Friday, July 16, 2010

TJX Watch: Flight of the Black Swan

TJX Companies Inc. (TJX), whose signature stores are T.J. Maxx and Marshalls, has whipsawed badly, showing a sharp decline and bear phase on Person's Proprietary Signal (pps) a day after showing bull phase. To make matters more unsettling, it's the second such one-two punch in a week.
TJX $41.42
I won't repeat the analysis posted yesterday. Today's unrelenting decline has covered 3.7% intra-day.

There was no particular news to weave a narrative around, and earnings are still some distance away, before the open on Aug. 17.

I'm looking at my charts to see if there was any precursor to the fall, which began at the open this morning. Yesterday ended with a rising price, so there's no harbinger of doom in that. And there was no volume spike on the decline (looking at the 133-tick chart, which is putting up a bar every two minutes or so), so clearly it's not a headlong flight for the exits.

The stock has been trading sideways since late June, and that's when whipsaws happen. But, it's also when breakouts happen, at the end of the sideways trend.

It is a mystery. A flight of the black swan. And also a fine reminder of the fundamental truth of technical signals: They are perfectly reliable, except when they aren't. The same, of course, is true for stock analysts' forecasts, the Index of Leading Economic Indicators, reports from the federal Office of Management and Budget, astrology charts, apocalyptic readings of the Book of Revelations, and any other attempt to predict the future.

Important to note: The price remains above the swing low of $40.93, set July 8. A decline below that would count as a breakdown to a lower low. Otherwise, the trend is murky.

    The Great Reflation: How Investors Can Profit From the New World of Money
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    Tim Bovee, Private Trader tracks the 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.

    • psar - Parabolic Stop and Reverse
    • adx - Average Directional Index
    • pps - Person's Proprietary Signal
    • ma20 - 20-day moving average
    • macd - Moving Average Convergence-Divergence
    • sto - Fast Stochastic
    About the glance: The colors indicate the state of each signal.

    • trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
    • adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
    • psar, pps, macd: green for bull mode, red for bear
    • sto: green for overbought, red for oversold, yellow for the neutral zone.

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