Thursday, January 27, 2011

VAR Watch

The medical gear company Varian Medical Systems Inc. (VAR) annonced 9.7% earnings surise after the close on Wednesday, but coupled that with an outlook statement that wasn't all that far from the consensus.

Also, VAR announced a huge order, and there was also some analyst target-raising going on. A busy, busy couple of days.

The net result in today's trading was a huge 5.1% price swing that has ended with a retracement of about one-third from the low and a current price not too far from where the stock opened this morning.

phase pfeppstrend

By the book, this position should be closed. I entered it as an earnings play using the pfe/pps analysis. That signal has turned neutral. Time to skedaddle. That's the short-term answer.

The stock set an all-time high on Thursday, before the announcement and the price plunge. However, the 50-day moving average is providing price support, and the stock is trading above the swing low set Jan. 10.

Reversal Levels
  • $72.19, +5.0% (all-time high)
  • $70.09, +1.9% (20-day moving average)
  • $68.76 --- You are here.
  • $68.64, -0.2% (50-day moving average)
  • $67.42, -2.0% (swing low)

VAR has been in bull phase on the slow-trade chart since August 2009.

Monthly chart
phase pfeppstrend

VAR entered bull phase on the 55-day/20-day price channel chart on Sept. 10, 2010. This is the second time that the price has come close to the 20-day lower line exit signal, at $67.42.

The adx has swung downward, but since it is trading below 40, that change has no trading significance.

Bottom line: I shall continue to hold my position based on the price-channel analysis. I think I can profit from taking a longer view with this stock.

Table Abbreviations:
  • pfe - Location of the polarized fractal efficiency line.
  • pps - Person's Proprietary Signal mode.
  • trend - Trend of the polarized fractal efficiency line.

Key to the PPS/PFE tables
phase bull phase
bear phase
pfe +100 and above
+50 to below 100
0 to below +50
below 0 to above -50
-50 to above -100
below -100
pps bull confirmation
bear confirmation
trend uptrend
no trend

More on the PFE/PPS analysis

Read a detailed explanation of the analytical tools and how they’re used, including trading rules.

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.

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