Tuesday, June 21, 2011

6/21 Top Prospects

My scan shows it to be a broad reversal day, with chart after bear-phase chart displaying little green candlesticks taking off sharply from the lower boundary of the 55-day price channel, like a fleet of green space shuttles rising from their launch pads.

All but one of the my bear positions have been stopped today and the day before.

From this, I conclude that the big money expects the Fed, in Wednesday's money-policy announcement, to do something good for equities -- such as keeping rates low and extending the qualitative easing perhaps? Of course, the big money can change its collective mind at the drop of pin.

I found two breakouts beyond the 55-day price channel among the 600+ stocks and exchange trade funds I screened. Both them have strong trends.

In addition, I noted six issues that are in the midst of ongoing, strong-trend bull phases: CI, CL, DGX, ONTY, SOLR and VVTV. For my account, they may or may not be worth opening bull positions. My theory is that the longer a trend has been in place, the more likely it is to reverse, as traders get nervous and move money out to take profits.

Strong-trend Breakouts
sym phase adx bday blevel stop atr atr%
jun21 $20.77 $21.12 0.35 1.7%
jun21 $13.84 $13.29 0.55 4.0%
Exchange-traded funds are marked with a plus sign (+) after the ticker symbol. My holdings are marked with an asterisk (*).

I'm bullish on IVR's financials.

The PMC breakout came on the second day of huge volatility that brought the price from the lower 55-day price channel boundary to the upper boundary. The company isn’t commenting on the unusual trading activity. I find its financials to be quite weak.

In both cases, the breakouts run counter to the financials.


  • 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 25 and up but below 40, magenta (light purple) for 20 and up but below 25, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, magenta 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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