Friday, June 28, 2013

EPD and ETE: Band of brothers

Enterprise Products Partners L.P. (EPD) broke above its 20-day price and confirmed the bull signal by trading above the breakout level the next day.

Energy Transfer Equity L.P. (ETE) did the same.

Those two natural gas companies were the only symbols to survive my second-wave analysis. And in the end, I have chart problems with both.

The companies met my criteria for nearer-term odds, with EPD showing 16 completed breakouts to the upside with a 56% success rate and ETE having completed one breakout, which was successful.

ETE has a better yield on the winning trades and win/lose yield spread that EPD, but the latter's numbers are quite acceptable.

EPD has far higher return on equity and slightly lower debt than ETE, but neither is a deal breaker.

No, it comes down solely to the charts, and in that area the two are marching in lockstep like a band of  brothers.

EPD began a rise from the lower boundary of the 20-day price channel on June 24 and on the fourth trading day broke above the upper boundary at $61.26.

ETE began a rise from the lower boundary on June 21 and on the fifth day cleared the price channel at $59.33.

But in neither case was it a true breakout. EPD's most recent swing high is $63.56, just a bit more than a day's true range away from the current price, $61.93. ETE's is $61.99, also less than two days' trading range away from the present price, $59.76.

This illustrates a shortcoming of the Turtle Trading method's reliance on price-channel breakouts. They are excellent tools for screening, but in the end, the trading decision must come down to the individual chart.

The other survivors of the initial screening, reported in last night's post, "Friday's Prospects", fell by the wayside in the second wave of analysis.

EXLP and TGH failed confirmation. CEB has been traded publicly for less than a year and so is too young for me to trade. GRFS is an American depository receipt for a Spanish pharmaceutical company and suffers from the information scarcity that plagues most ADRs.

SBH and NGLS might have been tradeable, but their longer term odds were just even and I wasn't otherwise excited by either.

THO has low win/lose yield spreads both in the nearer term and the longer term.

That left the band brothers, EPD and ETE, which I'll add to my list of symbols that I'm monitoring and that I'll consider if they proceed on to true breakouts.

Decision for my account: I won't be opening a new bull position in EPD or ETE.

My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

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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