Monday, June 30, 2014

Monday's Outcomes: DOW, MTRX

I've exited my bull position in DOW after it closed below its stop/loss, with confirmation. See my May 27 analysis, "DOW: An ambiguous breakout", for results and a chart talk.

I've removed MTRX from the Roll Shelf, where it has been sitting for possbile re-entry on the bull side, after its price fell below the 10-day price channel. See my June 11 analysis, "MTRX: Room to rise" for results.

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.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Monday's Prospects: Round 2

As the nursery rhyme has it,
Ashes! Ashes! 
We all fall down.
None of the six symbols that made it into the second round of analysis have survived to merit further analysis.

Three failed confirmation, two have bull signals unsupported by their not-bullish charts and one, the lone bear signal in the batch, is rising intraday, producing a failure of momentum.

I won't be analyzing any symbols from the "Monday's Prospects" list.


-- Tim Bovee, Portland, Oregon, June 30, 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.


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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Sunday, June 29, 2014

The Week Ahead: Jobs, Yellen and the Glorious 4th

The monthly employment and unemployment report dominates economic reporting in a trading week cut short by the U.S. Independence Day holiday.

All U.S. markets will be closed on Friday, July 4, although it will be business as usual in London, Tokyo and Sydney. The jobs report will be published a day earlier than usual, on Thursday at 8:30 a.m. New York time rather than Friday, because of the holiday.

The ADP employment report, a private sector report based on payroll data, will be released Wednesday at 8:15 a.m.

Two other potential market-movers are on the calendar: The Institute of Supply Managers manufacturing index, out Tuesday at 10 a.m., and international trade, released Thursday at 8:30 a.m.

Federal Reserve Chair Janet Yellen delivers the first Michel Camdessus Central Banking Lecture at the International Monetary Fund in Washington, at 11 a.m. Wednesday. Camdessus was the managing director of the IMF from 1987 to 2000.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

Average hourly workweek in manufacturing from the employment report, at 8:30 a.m. Thursday.

Manufacturers' new orders for consumer good and materials from the factory orders report, at 10 a.m. Wednesday.

Vendor performance, also called the deliveries time index, from the ISM manufacturing survey, at 10 a.m. Tuesday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday. 

Manufacturers' new orders for non-defense capital goods from the factory orders report, at 10 a.m. Wednesday.

Other items of interest:

Monday: Chicago purchasing managers index at 9:45 a.m., pending home sales at 10 a.m. and the Dallas Federal Reserve Bank manufacturing survey at 10:30 a.m.

Tuesday: Motor vehicle sales throughout the day, the Purchasing Managers manufacturing index at 9:45 a.m. and construction spending at 10 a.m.

Wednesday:  Factory orders at 10 a.m. and petroleum inventories at 10:30 a.m.

Thursday: Institute of Supply Management non-manufacturing index at 10 a.m.

I also keep an eye on the Baltic Dry Index, updated daily.

Fedsters

Aside from Fed Chair Yellen, whose appearance is noted above, one other from among the Fed glitterati has scheduled a public appearance: San Francisco Fed Pres. John Williams, an alternate on the Federal Open Market Committee.

Analytical universe

This week I shall be analyzing new bull and bear signals among 3,880 small-cap and larger stocks and exchange-traded funds.

Trading calendar

By my rules, I'm trading August options and later for the short legs of vertical, diagonal and calendar spreads and covered calls, and for all legs of butterfly spreads and iron condors. I'm trading October options and later for single calls and puts as well as straddles. Shares, of course, are good at any time.

Good trading.

-- Tim Bovee, Portland, Oregon, June 29, 2014
License

Creative Commons License

All content on Tim Bovee, Private Trader by Tim Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Monday's Prospects

On Friday, June 27:

Of 3,868 stocks and exchange-traded funds in my analytical universe, 52 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, 31 to the upside and 21 to the downside.

Thirty-seven major-exchange small-cap symbols broke out, 29 to the upside and eight to the downside.

Nine over-the-counter symbols broke out, six to the upside and three to the downside.

Three mid- or large-cap symbols traded on the major exchanges survived my initial screening, all having broken out to the upside.

Two small-cap major-exchange symbol survived initial screening, one having broken out in either direction.

One symbol traded over the counter survived my initial screening.

No large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

I shall do further analysis of the surviving symbols on Monday, June 30.

The next round of earnings begins July 8 with the announcement by AA. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, increasing numbers of symbols will be removed from my prospective trades list during initial screening.

First-round survivors

The lists are sorted in descending order by average yield.

Potential bull plays

Mid-, large-
cap
SBAC
MDU
BAM
Small-cap

LPSN
OTC

CRRFY

Potential bear plays

Mid-, large-
cap
(none)
Small-cap

ADNC
OTC

(none)
Large-cap
supplemental
(none)
Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:
  • mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
  • small-cap stocks on major exchanges,
  • mid- and large-cap over-the-counter stocks.
The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

If the odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

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

References

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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T

Friday, June 27, 2014

Friday's Prospects: Round 2

None of the seven symbols that survived my first round of analysis has made it past the second round.

Five failed because they were moving this morning opposite the direction of the signal, and two failed because they had given bull signals on bearish or ambiguous charts.

I don't intend to do further analysis with an eye to trading any of the symbols on today's prospects list, which can be found in "Friday's Prospects".


-- Tim Bovee, Portland, Oregon, June 27, 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.


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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Friday's Prospects

On Thursday, June 26:

Of 3,868 stocks and exchange-traded funds in my analytical universe, 43 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, 15 to the upside and 28 to the downside.

Thirty-five major-exchange small-cap symbols broke out, 17 to the upside and 18 to the downside.

Seven over-the-counter symbols broke out, two to the upside and five to the downside.

Three mid- or large-cap symbols traded on the major exchanges survived my initial screening, two having broken out to the upside and one to the downside.

Four small-cap major-exchange symbol survived initial screening, one having broken out to the upside and three to the downside.

No symbols traded over the counter survived my initial screening.

No large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

I shall do further analysis of the surviving symbols on Friday, June 27.

The next round of earnings begins July 8 with the announcement by AA. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, increasing numbers of symbols will be removed from my prospective trades list during initial screening.

First-round survivors

The lists are sorted in descending order by average yield.

Potential bull plays

Mid-, large-
cap
MGM
SYMC
Small-cap

CALD
OTC

(none)

Potential bear plays

Mid-, large-
cap
LXP
Small-cap

DSS
PINC
RSO
OTC

(none)
Large-cap
supplemental
(none)
Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:
  • mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
  • small-cap stocks on major exchanges,
  • mid- and large-cap over-the-counter stocks.
The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

If the odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

-- Tim Bovee, Portland, Oregon, June 27 2014

References

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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T

Thursday, June 26, 2014

Thursday's Outcomes: ROST, MPLX

ROST, which has been sitting on the Roll Shelf, gave a fresh bear signal and I've opened a new position. See the update to my April analysis, "ROST: A downtrend begins".

I analyzed MPLX as a potential bull play under my longer-term rules but declined to take the trade. See today's analysis, "MPLX: Three influences".

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.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

MPLX: Three influences

MPLX LP (MPLX) is a master limited partnership formed by Marathon Petroleum Corp. (MPC) to operate its midstream assets, such as pipelines.

Such partnerships are first and foremost income plays with favorable tax implications. Investopedia in 2009 published a fine introductory article on the subject, "Discover Master Limited Partnerships".

MPLX has three significant influences: General interest rates, certainly, but primarily the price of crude oil and the health of its parent company, Marathon. The prices of crude and Marathon, in turn, embody a multitude of influences, from geopolitics and sectarian strife in the Middle East to our summer vacation plans.

The Chart

MPLX is a tax vehicle created by Marathon and at the mercy of the commodity that keeps the world's economy moving. Its chart needs context.

In the first chart, MPLX vs. Crude, compare MPLX to the light sweet crude oil futues traded on the New York Mercantile Exchange. MPLX, after all, has little value of the product it moves for Marathon has little value.

The right-hand chart overlies crude futures in red on the MPLX chart. Clearly, they share trends much of the time, but with anomalies, such as the crude spike of 2013 and the sharp dips of April 2013 and January 2014.

MPLX has only been trading for a bit more than a year and a half, since Oct. 26, 2012. It has been in an uptrend since that time, but where is that trend embedded?

The left-hand chart is a 5-year weekly history of NYMEX crude oil futures. Crude is tracing out a triangle, and the present uptrend is nearing the triangle's upper trendline, signifying that a reversal is near.

Crude Oil vs. MPLX
Click on chart to enlarge.
Crude oil futures 5 years weekly bars (left), MPLX and crude 2 years 7 months daily bars (right)

Next, I turn to Marathon, the parent company of MPLX, in the chart below titled "MPC vs. MPLX".

The Marathon chart -- MPC is the symbol -- shows a distinct uptrend over the past five years, but also shows that the uptrend has ended with the May 2014 peak that I've labeled B {+2} on the left-hand chart. What follows by that Elliott wave count is a C wave to the downside, a wave that typically has much momentum.

The alternate count allows for a more shallow downside correction, but it is still bearish.

MPC, in red on the right-hand chart, actually has been less likely to diverge from MPLX than crude oil has been. It has sometimes shown more momentum to the upside or the downside, and the timing has sometimes been off by a bit, but generally, they've tracked each other in direction.

No more. The two symbols are presently in the midst of their first major divergence, with MPLX moving up swiftly and MPC declining at a similar steep angle.

MPC vs. MPLX
Click on chart to enlarge.
MPC 5 years weekly bars (left), MPLX and MPC 2 years 7 months daily bars (right)
At this point I know enough to break off my analysis and render a decision.

Decision for My Account

The bet on MPLX, I think, is whether its shares will follow those of the parent company, MPC, or whether MPC will trail along behind MPLX.

I'm betting on the Mother Ship. Just as a matter of common sense, I think MPC's chart will drive that of MPLX.

Moreover, crude is nearing a reversal point and MPC has already reversed. Does it seem reasonable that MPLX would move contrary to two of its significant influences? I think not.

For those reasons, I don't intend to open a bull position in MPLX under my longer-term rules, because of the reversal prospects for crude and the divergence from the parent company's chart.

-- Tim Bovee, Portland, Oregon, June 26, 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.


I use the number 68.2% in using applied volatility to calculate the expected trading range. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

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.


See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.

By preference I place my shorter-term trades in the last half hour before the closing bell in New York. See my essay "When is the best time to trade" for a discussion of the practice.


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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Thursday's Prospects: Round 2

Only one of the eight symbols that survived my first round of analysis has made it through the second round: MPLX, a master limited partnership in crude oil based in Ohio.

Half of the symbols either failed confirmation or had faltering momentum. One, BRX, has been traded for less than a year and so ran afoul my rule disqualifying symbols without at least a year's history.

MAIN had an insufficiently bullish chart to consider a play and ALJ has insufficient open interest on its options to use them in constructing a bear play.

MPLX has a bullish chart. Because it is an income play, it would go much better as trade under my longer-term rules, and I'll post an analysis prior to the closing bell considering it in that light.

See "Thursday's Prospects" for a list of symbols that survived my first round of analysis.


-- Tim Bovee, Portland, Oregon, June 26, 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.


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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Thursday's Prospects

On Wednesday, June 25:

Of 3,868 stocks and exchange-traded funds in my analytical universe, 41 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, 14 to the upside and 27 to the downside.

Eighteen major-exchange small-cap symbols broke out, seven to the upside and 11 to the downside.

Eleven over-the-counter symbols broke out, one to the upside and 10 to the downside.

Seven mid- or large-cap symbols traded on the major exchanges survived my initial screening, five having broken out to the upside and two to the downside.

One small-cap major-exchange symbol survived initial screening, having broken out to the upside.

No symbols traded over the counter survived my initial screening.

No large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

I shall do further analysis of the surviving symbols on Thursday, June 26.

The next round of earnings begins July 8 with the announcement by AA. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, increasing numbers of symbols will be removed from my prospective trades list during initial screening.

First-round survivors

The lists are sorted in descending order by average yield.

Potential bull plays

Mid-, large-
cap
MPLX
NXST
MAIN
SSP
BRX
Small-cap

EGAS
OTC

(none)

Potential bear plays

Mid-, large-
cap
EWS
ALJ
Small-cap

(none)
OTC

(none)
Large-cap
supplemental
(none)

Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:
  • mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
  • small-cap stocks on major exchanges,
  • mid- and large-cap over-the-counter stocks.
The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

If the odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

-- Tim Bovee, Portland, Oregon, June 26 2014

References

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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T

Wednesday, June 25, 2014

Wednesday's Prospects: Round 2

None of the 12 symbols that survived my first round of screening made it through the second round. (See "Wednesday's Prospects" for the symbols list.)

I'm not surprised. Tuesday was a major reversal today, quite heavy on bear signals after a period when they were a rarity. Today the market jumped back to the upside, taking back part of of the decline, as the markets often do.

In the first couple of hours of trading, the S&P 500 has retraced about 38.2% of the decline, a Fibonacci retracement level that often serves as a pausing point or a reversal when prices retrace.

In the chart below, I've marked the upward retracement with an oval in the chart below, which shows the S&P 500 index. The dashed line is the 38.2% Fibonacci retracement level.

Click on chart to enlarge.
S&P 500 index 2 days 1-minute bars
Ten of the symbols in the second round either failed confirmation or showed marked momentum opposite the direction of the signal. The rest were bear signals that had overly wide bid/ask spreads on their options, too wide for me to use as a vehicle for a bearish trade.

I turned next to the two high-volume liquid-option symbols on my supplemental bear-signal list. One, PG, failed confirmation, and the other,  NVDA, has a chart that is uptrending, contrary to the signal.

I don't intend to post any analyses today.


-- Tim Bovee, Portland, Oregon, June 25, 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.


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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Wednesday's Prospects

On Tuesday, June 24:

Of 3,868 stocks and exchange-traded funds in my analytical universe, 59 mid- and large-cap symbols that are traded on the major American stock exchanges broke beyond their 20-day price channels, nine to the upside and 50 to the downside.

Thirty-two major-exchange small-cap symbols broke out, seven to the upside and 25 to the downside.

Nine over-the-counter symbols broke out, five to the upside and four to the downside.

Four mid- or large-cap symbols traded on the major exchanges survived my initial screening, one having broken out to the upside and three to the downside.

Eight small-cap major-exchange symbols survived initial screening, one having broken out to the upside and seven to the downside.

No symbols traded over the counter survived my initial screening.

Two large-cap symbols survived screening for inclusion on the supplemental list of high-volume large-cap potential bear plays, having met the earnings exclusion test with sufficient open interest on its options, regardless of historical odds.

I shall do further analysis of the surviving symbols on Wednesday, June 25.

The next round of earnings begins July 8 with the announcement by AA. Under the exclusion rule that forbids me from opening new positions in stocks within 30 days of an earnings announcement, increasing numbers of symbols will be removed from my prospective trades list during initial screening.

First-round survivors

The lists are sorted in descending order by average yield.

Potential bull plays

Mid-, large-
cap
MEOH
Small-cap

UCP
OTC

(none)

Potential bear plays

Mid-, large-
cap
SRPT
WWWW
BC
Small-cap

APP
MXWL
CTHR
MNTA
IL
HVT
AXTI
OTC

(none)
Large-cap
supplemental
PG
NVDA

Methodology

The symbols are sorted into three groups and all have analyst coverage through the stock-ranking company Zacks. The groups are:
  • mid- and large-cap stocks as well as selected exchange-traded funds listed on major exchanges,
  • small-cap stocks on major exchanges,
  • mid- and large-cap over-the-counter stocks.
The small-cap group is further selected to ensure a minimum market capitalization of $1 million and a Zacks ranking of neutral or more bullish. (Small-cap stocks rarely have sufficient liquidity to allow a bear trade.)

I then screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.

If the odds of success are greater than 50%, I next screen for the absence of an earnings announcement within the next 30 days.

For bear signals, I also screen to ensure the ability to do a trade because of the presence of options.

I sort by the results in descending order by the average yield on signals in the direction of the breakout in preparation for the second round of analysis after the opening bell.

-- Tim Bovee, Portland, Oregon, June 25 2014

References

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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.T

Tuesday, June 24, 2014

Tuesday's Outcomes: HUM

I analyzed HUM as a potential bull play but declined to take the trade. See "HUM: Looming correction".

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.
License

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

HUM: Looming correction

Humana Inc. (HUM), like so much of the market, is in in the mature of its uptrend. I like the company's business and its financials, but it is quite expensive relative to growth, and the chart suggests that a correction looming.

The Chart

HUM is in the final leg of  its rise from November 2012, which more than doubled the price. In the very near term, the count gets a bit muddled beginning last month, but my Elliott wave count puts it in the home stretch of that uptrend.

I've labeled the wave up from $63.93 beginning near the end of November 2012 as wave 2 {+1}. The waves of lesser degree that it encompasses are 5th, and final, waves down to the {-2} degree.

Click on chart to enlarge.
HUM 2 years 11 months daily bars
The end of wave 3 {+1} will usher in a correction to the downside that will take back a portion of that rise. There's no way to say how far down the price will go, but if the correction began today, a typical shallow correction would take it down to the 38.2% Fibonacci retracement level, $103.53. A steeper 61.8% correction would bring the price down to $88.40.

There is, of course, no guarantee under the Elliott rules that the correction won't be steeper, or more shallow.

Moreover, there is also no way in Elliott to set an upside target for wave 3 {+1}.

The muddled part of the count is the placement of wave 3 {-1}. The magnitude of the ensuing correction is far too shallow, and the sideways correction embedded within what I have called wave 5 {-1} is atypical, given its placement.

However, the impulse waves carrying the main trend -- the completed 1st and 3rd of the {+1} degree -- are roughly comparable in magnitude, and also in duration, the 1st having lasted for three months and the 3rd for 2-1/2 months.

The alternative count would consider wave 3 {-1} to still be underway, giving more life to the uptrend, although it would be measured in weeks, months at best.

Wave 1 {+1}, the first leg up of the rise from November 2012, lasted for a year and for months. The present wave 3 {+1} so far has run for nearly a year and seven months. A correction soon wouldn't be anomalous.

Options are pricing in confidence that 68.2% of trades will fall between $118.48 and $136.74 over the next month, for a potential gain or loss of 7.2%, and between $123.22 and $132 over the next week. I've marked the range on the chart in blue.

Odds and Yields

HUM has completed eight bull signals since wave 3 {+1} began. Five were successful, on average yielding 7.4% over 37 days. The unsuccessful trades on average lost 5.2% over 14 days.

Three of those signal occurred in the final leg of wave 3 {+1}, wave 5, Two of them were successful with an average yield of 6.4% over 23 days and one unsuccessful with a loss of 7.5% over 16 days.

The win/lose yield spread is unimpressive within wave 3 {+1}, at only 2.2%. The spread is negative in the nearer-term wave 5, at -1.2%.

This suggests that HUM is having a hard time maintaining its momentum

The Company

Humana, headquartered in Louisville, Kentucky, is one of the household names of the American health-insurance system, with nearly 20 million members enrolled in its medical benefit and specialized plans. It is the nation's third-largest health-insurance provider.

Analysts are neutral about the company's prospects, company down with perfectly balanced enthusiasm rating of zero.

The company's financials are below the growth-stock levels but are otherwise quite acceptable, with return on equity of 13% and debt amounting to only 27% of equity.

Quarterly earnings over the past three years have lacked a trend, with the peak months fluctuating more or less sideways. Earnings have surprised to the downside three times in the period, most recently in the final quarter of 2013.

The earnings yield is 5.57%, and the company pays a quarterly dividend yielding 0.88% annualized at today's prices. The 10-year U.S. Treasury note, by comparison, has a market yield of 2.61%.

Growth estimates imply a "fair" price for HUM of $83.19 per share, suggesting that shares are overpriced by 67%. I've marked that level on the chart in purple.

The stock is selling for 18 times earnings but at a steep discount to sales. It takes 46 cents in shares to control a dollar in sales.

Institutions own 94% of shares.

Humana next publishes earnings on July 30. The stock goes ex-dividend on Thursday, June 26, for a 28-cent per share payout.

Liquidity and Volatility

HUM on average trades 833,000 shares a day and supports a wide selectoin of optoins strike prices spaced a dollar apart. Open interest runs mainly to three and four figures near the money.

The front-month at-the-money bid/ask spread on calls is 12.8%, a bit wider than I like, compared to 0.5% for the most-traded symbol on the U.S. markets, the exchange-traded fund SPY.

Implied volatility stands at 25% and has been falling from 39% on April 7. The S&P 500 index, by comparison, has volatility of 11%.

HUM's volatility is in the 34th percentile of the one-year range, suggesting that the most successful trades will be structured as long spreads bought with a debit.

Contracts today are skewed toward puts, which are are running 11% above their five-day average volume. Calls are running at 57% below average.

Decision for My Account

I'm declining to open a bull position in HUM because its wave 3 {+1} rise is so far advanced. My judgement is that a significant correction is likely sooner rather than later, and I'd very much prefer to avoid it.

Chart aside, it's a good prospect, and I anticipate having a chance to trade it after the correction has run its course.

-- Tim Bovee, Portland, Oregon, June 23, 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.


I use the number 68.2% in using applied volatility to calculate the expected trading range. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

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.


See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.

By preference I place my shorter-term trades in the last half hour before the closing bell in New York. See my essay "When is the best time to trade" for a discussion of the practice.


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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

Tuesday's Prospects: Round 2

Of the eight symbols that survived my first round of analysis, one, CMP, failed confirmation and two, MMLP and AXAS, showed downward momentum following a bull signal.

The lone bear signal of the lot, RT, has too narrow an options grid for me to use in construction a position that will profit from a downward move in price.

CLMT, ACT and GASS gave bull signals from bearish charts, although ACT's is only marginally bearish.

That leaves HUM as the sole survivor of the second round, and I shall post an analysis before the closing bell.

See "Tuesday's Prospects" for a full run-down of my first round of analysis.

-- Tim Bovee, Portland, Oregon, June 24, 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.


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

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.