Tuesday's Prospects

On Friday, Aug. 29:

Of 3,929 stocks and exchange-traded funds in my analytical universe, 112 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, 104 to the upside and eight to the downside.

Twenty-seven major-exchange small-cap symbols broke out, 22 to the upside and five to the downside.

Eight over-the-counter symbols broke out, two to the upside and six to the downside.

Twenty mid- or large-cap symbols traded on the major exchanges survived my initial screening, all having broken out to the upside. One symbol within that group broke out to the upside as a result of an earnings announcement, triggering the Reset Day rule.

Nine small-cap major-exchange symbols survived initial screening, all having broken out to the upside.

Two symbols traded over the counter survived my initial screening, both having broken out to the upside.

No large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

One symbol survived screening as potential bull plays from my supplemental list of innovative companies.

I shall do further analysis of the surviving symbols on Tuesday, Sept. 2.

First-round survivors: Regular rules

The lists are sorted in descending order by average yield. Regular rules means that confirmation will require trading above the 20-day price channel breakout level.

Potential bull plays

Mid-, large- cap MTW SIVB PEGI CXO NSC LVLT TEG CQH AVA FET CE DORM PKG PNM XOP NAVI DTV ERF IP

Small-cap CPE PQ OMER ISLE TSEM MC INGN PACB SNMX

OTC NABZY ITYBY

Innovators supplemental CAT

Potential bear plays

Mid-, large- cap (none)

Small-cap (none)

OTC (none)

Large-cap supplemental (none)

First-round survivors: Earnings Reset-day rules

The lists are sorted in descending order by average yield. Rules for a breakout immediately following an earnings announcement require that confirmation on the following trading day, Reset Day, require that the price be beyond the Reset-Day 20-day price channel.

Potential bull plays

Mid-, large- cap AVGO

Small-cap (none)

OTC (none)

Innovators supplemental (none)

Potential bear plays

Mid-, large- cap (none)

Small-cap (none)

OTC (none)

Large-cap supplemental (none)

Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:

• mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
• small-cap stocks on major exchanges,
• mid- and large-cap over-the-counter stocks.

The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options, without yet passing judgment on whether those options are liquid enough to support a trade.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

-- Tim Bovee, Portland, Oregon, Aug. 30, 2014

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T

Friday's Outcomes: INVN, ERF

I've opened a bull position in INVN. See the update to my Aug. 24 analysis, "INVN: A slice of the iWatch?".

I closed the bear hedge I had opened in my longer-term share holdings in ERF. See the update to my June 3 analysis, "ERF: A growth and income hydrocarbons play".

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Friday's Finalists: RRMS

Rose Rock Midstream LP (RRMS) was the sole symbol to make it to the finals out of 15 survivors from the first round of analysis. (See "Friday's Prospects".)

Only one out of the batch, AEP, failed confirmation, and three , NXPI, MMC and NGG, lost upward momentum after giving bull signals.

Both bear signals, WAGE and BRLI, have options that are insufficiently liquid to support a  bear play.

One symbol, PLL, broke out after earnings were announced, placing it under my Reset Day rules. It won't be in play until Monday.

The rest have charts that are insufficiently bullish to support their bull signals.

The finalist, RRMS, has a neutral rating from Zacks Investment Research, the service I use to short-cut my fundamental analysis. Like most companies that have "Midstream" in their names, it is in the oil business, a sector that I'm avoiding.

Energy stocks seem to account for a high proportion of the bull signals I've seen in recent days.

The companies in that sector, more than most, seem to march in lockstep. Not surprising, since it is a commodities business, and commodities are fungible.

So rather than playing energy based on whichever company is giving a signal on a given day, I find it far more useful to play the sector as a whole though a fund (XLE) or the commodity itself (USO), or at the least to pick a highly liquid carrier of my aspirations (BP, XOM, COP).

RRMS, with options too illiquid for use in a leveraged and hedged trade, and with five-figure volume on the shares, is far from meeting my needs in that regard.

I'm passing on RRMS and won't be writing any new analyses today.

-- Tim Bovee, Portland, Oregon, Aug. 29, 2014

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Friday's Prospects

On Thursday, Aug. 28:

Of 3,921 stocks and exchange-traded funds in my analytical universe, 60 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, 48 to the upside and 12 to the downside.

Twenty-six major-exchange small-cap symbols broke out, 11 to the upside and 15 to the downside.

Eleven over-the-counter symbols broke out, five to the upside and six to the downside.

Twelve mid- or large-cap symbols traded on the major exchanges survived my initial screening, 11 having broken out to the upside and one to the downside. One symbol within that group broke out to the upside as a result of an earnings announcement, triggering the Reset Day rule.

Two small-cap major-exchange symbols survived initial screening, onehaving broken out in either direction.

One symbol traded over the counter survived my initial screening, having broken out to the upside.

One large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

One symbol survived screening as potential bull plays from my supplemental list of innovative companies.

I shall do further analysis of the surviving symbols on Friday, Aug. 29. 

First-round survivors: Regular rules

The lists are sorted in descending order by average yield. Regular rules means that confirmation will require trading above the 20-day price channel breakout level.

Potential bull plays

Mid-, large- cap CODE RRMS NXPI MRH CSRE CPHD AEP MMC DPM NGG

Small-cap STCK

OTC HYPMY

Innovators supplemental GPRO

Potential bear plays

Mid-, large- cap WAGE

Small-cap BRLI

OTC (none)

Large-cap supplemental TLM

First-round survivors: Earnings Reset-day rules

The lists are sorted in descending order by average yield. Rules for a breakout immediately following an earnings announcement require that confirmation on the following trading day, Reset Day, require that the price be beyond the Reset-Day 20-day price channel.

Potential bull plays

Mid-, large- cap PLL

Small-cap (none)

OTC (none)

Innovators supplemental (none)

Potential bear plays

Mid-, large- cap (none)

Small-cap (none)

OTC (none)

Large-cap supplemental (none)

Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:

• mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
• small-cap stocks on major exchanges,
• mid- and large-cap over-the-counter stocks.

The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options, without yet passing judgment on whether those options are liquid enough to support a trade.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

-- Tim Bovee, Portland, Oregon, Aug. 29, 2014

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T

Thursday's Outcomes: BXMT, SINA

BXMT closed above its 10-day price channel and I've exited the bear hedge I had entered against my longer-term bull position. See "BXMT and NYMT: Two mortgage trusts".

I analyzed SINA as a potential bear play but decided not to open a position today, instead placing the symbol on the Watchlist until it produces a new lower low. See "SINA: Drive the wolf from the door".

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

SINA: Drive the wolf from the door

Update 9/12/2014: SINA is closing above its 10-day price channel without ever having dropped to my $42.40 entry level. Under my rules, symbols on the Watchlist are removed when then close beyond the 10-day channel opposite the direction of the proposed trade, and so I'm removing SINA from the Watchlist. I'll consider it again as a trade if it closes beyond the 20-day price channel in one direction or the other.

---

Sina Corp. (SINA) has the sort of chart that gives me an "a-ha!" moment. It looked bearish at first glance, but digging in, my count shows that the bear beginning in May drove the wolf from the door. The beast may lurk in the neighborhood but seems unlikely to make a dramatic return.

SINA broke below its 20-day price channel on Wednesday and confirmed the bear signal today. However, I see little room for decline on the chart.

The Chart

SINA peaked in May 2011 at $147.12, wave 1 {+2} in Elliott wave analysis, and then began tracing the wave 2 {+2} correction to the downside.

Click on chart to enlarge.

SINA 15 years monthly bars (right), 1 year daily bars (center), 6 months 2-hour bars (right)

The key question in assessing this chart is whether wave 2 {+2} has run its course.

The longer-term chart (left) shows a clear three-wave decline from the peak, although the C {+1} wave seems a bit truncated if the pattern is to be a Zig-Zag.

There is, of course, no rule that requires the correction to be a Zig-Zag. It could well be a Flat, or even a Triangle. In the last two patterns, the vertical decline would be shallower than in the first instance.

Has wave C {+1} come to an end? There is a clear five waves down, arguing that it has. The 4th wave, wave 4 at the base degree, also has five waves internally, although they are less clearly differentiated than in the parent wave.

The price since the May 23 end of wave C {+1} has traced a 1st wave to the upside and is working on a 2nd wave to the downside. The 2nd wave, which I've called wave 2 {-1}, can be expected to remain above the wave 1 {-1} starting point, $42.40. A fall below that level will invalidate my count.

Odds and Yields

Wave C {+1} to the downside, from its beginning in October 2013, has completed three bear signals, two of which were successful. The winners on average yeilded 15.4% over 44 days. The loser declined by 3.6% over 22 days.

The win/lose yield spread is quite high, at 11.4%.

The Company

Sina, headquartered in Shanghai, China, is China's Twitter. Also, China's Google and Yahoo! And China's Tumblr.

It has stretched out wide to serve the world's largest market. Like all things in that outsized piece of the global economy, Sina is seen as having huge potential for profit, and also a significant chance of running afoul of the still autocratic government.

Analysts collectively give it a 17% positive enthusiasm rating

The company reports a modest return on equity of 3.3% with debt amounting to 35% of equity.

The earnings yield is 0.78%, compared to 2.33% on 10-year U.S. Treasury notes.

Earnings over the last three years peaked in the 4th quarter of 2013 and then fell, recovering only slightly in the most recent quarter.

Sina has been consistently profitable since the 2nd quarter of 2012. It has produced two negative earnings surprises in the last three years, most recently in the 1st quarter of the current year.

Growth and earnings  estimates imply a "fair" price for SINA of $5.18 per share. That would mean that  SINA is overpriced nearly eight times over. I've marked that price on the left-hand chart in purple.

The stock is selling at a steep premium to sales. It takes $4.25 in shares to control a dollar in sales.

Institutions own 51% of shares.

Sina next publishes earnings on Nov. 10. The company pays no dividend.

Liquidity and Volatility

SINA on average trades 2.2 million shares per day and supports an extremely wide selection of option strike prices spaced $50 cents apart near the money, with open interest running to three figures.

The front-month at-the-money bid/ask spread on puts is 4.2%, compared to a 1.6% spread on the most-traded symbol on the U.S. markets, the exchange-traded fund SPY.

Volatility stands at 72% and has been falling since early August, having bounced slightly after reaching its low for the past year a few days ago. By comparison, volatility on the S&P 500 index is 12%.

SINA's volatility stands at the 2nd percentile of the 1-year range, suggesting that the most successful trades will be structured as long option spreads bought with a debit, such as a bear put vertical spread.

Options are pricing in confidence that 68.2% of trades will fall between $40.76 and $50.80 over the next month, for a potential gain or loss of 11%, and between $43.37 and $48.19 over the next week. I've marked the month range on the center chart.

Contracts today are skewed toward puts, which are running 16% above their five-day average volume. Calls are running 26% below average volume.

Decision for My Account

I would open a bear position if SINA were to close below $42.40 and confirm it by trading lower the next day. Without that decline, I consider SINA to be in an uptrend that began May 23, with the decline from July 2 being a counter-trend correction of the {-1} degree that is nearing its end.

I.e., I don't see that much downside potential.

So I'm not opening a bear position today. I will add SINA to my Watchlist with an entry signal below $42.40.

-- Tim Bovee, Portland, Oregon, Aug. 28, 2014

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

From time to time I use the number 68.2% in using applied volatility to calculate the expected trading range. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.

See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.

By preference I place my shorter-term trades in the last half hour before the closing bell in New York. See my essay "When is the best time to trade" for a discussion of the practice.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Thursday's Finalists: SINA, ETE, CVTI

After the dust cleared away from a carnage of non-confirmations this morning, three symbols survived: China's largest Internet portal Sina Corp. (SINA) with a bear signal, and the New York energy investment company Energy Transfer Equity LP (ETE) and the Tennessee trucker Covenant Transportation Group Inc. with bull signals. (See "Thursday's Prospects" for the first round of analysis.)

Altogether 11 symbols failed confirmation, and a 12th showed a marked lack of momentum in the direction of the signal. That's more than a third of the 27 symbols that survived my first round of analysis.

An additional 11 symbols had charts that were insufficiently strong in the direction of the signal to justify a trade.

One bear signal had options that are too illiquid for use in building a bearish position.

All three of the finalists are ranked neutral by Zacks Investment Research, the service I use to short-cut my fundamental analysis.

CVTI has no options and so can't be leveraged or hedged. It is the least liquid of the group, with five-figure volume.

SINA and ETE each trades more than a million shares a day and have options with sufficient open interest. The front-month at-the-money bid/as spread on SINA puts is 3.8%, compared to a spread on ETE calls of 23%.

The narrower spread makes SINA much more attractive.

I intend to post a full analysis of SINA as a potential bear play under my shorter-term rules prior to the closing bell.

The bull signal from CB on my Innovators supplemental list isn't backed by a sufficiently bullish chart, so I've set it aside.

-- Tim Bovee, Portland, Oregon, Aug. 28, 2014

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Thursday's Prospects

On Wednesday, Aug. 27:

Of 3,921 stocks and exchange-traded funds in my analytical universe, 68 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, 60 to the upside and eight to the downside.

Thirty major-exchange small-cap symbols broke out, 24 to the upside and six to the downside.

Ten over-the-counter symbols broke out, eight to the upside and two to the downside.

Twenty-three mid- or large-cap symbols traded on the major exchanges survived my initial screening, 21 having broken out to the upside and two to the downside. Two symbols within that group broke out to the upside as a result of an earnings announcement, triggering the Reset Day rule.

Four small-cap major-exchange symbols survived initial screening, all having broken out to the upside.

Two symbols traded over the counter survived my initial screening, both having broken out to the upside.

No large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

One symbol survived screening as potential bull plays from my supplemental list of innovative companies.

I shall do further analysis of the surviving symbols on Thursday, Aug. 28. 

First-round survivors: Regular rules

The lists are sorted in descending order by average yield. Regular rules means that confirmation will require trading above the 20-day price channel breakout level.

Potential bull plays

Mid-, large- cap EQM BBRY QIWI WGP CPG ETE WFT AMAT ACMP HUM MOG/A CVE TD NI BXMT CB EE NWN HE

Small-cap VTNR CVTI AAOI CUNB

OTC ASBFY IFNNY

Innovators supplemental CB

Potential bear plays

Mid-, large- cap SINA SLH

Small-cap (none)

OTC (none)

Large-cap supplemental (none)

First-round survivors: Earnings Reset-day rules

The lists are sorted in descending order by average yield. Rules for a breakout immediately following an earnings announcement require that confirmation on the following trading day, Reset Day, require that the price be beyond the Reset-Day 20-day price channel.

Potential bull plays

Mid-, large- cap BMO GSM

Small-cap (none)

OTC (none)

Innovators supplemental (none)

Potential bear plays

Mid-, large- cap (none)

Small-cap (none)

OTC (none)

Large-cap supplemental (none)

Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:

• mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
• small-cap stocks on major exchanges,
• mid- and large-cap over-the-counter stocks.

The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options, without yet passing judgment on whether those options are liquid enough to support a trade.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

-- Tim Bovee, Portland, Oregon, Aug. 28, 2014

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T

Wednesday's Finalists: QEP

Tuesday was an up day in the markets, as the S&P 500 closed above $2,000, a level considered (by headline writers, at least) to be significant.

On Wednesday, markets were intent on providing a case study in the Law of Gravitation: What goes up must come down.

Only one symbol emerged as a finalist out of the 21 symbols that survived my first round of analysis. (See "Wednesday's Prospects".)

The finalist is QEP Resources Inc. (QEP), a natural gas and petroleum exploration company in Colorado. It gave a bull signal on Tuesday and confirmed it today.

Most of the other 20 first-round survivors, all having given bull signals, either failed confirmation or showed marked downside intraday momentum in the first hour of trading today.

Six, including AMZN -- the most liquid of the batch -- have charts that are insufficiently bullish to support a trade. The other five are EDU, SPN, ENTA, BIND and CYCC.

That left QEP as the sole symbol standing, and frankly, I don't like it as a trade.

The options have a 23% bid/ask spread on front-month at-the-money calls, with spotty open interest on the slightly out-of-the-money strike prices. I would find it hard to construct a leveraged/hedged position.

Plus, fossil fuels? I'm not in the market for that at this point unless I'm getting a huge dividend. If I were buying in to fossils, it would be a longer-term play in something like BP, with large proven reserves and the power to dominate markets.

Also, the chart is at the top of what has been a sideways movement, with a $26 to $34 range, dating back to 2011. Maybe it's a breakout, but maybe not. I'm unwilling to risk it at this point.

Click on chart to enlarge.

QEP 3 years 2-day bars

Given all of that, I'm passing on any QEP trade today.

My supplemental list of highly liquid potential bear plays also came a cropper. DLTR gave a bear signal, but the chart is insufficiently bearish.

AMZN, mentioned above as having an insufficiently bullish chart, is on my supplemental list of innovative companies.

-- Tim Bovee, Portland, Oregon, Aug. 27, 2014

References

My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Wednesday's Prospects

On Tuesday, Aug. 26:

Of 3,921 stocks and exchange-traded funds in my analytical universe, 83 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, 76 to the upside and seven to the downside.

Thirty major-exchange small-cap symbols broke out, 28 to the upside and two to the downside.

Nine over-the-counter symbols broke out, eight to the upside and one to the downside.

Fifteen mid- or large-cap symbols traded on the major exchanges survived my initial screening, all having broken out to the upside.

Five small-cap major-exchange symbols survived initial screening, all having broken out to the upside.

One symbol traded over the counter survived my initial screening, having broken out to the upside.

One large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

One symbol survived screening as potential bull plays from my supplemental list of innovative companies.

I shall do further analysis of the surviving symbols on Wednesday, Aug. 27. 

First-round survivors: Regular rules

The lists are sorted in descending order by average yield. Regular rules means that confirmation will require trading above the 20-day price channel breakout level.

Potential bull plays

Mid-, large- cap AMKR ILMN VPFG TCBI MNK ATI ISBC GBCI MBFI EDU AMZN OKE HBHC QEP SPN

Small-cap ENTA WIBC BIND QADA CYCC

OTC BBSEY

Innovators supplemental AMZN

Potential bear plays

Mid-, large- cap (none)

Small-cap (none)

OTC (none)

Large-cap supplemental DLTR

Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:

• mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
• small-cap stocks on major exchanges,
• mid- and large-cap over-the-counter stocks.

The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

For symbols whose odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options, without yet passing judgment on whether those options are liquid enough to support a trade.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

-- Tim Bovee, Portland, Oregon, Aug. 27, 2014

References

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T