Thursday, June 20, 2013

Friday's Prospects

Update 6/22/2013: CORRECTED the percentage of symbols within the analytical universe.

On Thursday, June 20:

Of 2,304 stocks and exchange-traded funds in this week's analytical universe, 227 that are traded on the major American stock exchanges broke beyond their 20-day price channels, six to the upside and 221 to the downside.

In addition, 34 that are traded over the counter broke out, all to the downside.

Within my analytical universe, 7.7% 11.3% of symbols gave bull or bear signals, up from 1.8% the prior trading day. It is the highest percentage since June 5, when 11% gave signals.

The ratio of bull to bear signals is 1:43, compared to 1:6 the prior trading day, a strengthening of the bearish bias in the markets. It is the strongest bearish bias since June 5, when the ratio was 1:84.

Although the drama of Thursday's market decline makes it look like a capitulation, the numbers above tell a different story. It was a strong down day, but not the zombie bears apocalypse.

Twelve of the major-exchange symbols survived my initial screening, two having broken out to the upside and 10 to the downside. The upside symbols are GME and QID. The downside symbols are AEM, EBR, HMIN, IOC, IPXL, JCP, NGD, NPSP, NTGR and TDC.

None of the over-the-counter symbols survived my initial screening.

I'll do further analysis on the survivors that confirm their signals by trading beyond their breakout levels on Friday, June 21.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...
  • the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
  • a yield adjusted by those odds of 5% or greater,
  • and absence of an earnings announcement within the next 30 days. 
For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

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