Tuesday's Prospects: Round 2

It was a heavy day for screening, since 42 symbols made it past my first round of analysis. (See "Tuesday's Prospects".)

The number of symbols excluded from consideration because they were within 30 days of an earnings announcement was down sharply as the earnings season that began April 8 trails off.

Also, Monday was a heavy day to the upside, and that trend continued today, so a huge proportion of the first-round survivors confirmed their bull and bear signals.

Indeed, only three failed confirmation: CYT, INSM and IPCC.

Twelve have charts that run counter to their signal, meaning a bull signal within a bearish chart or a bear signal within a bullish chart. I've found such situations to be setups for a whipsaw and I avoid them. They are GNW, ADVS, COF, ENV, CELG, CNP, AFAM, MSO, CBR, DCO, SYKE and FPO.

Two were ultra or short exchange-traded funds, the variety that either offers a leveraged return or move counter to the underlying symbol, or combine the two. I avoid these because if I want leverage or a short, I build it out of options, a practice that gives me greater control. The two are FAZ and QID.

At this point I turned to Zacks, the ratings company that provides me with a short cut in assessing analytical opinion and the fundamentals, looking to pick out the bull signals with bullish ratings and bear signals with bearish ratings.

That narrowed my pool to seven second-round survivors, XRS, LUV, HUN, IEX, URI, XRT and FNHC.

I then applied my rough value, liquidity and return tests: A price-earnings-growth (PEG) ratio price near or below market, giving preference to the higher volume symbols and those with the highest average returns on their signals over the screening period, which began June 23, 2013.

That narrowed the fields to XRS, LUV, URI, XRT and FNHC.

LUV and URI were the only two with average volumes exceeding one million shares a day, both have PEG prices below the market price, LUV has greater volume and a higher Zacks rating than URI, and so LUV, with its bull signal, wins the second round of analysis.

I'll post a write-up of LUV prior to the closing bell.

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.

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.