Thursday, May 29, 2014

Trading Idea: Pioneer Natural Resources (PXD)

Pioneer Natural Resources (PXD) ran up 75% after breaking out from a first stage double bottom base on top of a cup and handle base in May of 2013. The stock broke out of a second stage cup and handle base on May 7th, in volume 121% above average, but did not make any progress. The stock has spent the last three weeks forming a three weeks tight pattern and is on the verge of attempting another breakout today. Volume is running about 50% higher as of mid day.

Fundamentals are strong and are expected to stay strong for the next three years. Sales and earnings growth are seen accelerating to 24% and 27% respectively. The company beat earnings by almost 19% the last quarter and estimate revisions have been significant since. Operating margins have accelerated for five straight quarters and are at the highest point in the last eight quarters.

Potential price target range for the stock is between $336 - 429 (60 - 100%), based on several of our own proprietary indicators and a pe expansion price target from its first stage base.

Full Disclosure: Hold position in stock.

Tuesday, May 27, 2014

Market Rally Resumes Poor Price Volume Action Dominates

After shuffling sideways over the last few weeks, the market finally managed to confirm the rally that started on April 15th. The Nasdaq rose 1.2% and the SP 500 and NYSE closed at new fifty two week and all time highs, in higher volume. Overall, volume remained well below average throwing suspicion on the strength of the rally.

Leading growth stocks lagged the market except for handful of the more speculative names making new fifty two week highs, but on below average volume. Higher quality growth stocks continued to consolidate at or around their fifty day moving averages with a few starting to climb up the right side of their consolidations, but also in below average volume. Jazz Pharmaceuticals (JAZZ), Priceline (PCLN), Eagle Materials (EXP), and Lannett (LCI), joined Netflix moving up the right side of their consolidation in above average volume. Suspiciously, Netflix (NFLX) failed to participate in today's strong action and Applied Materials  (AMAT) broke out of a cup and handle base, but failed to clear fifty two week highs.

The NYSE advance decline line is about the only indicator that is confirming the rally. It has continuously made new highs and led, even as the Nasdaq corrected near ten percent. Otherwise, the VIX is at rally lows and levels not seen since 2007, the fifty two week high low ratio has been in a downtrend since the end of the third quarter of 2013, and the bull bear ration is near the widest spread of the entire bull market. Indicating continued complacency despite the extensive run without a major correction for all the indices over the last year and a half.

It's not unusual for a rally to start in low volume and with a lack of quality growth stocks breaking out, but rare. In many cases it can take a few weeks and shakeouts for other quality growth stocks to setup and break out. It is important that volume begins to pick up and distribution is avoided as more quality growth stocks setup and start to breakout in above average volume. Otherwise, the rally could be short lived and turn out to be nothing more then a bull trap. In the meantime, it is important for investors and traders to stay patient and wait for their stocks and setups to start breaking out, or risk getting whipsawed around.

Thursday, May 22, 2014

Trendless Market Atrocious For Traders

Poor price volume action continues to plague the indices. After another distribution day Tuesday following a two day rally in diminishing volume, the market managed to surge higher Wednesday and recover all the losses, but once again, volume fell significantly lower, continuing the trendless action over the past month, the Nasdaq drifting higher towards the fifty day moving average and range highs, while the NYSE, DOW, and SP 500 hover near fifty two week and all time highs.

Leading growth stocks barely keep up with the market on good days, significantly under perform on bad days, and few are anywhere near low risk buy points. Any stocks that do manage to breakout from shorter term setups, tend to reverse same day or within a few days. Bitauto Holdings (BITA) broke out from a tight range yesterday, only to reverse lower and bearishly engulf the previous day in above average volume. Not all is bad, Netflix (NFLX) and Sanchez Energy (SN) have started to move up the right side of their respective bases, a cup shaped and double bottom base, in heavier volume.

Short trading ideas have not been any better. Most remain with their setup ranges but refuse to tighten or breakdown. Considering the poor action in the indices and leading growth stocks, monitor short trading ideas closely for potential breakdowns. Krispy Kreme Donuts (KKD) and Jabil Circuits (JBL) continue to tighten around their respective fifty day moving averages.

Trendless markets are atrocious for swing traders. It is too easy to lose money by a death of a thousand cuts. Unless you are day trading or take on more risk by widening initial stops, most positions get stopped out on the same day they attempt to breakout from shorter term setups. Even if a trader has gotten a position or two correct, the insignificant follow through and continued risk in a wider stop, does not make up for the stopped out positions. At this point, cash is still the best position.

Monday, May 19, 2014

Avoid Obscure Markets in Cash

Since about the middle of April, the Nasdaq and Nasdaq 100 appeared ready to rollover several times only to hold a previous low, rally on lower volume, and stall near or at the fifty day moving average. The DOW, NYSE, and SP 500 have attempted to breakout to fifty two week and all time highs on diminishing volume only to stall or sell off in heavier volume. 

The last three days have followed a similar pattern. After a major distribution day on Thursday, the market has mustered a two day rally on diminishing volume, including expiration Friday.

Leading growth stocks have been unable to muster any strength or confidence either. Few stocks have been able to setup near fifty two week highs. Those that have attempted to breakout or move into new highs have done so in below average volume with lagging relative strength lines. The remaining stocks are mired below or on the verge of falling below the fifty day moving with no ability to rally above or off the moving average with any strength.

With an upcoming holiday weekend it is doubtful anything exciting will occur until afterwards. Expect the Nasdaq to attempt a test of the fifty day moving average and recent range highs, and the NYSE, DOW, and SP 500 to test fifty two week and all time highs. If volume is low, or higher and the market stalls, this could be a strong indication of another wave lower. Of course, leading growth stocks could use this time to work their way up the right side of their consolidations in higher volume and soften any major selling in the market after the holidays.

With so little follow through in either direction and too many shorter term setups being nothing more then bull or bear traps that reverse back into consolidations the same day they attempt to breakout or breakdown, traders continue to be better off on the sidelines waiting for leading growth stocks or short trading ideas to tighten further before attempting to trade. Cash really is a strong position in obscure markets.

Monday, May 12, 2014

Learn From The Past Know When Not To Trade

The DOW, NYSE, and SP 500 closed at all time highs, technically reconfirming the rally, while the Nasdaq vacillates around the ten and twenty day moving averages stuck between the fifty and two hundred day moving averages, five percent below fifty two week highs. Going into the close, volume had receded for a fourth straight day and near the lowest levels of the year, not the type of action that lends confidence to a rally. 

Leading growth stocks are all over the place. One day they are ready to break higher and the next day they are breaking below short term pivot points, vacillating wildly around moving averages and near base bottoms, making them very difficult to hold without a lot of risk. A few value and higher dividend yielding stocks have managed to make new highs, but with little progress, a worrisome sign. Most of today's stronger action came in stocks well off their recent highs: YY (YY), Qihoo 360 Technology (QIHU), Vipshop Holdings (VIPS), and Bitauto Holdings (BITA) rose sharply in mixed volume.

Short trading ideas are acting similarly to leading growth stocks. Except for the few earnings meltdowns, most breakdowns have squeezed back into consolidation within days of trying to break down. So unless traders are willing to bet on a stocks ahead of earnings, taking on enormous risk, most trades are stopped out before they get going.

Value stocks have led for around the past three months. As this blog recently stated, rallies led by value tend to be short lived, choppier, and harder to trade. Almost to the point that traders would be better off day trading or in cash rather then trying to hold positions.

It's easy to turn a blind eye on a position and hope it goes well, especially when it has worked so well over the last year or two. But five years into a bull market and well over a year without a major correction, the risks are extremely high. Experienced traders and investors should have learned their lessons from 2000 and 2008. Sometimes it is better to miss the last run, then get caught up in the carnage afterwards, especially when the last few trades and most of the recent trading setups have made no progress despite record highs in the market.


Krispy Kreme Doughnuts (KKD) continues to work on its bearish head and shoulder pattern and stall at the fifty day moving average despite the market trading at new all time highs. The stock could be shorted anywhere within the current range or a breakdown below the recent support with a stop above recent highs. Earning are expected June 2nd.

Friday, May 09, 2014

Bifurcated Market Creates Choppy Trading Environment

The DOW, SP 500, and NYSE are all within striking distance of fifty two week and all time highs, but have stalled at those levels several times over the last five weeks. The Nasdaq, SP 600, and Russell 2000 have been unable to muster any type of significant rally since their respective corrections began at the beginning of March. Volume has been high on the DOW, SP 500, and NYSE indicating that while these indices might appear strong, they could be stalling and it is a matter of time before they join the Nasdaq, SP 600, and Russell 2000 in deeper corrections. The market doesn't stay bifurcated for too long.

Leading growth stocks can't seem to get out of their own way. Few are near fifty two week highs ready to break out, while the majority stall at moving averages with every rally attempt and head lower. Most continue to consolidate within acceptable correction levels and are months from being considered in bearish patterns that would indicate a bear market is inevitable. Stocks will typically test their major moving averages and fail at least two or more times within several months, before we consider them bearish. Of course there is always a first time for everything.

The beginning of bear markets and major corrections tend to start the same way and feel equally horrible. Leading growth stocks sell off and the major indices appear ready to fall off a cliff. The difference between the two becomes more obvious as leading growth stocks start to hold near previous lows and new leading growth stocks begin to emerge as the market takes a second  major leg down. Unfortunately, a major correction could reach bear market correction levels, down twenty percent or more, on panic selling. Since we don't have many bearish patterns in former leaders yet and the NYSE advance decline line has not lagged, we can assume this is more of a correction, then the start of a bear market. But we all know what happens when we assume. So we take it one day at a time.

At this point traders should have been in cash since Tuesday unless day trading. Even then, the environment has been very choppy with all the intra-day reversals. Conservative traders could probably go fishing until either new leaders emerge or the old leaders bottom and move up the right side of their bases. Aggressive traders on the other hand should continue to watch for stocks with strong relative strength verse the rest of the market that could move higher with every rally attempt. Remember, in order for there to be stocks near fifty two weeks highs ready to breakout as a major correction or bear market ends, at some point they have to move higher despite the heavy selling in the market.

Have a nice weekend!!

Tuesday, May 06, 2014

So Much For The Rally Attempt

Around 11 am, the Capitalist Bull Twitter feed alerted traders to tighten stops to protect profits and prevent losses on recent positions because the market and leading growth stocks appeared to be stalling, and stall they did. Going into the close, all three major indices were down significantly in heavy volume.

Leading growth stocks suspiciously performed in line with the market yesterday. In the afternoon, they began stalling near moving averages and couldn't follow through in any meaningful volume despite the rally into the close. That action continued this morning forcing a reevaluation of the technicals, which quickly became more negative with every small rally attempt as leading growth failed to follow, eventually rolling over towards recent lows and tighter stops in heavier volume.

Few stocks survived today's selling. Trader's that hesitated to lock in small profits and cut losses, paid the price by the close. At this point, most positions should have been stopped out. While it would be nice to go fishing, the damage is not severe enough to require a very long time to correct. Most stocks just continue to work on the bottoms of their consolidations and could attempt a move up the right side over the next week or two. Tesla Motors (TSLA), Jazz Pharmaceuticals (JAZZ), Valeant Pharmaceuticals (VRX), Solar City (SCTY), and Horizon Pharma (HZNP) all report over the next few days. Market reactions to their reports will give traders further insight into the market's health.

Every stock has a bad day or two, but when they all begin to under-perform together, especially when the rally attempt is tentative, alarm bells have to ring quickly, especially for aggressive traders that do not wait for an official follow through day. 


Jabil Circuit (JBL) failed to participate in the recent rally attempts and has continued to stall and consolidate into it fifty day moving average. A breakdown below the recent support can be shorted.

Krispy Kreme Donuts (KKD) continues to work on a bearish head and shoulder pattern. The stock has rallied in low volume or stalled at the fifty day moving average for since the beginning of the year. A breakdown off the fifty day moving average can be shorted. Earnings are expected around May 29th.

Monday, May 05, 2014

Early Market Shakeout Reverses Higher

A scary opening shake out reversed quickly and climbed higher for the remainder of the day. Volume was low on the shakeout and never really picked up as the market rallied back. The good news, the market remains in a tight consolidation and ready to breakout.

As scary as the first few minutes of the day were, few leading growth stocks triggered tight stops on recent breakouts, keeping traders in long positions. Traders should continue adding long positions with every shakeout until at least some recent breakouts begin to fail or show signs of weakness...stalling at moving averages, low volume follow through, climactic action, etc.

Air Lease (AL) recovered the fifty day moving average in above average volume after a recent shakeout below, Carrizo Oil and Gas (CRZO) followed through to fifty two week highs, Intermune (ITMN) and Fleetcor Technologies(FLT) continued higher off the fifty and two hundred day moving averages, respectively.

Review the leading growth stocks analysis for trading ideas.

Friday, May 02, 2014

US Stock Market Flat Lines While NYSE Advance Decline Line Continues to New Highs

Today's action was a touch more exciting then watching paint dry. After a week of wild intra-day swings, and positive closings, the market traded mostly sideways for the majority of the day, but not before a morning seesaw ride. Closing little changed in lower volume. 

Leading growth stocks outperformed the market for a third straight day, but need to start powering and following through on their moving average bounces, preferable in heavier volume, or risk stalling and retesting recent lows. Fleetcor Technologies (FLT) made a major move up the right side of its cup shaped base, Cabot Oil and Gas (COG) has started tp form the handle of its cup shaped base, and NPS Pharmaceuticals (NPSP) continues to round the bottom of its cup shaped base.

Short trading ideas continue to consolidate around major moving averages preparing to roll over with the next tide of selling. Still a major sign of weakness with the current market rally. Typically these will start to break higher rather stay tight.

Nothing wrong with a bit of a rest after the gains made after Monday's reversal bottom, but let's not sit around too long to unnerve the already extremely nervous sellers and profit takers. The NYSE advance/decline continues advancing into new highs, making it hard to be too bearish yet. 

In general, the market and leading growth stocks need much more time to setup a major sustainable rally. With value leading and a few growth stocks bouncing, short term, the current rally still has some legs, but very shaky.

Few positions triggered tighter stops, broke out, or followed through on recent gains. Giving traders little to do. But, with little follow through and potential stalling at moving averages, traders need to keep tight stops in case another shake out develops on unexpected news headlines over the weekend or next week. For now, stay patient with current positions and look for new entries on pullbacks. Unless, current positions start triggering protective stops en masse. Then, cash may become a great position and sell in May and go away can begin?

Thursday, May 01, 2014

US Market Leading Growth Stocks Quiet Ahead Of Friday's Monthly Job's Report

Over the last two weeks, the Nasdaq staged two positive reversals in heavy volume at or around the two hundred day moving average, the NYSE advance/decline line made new highs, the Dow and NYSE closed at all time highs in heavy volume, confirming the rally. Except for a few hours of heavy selling and shakeouts, here and there, the market has defied mixed economic and geopolitical news breaking out of the Ukrainian-Russian Crisis, and has traded orderly with no distribution in the last two weeks. Friday's Monthly Unemployment report will be the next test for the market.

Leading growth stocks significantly outperformed the market for a second straight day, following through on recent breakouts and bounces off moving averages in heavy volume, and consolidated sideways as the market drifted lower in the afternoon. The morning uncertainty, and afternoon selling, presented potential low risk entries into new and recent breakouts. US Silica Holdings (SLCA), Smith and Wesson (SWHC), Micron Technology (MU), and Western Refining (WNR) added to recent gains.

Interestingly enough, short trading ideas also added gains to recent breakdowns and others continued to hold bearish consolidations. Avon Products (AVP), Walter Investment Management (WAC), and Ocwen Financial (OCN) added to recent gains in heavy, above average volume. This continues to be the rallies main weakness besides the low number of new highs.

On Monday, the US Stock Market Update and Trading Ideas warned investors not to go fishing jut yet, and on Tuesday, the US Stock Market Update and Trading Ideas suggested traders should have been accumulating a long position or two, and add to positions with each shake out as long as initial positions do not get stopped out. The market has presented two opportunities the last two mornings and afternoons to enter long positions on shakeouts without initial positions being stopped out. Most positions should be bounces off moving averages not stocks breaking out to new highs. Review the leading growth stocks analysis for additional trading ideas.

Don't expect this rally to last too long, most likely a few weeks...tops, or be easy to handle with intra-day pullbacks feeling worse then they are. Expect most stocks to stall near fifty two week highs and others to climax, short term and/or permanently. Bounces and breakout should continue to follow through in strong volume, or stops should be tightened quickly to protect profits and avoid major losses.


Intercontinental Exchange (ICE) is in the process of forming a second stage double bottom base after advancing sixty percent in just under a year. Sales are expected to accelerate to 178% over the next four quarters and earnings to 50%. The stocks pe expansion price target range, at its breakout in January 2013, was $345 - $395, another 60 - 90% from here. A breakout above the recent range or double bottom mid point at $219.83, could launch the stock toward the PE Expansion target. Earnings are expected May 8th before the opening bell.

Krispy Kreme Doughnuts (KKD) more then tripled out of a cup and handle breakout at the end of 2012 while formingind and breaking out of three bases along the way. The stock topped in low volume (institutions lost interest) and gapped down in the heaviest volume of its advance, on poor earning's guidance in December 2013. The stock has spent most of the last year forming a bearish head and shoulder's pattern, stalling at the two hundred day moving average, and recently consolidating into the fifty day moving average in lower volume, with several above average volume sell offs. A breakdown below the recent lows could accelerate the selling to the next support area between $12 - $15. Don't cheat, the stock could just try and retest the two hundred moving average above before selling resumes if the market rally holds, so be patient.

Krispy Kreme Donuts (KKD)