Thursday, June 19, 2014

Thursday's Prospects: Round 2

Four of the 32 symbols surviving my first round of analysis have made it past the second round. Even so, I hate them all.

The problem is this: Each is a power utility with paying a high dividend. In other words, these are interest-rate plays, the sort of thing that is ultimately a bet on the Federal Reserve's policy setting.

The markets rose sharply on Wednesday after Fed Chair Janet Yellen gave a money-policy news conference so optimistic that I fully expected her to break into song.

"I Have Confidence in Me" from The Sound of Music.

The breakouts are a response to news, and to trade them now would be going against Nathan Rothschild's dictum from the Napoleonic Wars era, counseling traders to buy on the roar of canons and sell on the sound of trumpets. The Yellen newser was trumpets from start to finish.

The news exclusion clause of my shorter-term trading rules goes like this:
Symbols that break out the day of or immediately following a major news announcement may optionally be excluded from trading on those grounds. The decision to trade or not will be based on a judgement of the degree to which continued price movement is likely, a highly subjective call.
My judgment is that the news was priced into these issues by time the Fed chair finished speaking so I'm not trading any of them today.

The four utilities are EIX, NI, EDE and VVC.

A full list of the first-round survivors may be found in "Thursday's Prospects", posted this morning before the markets opened. All but one was a bull signal. Here's how the rest of them fared.

Four failed confirmation by moving back within their 20-day price channels in morning trading: LOPE, XYL, GA and TCEHY.

One, the exchange-traded fund XLU, had a bearish Zacks rating with a bullish chart.

The lone bear signal, from OXBT, can't be traded because the symbol has insufficient open interest on its options.

The rest either had insufficiently bullish charts or were moving opposite the signal, showing a lack of momentum.

I next turned to my supplemental list of potential high-volume bear signals. They're also part of the regular analysis, but for the supplemental I ignore the historical odds of success, a factor I use to screen for the primary lists.

The one symbol listed, ESRX, has a bearish rating from Zacks. The chart, however, shows that it has set a low since peaking in March, but has not yet set a lower low. Therefore, it's not a trend, and I would have to rate the chart as ambiguous.

ESRX is worth considering if it breaks below its prior low, $64.64, set on April 30. But it's nearly 6% above that level now, so it's not a trade for me today.

I don't plan to file any new analyses today, and I won't be placing any trades from among Friday's prospects.

-- Tim Bovee, Portland, Oregon, June 19, 2014

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.

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.

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