At TTPtrading we use a “techno-fundamentalist” approach as the basis for our trading methodology, made prominent by William J O’Neil founder of Investors Business Daily, to find many of our trade candidates. We also use other swing trading techniques to find profitable set ups, long or short. Although the service is slightly geared toward less experienced traders, it works equally well for intermediate to advanced traders. Aside from live trading alerts, traders also receive- nightly videos recapping the action of the major indices and all of our open positions, and an even more detailed weekend trading review video that thoroughly covers the indices, our open trades, individual industry groups, and new stocks we are adding to our watchlist. We also address all the other important elements of trading such as position sizing, trade management and money management. As a bonus, traders will also have access to veteran technical trader Greg Krupinski of GK Trading, who also includes his own real time trading alerts for his swing to position trading portfolio, nightly updates and weekend watchlist videos. You get access to both traders for only $69.00 per month with no long term commitment. Go to http://www.ttptrading.com See you there!
Shares of Consumer Electronics company Fabrinet (FN) have trended nicely rising nearly 150% since the stock bottomed near $25 in early February of 2018. The stock however, has had trouble gaining any momentum after breaking out of two month consolidation late last fall. It has made three attempts to hold that recent breakout, and did register all-time highs in the process, but this advance has now been thrown back into the previous base for a third time. The first chart below shows the strong advance the stock has made over the last 14 months, but let’s take a closer look now at a zoomed in view.
This closer look shows that a possible correction may be in store. For one, the stock has been trown back into its previous base after printing a bearish engulfing bar as it made a new intra-day of high of $59.94 on 2/27. Our conversion and base lines also crossed over last week suggesting that a change in trend could possibly be on the horizon. This was confirmed on Friday as the stock broke and closed below the cloud in Fridays session. Nearly simultaneously, the stock broke five month trend line that had been supporting any pullbacks during the most recent uptrend. This triggered a short sale for me near $52.25. When I overlay a Fibonacci grid that encompasses the 14 month extremes, I get a conservative price target near $46 which would mark a 38% retracement of this longer advance. This price target also coincides with support at the bottom of the previous base consiolidaton. Should this pattern prove successful it would offer swing gains of around 10%. This trade idea was sent to subscribers during Fridays session.
The Russell 2000 has now registered its third distribution day in the last seven sessions after running into longer term resistance levels near $160. Wednesday’s session saw a noticeable increase in volume as the index shed nearly 2% as it closed just a shade below the 200 day exponential moving average. The index now posts a total of four distribution days over the last 19 sessions. The S&P 500 also added a distribution day today giving that index five such days over the last 19 sessions, and three within the last five days. Traders should keep close watch for any new distribution sessions thru the end of the week.
Sprit Airlines shows yet another example of a lack of demand as it tried to breakout of a Cup and Handle consolidation early last month. Again here, on two consecutive days, volume came in at only average levels as the stock tried to charge above a key pivot point on 2/4 and 2/5 . A second and third low volume attempt failed days later. A high volume sell-off on 2/20 followed by a weak four day rally even gave aggressive traders a shorting opportunity. The stock gave traders ample time to close their position before any real trouble showed up if they were paying attention to what the stock was telling them via volume demand at a key level. The stock is now down over 13% from its most recent high.
Paying attention to volume levels at key areas, such as breakout levels, will increase your chances at success and could give you a quick, early warning that something is not right with your new trade. Traders should demand an increase in trading volume of at least 50% and preferably more, above the 30, or 50 day average on breakout day. Some stocks can and do occasionally succeed without this criteria, but more often than not this is a sign of trouble. Lack of institutional demand at higher levels as Shenandoah Telecom (SHEN), part of a hot telecom group, tried to breakout into new high territory on 2/15 spelled doom for investors that jumped on board and were not quick to vacate their trade. Two consecutive days of less than average volume led to a failed breakout as shares back peddled over 13.5% in just seven trading days leaving traders with a big loss if they didn’t heed the warning. The lower pane also shows a declining relative strength line as the stock tried to move into new high ground, also an indication that things were not right.
Shares of Credit Card Payment Processor PagSeguro Digital (PAGS) looks like it may have put in a bottom back in December. Sales and earnings growth has been strong since this stock IPO’d a year ago. Five straight years of increasing earnings with an annual EPS growth rate of 142%.
Weak breakout volume and a series of reversals has triggered a breakdown in shares of Sprit Airlines (SAVE) today after four days of a weak rally attempt. The stock is currently trying to hold the 50 day EMA. Volume is currently running well above average in todays session.
The “N” in the CAN SLIM acronym stands for “new”. This could be new management, or new products that drive prices to new highs. The Telecom groups have been some of the leading industry groups during this current confirmed rally, and Viavi Solutions (VIAV) seems to be one of the benefactors of the recent rollout of the new 5G technology that appears to be driving the groups strength. The company has doubled earnings over the last two quarters while turning in accelerating sales growth for the last four quarters. Its Relative Strength rating, which sits at 94, made an new high well ahead of the stocks breakout in Fridays session, which gave clues to the underlying strength in the stock. Volume increased 100% over its 50 day average helping legitimize Fridays breakout of a cup and handle pattern. Breakouts, now matter how good they look, can, and do fail so always be sure to cut your losses no more than 7-8% below your purchase price and never chase a breakout more than 5% past its pivot point, which is $12.67 in this case.
MARKET GAUGE- Confirmed Uptrend (1/4/19)
WEEKLY QUOTE-“One useful fact to remember is that the most important indications are made in the early stages of a broad move. Nine times out of ten, the leaders of the advance are the stocks that make new highs ahead of the market averages.” –Gerald Loeb
OVERVIEW: The most recent market action is a great example of why it is important to try and interpret the action of stocks and indices and not try to predict what may happen next. There is a fine line between watching the market action and being prepared to act in a timely manner when the landscape may be changing, and trying to be well out in front of the crowd with a firm line in the sand, and worse yet, stubbornly sticking to those projections when wrong. Those who have expected the markets to get turned back at the 50 day moving average have been disappointed, those who placed bets that the S&P 500 would get immediately turned away at the 2700 level, have been equally disappointed to this point. And while the current rally may get turned back as it now approaches longer term resistance levels, I for one will not make a prediction in that regard. Our follow thru day signal has worked well to this point, and leading stocks also continue to act well. We have also seem the list of leading stocks broaden somewhat recently, as more non- defensive industry groups have joined in the rally. Furthermore, we have seen little in the way of distribution in the indices since our confirmed uptrend got underway just after the start of the year. That said, traders should never get comfortable, or overconfident, as the tide can always shift quickly without fair warning. So, stay disciplined, honor all stops and never chase extended stocks.
INDUSTRY GROUP CHECK- Last week we took a look at the Semiconductor-Fabless Group, which had run its way quickly up the IBD industry group rankings and still sits strongly at #6 this week out of the 197 groups tracked. This week we take a look at another industry group that has made a big push over the last six weeks and that is the Electronic- Scientific/Measuring Equipment group. This fairly small industry group comprised of 18 stocks have made quite the accent running up over 27% since they bottomed on 12/24/18 putting it firmly in new high territory. The top stocks to watch in this group are KEYS, MTD, VPG, NOVT, BRKR, CGNX and CAMT. Here is the chart courtesy of IBD and MarketSmith.
MAJOR INDEX CHARTS- Here is our weekly look at the major index charts as we head into trading on Tuesday.
That’s all for today. We will see premium members tomorrow with our Weekend Trading Review. Have a great Saturday!