Thursday's Prospects: Round 2

None of the dozen symbols that survived the first-round of analysis made it past the second round. (See "Thursday's Prospects" for details of the first-round analysis.)

Three failed confirmation, moving back within their 20-day price channels: GPN, PPL and LIVE.

One, MRTX, has been trading for less than a year and so runs afoul of my rules requiring at least a year's worth of history on anything i trade.

The others, with three exceptions, had charts that I found to be unacceptably bearish, despite their having given bull signals.

The three exceptions are STN from the mid- and large-cap symbol list, CUR from the small-cap list, PNGAY from the over-the-counter list.

Two were easy rejects: CUR as it turns out has lost money every quarter for at least the last three years, and PNGAY has no earnings estimates available from Zacks and no return on equity or debt to equity numbers, leaving me effectively blind when it comes to the company financials.

STN, rated neutral by Zacks Investment Research, is a different case. It has good earnings and good financials, and a price that is about where it should be when growth estimates are taken into account.

But, despite being a mid-cap stock, it has low volume, averaging about 8,000 shares a day. That in turn gives it a 10-cent bid/ask spread on the stock, in a world where most stock spreads are one cent.

The stock has been on the rise since 2008, but it has gone into a shallow decline since December. Moreover, a quick Elliott-wave count suggests that it is in a downward correction and is in a B-wave which may well be nearing its end. I loathe B waves, which I find to be an occasion for whipsaws.

It's an interesting company with a great story, as related in a 2011 Globe and Mail story by Gordon Pitts.

I'm deciding against taking a closer look at STN, based on its low liquidity and also on a preliminary reading of the chart.

Click on chart to enlarge.

STN 20 years monthly bars (left), 3 years daily bars (right)

Therefore, I won't be writing any analyses today.

-- Tim Bovee, Portland, Oregon, May 29, 2014

References

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

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.

Disclaimer

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 decisions for his or her own account, and take responsibility for the consequences.

License



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Based on a work at www.timbovee.com.