Tim Bovee, Private Trader: Friday's Prospects: Round 2

Friday, July 25, 2014

Friday's Prospects: Round 2

Nearly all of the 11 symbols that survived my initial screening have failed confirmation.

In fact, only two remain standing: WAB from the mid-/large- cap list and ALLAY from the over-the-counter list, both with bull signals.

I also have two survivors on my supplemental list of highly liquid stocks that have given bear signals but that have failed the odds test in my first round of analysis. They are GM and BA.

Both symbols on the regular lists have bullish charts. ALLAY, however, has a bearish rating from Zacks Investment Research, as well as average volume of less than 1,500 shares per day. Both are large marks against trading it.

WAB has a bullish rating from Zacks and decent volume of nearly 500,000 shares per day. It's one-year success rate on bull signals is 75%. However, it lacks sufficient open interest on its options for use in constructing a leveraged position. That's not a deal killer, but it does make WAB less attractive as a trade.

The two supplemental list bearish prospects have high volume and great open interest on their options. Both have bearish charts. Moreover, GM has a bearish rating from Zacks, a big point in its favor. BA is rated neutral.

Both are in a similar place in their charts, having peaked around the beginning of the year, fallen, and then attempted a rise that failed to make a higher high.

BA has a higher success rate, at 50% compared to GM's 25%. GM, however, has a higher average yeild of 4.59%, compared to 1.11% for BA.

Tough choice. My last recourse is to take the success rate and average net profit on successful trades for the past year, and combine them into a score. Basically, I'm taking the net profit and multiplying it by the success rate. It's a rough and ready way of getting a single number that reflects both elements.

WAB wins the day with a combined score of 4.89%. I'll write an analysis of WAB and post it prior to the closing bell today.

Yet, I don't want to give up on the supplemental list prospects.

GM has a score of 1.15%, and BA comes in last at 0.56%. The low score, combined with the neutral rating from Zacks, is eough for me to strike BA from the list.

I intend to write an analysis of GM as a potential bear play, today if possible and over the weekend if time runs out. WAB will be my first priority.

-- Tim Bovee, Portland, Oregon, July 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.