5/3 Top Prospects

Impressionistically, a lot of stocks -- perhaps a majority of the highly liquid issues I scanned -- pulled away from the 55-day price channel boundaries in retreats toward the center.

When I say pulled away, it works both ways: Stocks in bull phase declined and those in bear phase rose. Quite fascinating, really, this rush toward trendlessness and mediocrity.

They’ve not drawn back enough to trigger a phase change, in most cases, but they certainly managed to trigger a number of stop/losses on my positions this morning.

All in all, I found one new phase:

sym	phase	adx	bday	blevel	stop	atr	atr%
NOV		22	may3	$72.35	$74.61	2.26	3.1%

Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

For today, at least, the conventional wisdoms have been turned on their heads, and old darlings have become pariahs. The nine China funds I track, all heading south. The four BRICs, south. Commodity funds, south. Silver and gold, south. Oil, south. Dividend stocks (at least the ones I track), south.

A bright, northerly note, for those inclined toward bullishness: LLY broke strongly above the price channel amid a bull phase that began on April 11.



Key

• phase: Green for a bull-phase breakout, red for a bear phase.
• adx: Average direction index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 30 and up but below 40, magenta (light purple) for 20 and up but below 30, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, purple for sunset on the horizon and brown for the earth.)
• bday: Breakout day, the day the price broke through the upper or lower 55-day price line.
• blevel: Breakout level, the price level of the line that was broken through.
• bstop: The stop/loss price calculated on breakout days as the 14-day average true range below the breakout-day low for a bull phase and above thre breakout-day high for a bear phase.
• atr: The 14-day average true range, in the same currency as the price.
• atr%: The average true range as a percentage of the breakout level, an indicator of volatility that is comparable for all potential trades.

About channel analysis

Read a detailed explanation of my channel analysis method, including trading rules.