Wednesday, June 1, 2011

6/1 Top Prospects

Three breakouts beyond the 55-day price channel among the 300+ stocks and exchange trade funds I screened.

sym phase adx bday blevel stop atr atr%
jun1 $30.67 $31.18 0.51 1.7%
jun1 $27.30 $26.31 0.99 3.6%
jun1 $26.75 $27.45 0.70 2.6%
Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

ALL has middlin’ financials -- sort of bearish but not spectacularly so.

HK has been in bull phase since Oct. 11, 2010. Today’s breakout follows a pullback to within 12¢ of the neutrality line (lower 20-day price channel). The financials match a bull play, although I’d wish for a debt/equity ratio lower than 0.8.

STI has weak financials, perfect for a bear play.

JCP broke below the 55-day price channel, at $35.17, but with a declining average direction index (adx) that negates the signal. Also, JCP’s financials are at variance with a bear play.

NLY has touched the upper price channel -- 1¢ away from bull phase. It’s annual dividend yield is just a bit below 14%. The financials are excellent for a bull play, except for the debt/equity ratio, which is at 6.3. However, I think that results from the nature of NLY’s business, so I’ll give it a pass.

If NLY breaks out today, the analysis looks like this:

sym phase adx bday blevel stop atr atr%
june1 ? $18.16 $18.04 0.12 0.7%


  • 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.

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