Tag Archives: market lab report

Market Lab Report – Review of Pocket Pivots and BGUs for the Week of 3/28-4/1/16

Notes from Gil’s and Dr. K’s trading journals regarding this past week’s pocket pivot and buyable gap-up reports: Ellie Mae (ELLI) GM – ELLI is in new high price ground and somewhat extended. I would look to buy a pullback into the 10-day line at 85.49 as a lower-risk entry opportunity. Dr. K – If you examine the prior uptrend between Jan-Aug 2015, ELLI routinely hits its 10- and 20-day moving averages, thus buying at either moving average can work. Use market strength or weakness to guide your decision.  Facebook (FB) GM – FB provided buyers with a nice pullback on Friday that pushed right into the 10-day moving average and then turned back to the upside by the end of the day, closing near its high for the day. This is a typical example of how you would prefer to handle most pocket pivots – look to buy on constructive weakness into a logical support area. In this case the 10-day line worked just fine. Dr. K – This is a mega-cap institutional quality name thus major funds will own a piece of this company since you cant get fired for owning what everybody else owns. Thus should major averages continue their uptrends, FB should continue right along with them. One headwind would be the mandate these huge funds have which says they cannot own more than x% of any stock, but the beneficial tailwind from uptrending markets is always stronger.  Cantel Medical (CMN) GM – This is a very thin stock that trades a little less than 200,000 shares a day. Given its thinness and hence potential for price volatility, I would look to buy into this on a pullback to the 20-day moving average at 60.90. That has served as solid support for the stock throughout March. As a general rule, speaking for myself, this stock is too thin for me to play around with. I prefer bigger institutional-grade stocks. Dr. K – Some markets favor big caps while others favor small caps. The QE-market has favored larger cap stocks, thus smaller cap stocks which some members prefer such as CMN have to contend with that small cap headwind. Also note that the way markets are made in smaller caps subjects them to a greater degree of volatility which further increases risk. Nevertheless, any smaller cap names we mention come with these two caveats. On the plus side, CMN has had a number of relatively clean uptrends.   Webmed (WBMD) GM – a BGU coming out of a slightly ascending price trend. The stock held very tight on Friday after Thursday’s BGU on huge volume and remains in buyable range using the 60.70 intraday low of Thursday as a selling guide.  Dr. K – WBMD closed at 62.45, so if one uses a 1-2% undercut of the buyable gap up low as their sell stop, their current risk in buying it here is 4-5% which may be acceptable to some depending on their risk tolerance profiles. Intuitive Surgical (ISRG) GM – This stock is a bit on the wiggly side, so I would look for a pullback to the 20-day line at 584.80 as the lowest-risk entry point. The line has served as solid support for the stock so far since the market lows of early February. Dr. K – The stock’s upside reversal on higher volume is a bullish sign but the stock tends to trade a bit loose at times, so buying on weakness to reduce risk is a good strategy. Should the market continue to show strength given its recent behavior, one may decide to buy ISRG on relative weakness which means it may not reach its 20dma before going higher. This is where context becomes essential as well as a well-trained chart eye. GoDaddy (GDDY) GM – Basically speaking, a breakout from a cup-with-handle base that is also a pocket pivot. Stock is fairly close to its 10-day and 20-day moving averages which can be used for tight selling guides or reference points for buyable pullbacks from Friday’s close, should they occur. Dr. K – GDDY’s high volume upside reversal base breakout is a strong pattern. It should move higher from here unless the general market starts to falter. Its 10- and 20-day moving averages serve as support as they also coincide with its base which also serves as support. 

Market Lab Report – Premarket Pulse 4/1/16

Major averages finished yesterday mixed on higher volume, closing near the lower end of their trading ranges ahead of today’s employment report. The report came in stronger than expected and showed that nonfarm payrolls increased by 215,000, compared to the 200,000 consensus. Average hourly earnings increased 0.3% matching consensus while the unemployment rate ticked up to 5.0% from 4.9%. The market is lower following the report which shows progress towards an eventual rate hike, though Fed Chair Yellen recently increased her focus from what’s happening at home to what’s happening globally. She admitted that global growth remains a big problem which today’s report, while a sign of strength, does little to solve. Healthcare content provider WebMD (WBMD) had a buyable gap up with an intraday low of 60.70 which would serve as a selling guide. Earnings and sales are accelerating, ROE 58.8%, group rank 58.

Market Lab Report – Premarket Pulse 3/31/16

Major averages rose yesterday on lower volume ahead of tomorrow’s employment report.  Yesterday’s market correlated strongly once again with the price of oil. Should this strong correlation persist, the current minor correction in oil could pressure the stock market lower in the coming days. Indeed, while a few new names have registered actionable buy points over the last several days, the overall action of leading stocks remains weak. Thus the market could have another mini-correction of a few percent as it has done many times before, only to have QE/central banks come to the rescue. Indeed, another straw onto the camel’s back came as the S&P overnight lowered its rating outlook for China to AA- Negative from AA- Stable. Our buying and selling strategies as noted in the recent March monthly wrap up report is key to keeping risks to a minimum while taking profits when you have them. An example would be Silicon Motion (SIMO), which is up about 15% from the time we first reported on the stock as a real-time pocket pivot. Of course, despite all central banks blowing the QE trumpet, further evidence of a sagging global economy could further diminish investor confidence which could result in a steeper correction. All that said, these market rallies can go longer than expected given that central banks are in alignment with respect to low rates. Thus, as always, keep a close eye on your stocks and also on your leading stocks list for early clues as to market direction.