. First, the pullback from the July high in a rounded bottoming format. It is clearly heading higher now since the October low. Second, is the red zone just under 46 that was important for buyers in June and July and sellers in August and November is now import for buyers again, acting as a support level.

The third is the short term red line that has acted important for sellers, a resistance level, until Tuesday. With the move over that level the selling has abated and it is time to own the stock for a move higher. It may encounter another area of selling at the prior high near 48, but history shows there is not much inventory of holders at that level to work through to continue higher.

How high could it go? Who knows. But one measure is to look at the move into the range between support and resistance and add that back to the break out. This suggests that a move to 50.50 is possible. Technicians will point out other patterns that could move the stock higher as well. But a quick 7.5% would not be anything to snarl at. Unless you don’t like the earnings multiple, or sales to book ratio or something else.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

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Dragonfly Capital Views Performance Through February 2015 Expiry and sign up here

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Incompetence of medical researchers leads to doubt regarding climate change?

“Feeding Infants Peanut Products Could Prevent Allergies, Study Suggests” (nytimes) is a recent example of the public learning about the incompetence of medical researchers. Previously these folks had told parents to keep children in a nut-free bubble so as to prevent nut allergies from developing. Now they are saying that a nut-free bubble may lead to a nut rash later in life. In a society that spends so much of its time and effort trying to separate children from nuts and so much money on medical research, how could this question not have been answered definitively and correctly many years ago?

From a consumer’s point of view an epidemiologist or other medical researcher is a “scientist” in the same category as a physicist or chemist.  So the manifest inability of “scientists” to answer a simple question such as “Is a child more or less likely to develop a peanut allergy given early peanut exposure?” could easily make a consumer skeptical when a “scientist” says “I have a pretty good idea what the average global temperature 100 years from now is going to be.”

What do readers think? Do these constant reversals on everyday questions make consumers wary of science in general?

Related: Back in the early 1980s the great mathematician Gian-Carlo Rota would say “The methods of the biologist are not distinguishable from those of the stamp collector.”

[Of course it may well be the case that Earth turning into Venus 100 years from now is a simpler question than the origin of nut rashes. But that would not be obvious to someone without a degree in the physical sciences.]

Philip Greenspun’s Weblog

J. B. Hunt is Driving Higher

Written By: DragonFly Capital

JBH truck 7_jpg

Despite new highs in the Russell 2000, S&P 500 and Dow Industrials, the broad market still needs to see the Dow Transportation Index ($ IYT) make a new high to reconfirm the uptrend via Dow Theory. One stock that can help out there is J.B. Hunt Transportation ($ JBHT) which seems to have packed up its bay started the journey higher.

jbht

After a strong move off of the October low, J.B. Hunt settled over November and early December before a final move into year end. Since year end the price action has built an ascending triangle against resistance at the year end all-time high. With rising tightening support the price moved over the 20 and 50 day SMA last week and closed at the highs. Monday sees a break above the triangle, giving a target of 92.75.

The momentum indicators are backing the break out. The RSI is making a higher high as it drives into the bullish zone while the MACD continues to navigate upwards. Finally the Bollinger Bands® are opening to the upside to allow the stock to move.

You can use a stop $ 1 below the break out level at 85.00 for a reward to risk ratio of almost 5:1. If that is not enough for you, maybe try a March 85 Call (offered about $ 1.95 as I write) to juice up the return and define your maximum risk.

Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades.

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Dragonfly Capital Views Performance Through February 2015 Expiry and sign up here

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The sleepover: American versus French standards

Bringing Up Bébé (Druckerman 2012) talks about trips by French children without parents:

One day, a notice goes up at Bean’s school. It says that parents of students ages four to eleven can register their kids for a summer trip to the Hautes-Vosges, a rural region about five hours by car from Paris. The trip, sans parents, will last for eight days. I can’t imagine sending Bean, who’s five, on an eight-day school holiday . She’s never even spent more than a night alone at my mother’s house. My own first overnight class trip, to SeaWorld, was when I was in junior high. This trip is yet another reminder that while I can now use the subjunctive in French, and even get my kids to listen to me, I’ll never actually be French. Being French means looking at a notice like this and saying, as the mother of another five-year-old next to me does, “What a shame. We already have plans then.” None of the French parents find the idea of dispatching their four- and five-year-olds for a week of group showers and dormitory life to be at all alarming.

I soon discover that this school trip is just the beginning. I didn’t go to sleepaway camp until I was ten or eleven. But in France, there are hundreds of different sleepaway colonies de vacances (vacation colonies) for kids as young as four. The younger kids typically go away for seven or eight days to the countryside, where they ride ponies, feed goats, learn songs, and “discover nature.”

It’s clear that giving kids a degree of independence, and stressing a kind of inner resilience and self-reliance, is a big part of French parenting. The French call this autonomie (autonomy).

It’s not simply that Americans don’t emphasize autonomy. It’s that we’re not sure it’s a good thing. We tend to assume that parents should be physically present as much as possible, to protect kids from harm and to smooth out emotional turbulence for them. Simon and I have joked since Bean was born that we’ll just move with her to wherever she attends college. Then I see an article saying that some American colleges now hold “parting ceremonies” for the parents of incoming freshmen, to signal that the parents need to leave.

 The latest opportunity to see if Druckerman is right comes courtesy of a five-year-old. Here’s a pattern that has been repeated about four times: She invites her five- and six-year-old friends to sleep over on her trundle bed. The other little girl agrees readily, especially if bacon and pancakes are promised for breakfast. If the father of the child is present, he agrees to the idea. If the mother is present, she says to her child “We’ll have to discuss it,” then explains to us “She’s never been away from me overnight and I don’t think she is ready for it.”

Philip Greenspun’s Weblog