Weekend Trading Review

The two week run in the markets ended with a bang on Thursday as the NASDAQ and S&P 500 reversed after tagging new highs. Meanwhile the Russell 2000, which has been lagging the other indices, finally broke out of a seven and one half month range only to falter and once again fall back into its base. As for our positions, it was another solid week for us. We did however, get stopped out of Mimedex (MDXG) on Thursday afternoon. The stock responded very favorably early in the day to a solid earnings report only to stage a reversal of its own to finish the day lower. No real damage was done as we cashed out just above break even.  Now, lets take a look at the indices in more detail before moving on to our individual positions.

NASDAQ- The index printed a bearish wide range bar on Thursday after reaching new high territory early in the day. The sell-off came on heavy volume printing a distribution day for the index. That said, it was only the second such day for the NASDAQ in the last twenty sessions which in and of itself is not an issue. However, the fashion in which the sell-off occurred, that is, a wide range outside day reversing at new highs does catch our attention. It should also be noted that the index did hold the breakout level of around 6340 in Fridays session. The uptrend is still in tact but a couple more distribution days early next week may put us back in a cautionary state.

COMP

S&P 500- The S&P also reversed after making new highs on increased trade, but as we can see on the chart below, the index did not register a distribution day as a late day rally pushed the index back into the upper half of its daily range. Distribution days here have been fairly non-existing as of late which is a positive sign for the markets in general. The index seems a bit more tempered than its tech heavy counterpart as of late. Many tech stocks reversed or acted poorly this week, even after reporting solid earnings and raised forecasts. Whether a healthy market rotation has been taking place over the last several weeks, or a market correction is in the cards only time will tell. Just to pay attention to what the markets are telling you and stay disciplined.

SP500

Russell 2000- The Russell finally looked like it had broken out of a seven month strangle hold only to get thrown back into its long base. This index looks a bit more shaky than the others on a distribution basis and as we noted earlier in the week, volume did not confirm price action on Tuesday as the index broke out of its range. While volume increased on breakout day compared to Mondays session, it came in at only 21 million shares whereas the 90 day average is nearly 27 million. On a slightly positive note, the Russell has been up trending within its base since late May registering gains of just under 6%.

IWM

Now, lets move on to our current trades where we are down to three LONG positions after the sale of MDXG, while still holding one SHORT position.

HIIQ- The stock was a poster child early Friday for not using hard stops. Markets opened lower on the heels off Thursdays sell-off and pulled the stock down sharply and ever so briefly below our mental stop area of $25.00 only to have the stock quickly reverse and close in positive territory near the highs of the day. After taking our LONG position is mid June at $21.97 and cashing in swing trade profits on half our shares several day later for a 13.56% gain, we are now up just under 28% on the second half of our shares. We will continue to follow this trend leaving our current stop in place near $25.00. We would also note that earnings are due out Thursday, August 2nd. Since we cashed out half of shares and are still in solid profit territory, we will customarily hold onto our position through earnings.

HIIQ

SEDG- Solar Edge is the only full position we currently hold on the long side. The solar sector has been very strong and with First Solar (FSLR) reporting a super quarter on Thursday evening, perhaps the trend is just getting started. We did a write up here back on June 28th highlighting the strength of the sector with a watch list of names to consider, hopefully some of you jumped on board. We are LONG here as of 7/12 at a price of $21.47, so with a close on Friday of $22.80 we are up just over 6% about two weeks into the trade. We have bumped our stop up to near $20.50.

SEDG

GILD- Strength in the Biotech arena led us to this Trend Transition play as we took a LONG position in Gilead Sciences on 7/13. We were filled at a price of $70.81 and the stock has responded nicely since then. If you have been with us you know that we were forced to sell half our position, as is our rule, before earnings that came out Wednesday evening. We cashed half of our shares in on Tuesday for a gain of just over 4.5% and with a closing price Friday of $75.94 we are now up 7.24% on the trend following portion of the trade. We have bumped our stop up to near breakeven on our remaining shares.

GILD

BURL- Our last remaining position finds us SHORT Burlington at a price of $89.05. We took our position on 7/5 and the stock, despite a bit of bobbing and weaving, has steadily trended down closing the week at $85.78 leaving us up 3.68%. This is still a full position and we have a swing trade profit target of $81.00. As we have stated in the past, short positions are a different breed and we may have cause to take profits earlier than anticipated or perhaps close our full position all at once. Adding to the case, we are in a bull market, so a retracement can come hard and quick. We do not make a habit of taking short positions in up trending markets but good set ups can and do come along and we felt compelled to take this one based on rather text book set up and extreme sector weakness. We have been able to move our stop all the way down to near $91.00 which has now lowered, on a percentage basis, any possible negative outcome on this trade.

BURL

That’s all for now. Enjoy your weekend!

-CJ

Charts TC2000

 

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