Tim Bovee, Private Trader: Wednesday Prospects: Round 2

The prospects list for Wednesday produced a bountiful catch, with FISH leaping from the net as the prize whopper of the day. FISH is Marlin Midstream Partners LP, a Houston-based oil and natural gas exploration and services company.

The good news: Inexpensive compared to the growth estimates with a high dividend, conditions that recommend it as a bull play under my longer-term rules.

The bad news: Low volume and no options, making it impossible to hedge or leverage, making it a buy-and-hold play under my longer-term rules or an unleveraged speculation under my shorter-term rules.

Neither of the bad news characteristics is attractive. However, for a starving trader, even a scrawny, bony fish will provide a meal. Happily, I'm not yet starving, so let's see how FISH came out on top and what else is in line for analysis.

Eight symbols out of the 27 that survived the first round of analysis from my standard lists failed confirmation by trading within their 20-day price channels today. They are USG, AZO, JNJ, THO and FAF from the large-/mid-cap list and TWER, CHFC and XNCR from the small-cap list.

Nine symbols were insufficiently bullish to support their bull signals: KW, UGP, ETFC, WBK, SWX, DLX, GRT and XRT from the large-/mid-cap list and GTT from the small-cap list.

One, TZA, turned out to be an inverse exchange-traded fund, meaning when the underlying goes up, the fund goes down. Crustraceans like these get tossed back in the water right away.

I next checked out the Zacks Investment Research rating for the nine symbols still standing. Zacks provides me with a short-cut in assessing a companies fundamentals and the Street opinion of growth prospects. It's not an automatic fail, but I find it to be a useful screening tool.

One symbol, XLY, has given a bull signal while holding a bearish Zacks rating.

Six have neutral ratings from Zacks: SLXP, UGI, GGP, MGA, BRX and XLV.

That left EIX from the large-/mid-cap list and FISH from the small-cap list, both with bullish ratings from Zacks.

EIX at first glance has a bullish cast on the 3-year chart (right). However, the 20-year chart (left) suggests that a possible counter-trend correction is correcting an upward swing (a B wave in Elliott wave analysis) and will soon reverse.

Click on chart to enlarge.

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

FISH is only in its 14th month on the exchanges and so lacks EIX's history. Working with what I do have, it appears that FISH is in the final upward push within an uptrend, a 5th wave in Elliott. It may go much higher, but there are no guarantees.

Click on chart to enlarge.

FISH 14 months daily bars

I rejected EIX because it is in a counter-trend nearing its end. Even on longer-term chart, the potential for near term decline is significant.

I am rejecting FISH because of the lack of options for hedging and leverage and also because it is in the last leg up within its uptrend. It may go much higher, but then again, it may not. Under those circumstances, the lack of a hedge leaves me vulnerable.

The survivor from my supplemental list of innovative companies, JNJ, has a chart that is insufficiently bullish to support a play.

So today, I'm dropping back to Monday's market, where the exchange-traded fund QQQ, tracking the Nasdaq 100, gave a bull signal. (See "Tuesday's Prospects: Round 2".) I was unable to act on the signal because my analysis was late; I was airborne on a trans-Pacific flight all day.

I'll post an analysis of QQQ today prior to the closing bell.

By Tim Bovee, Portland, Oregon, Aug. 20, 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.

My chart assessments are based on Elliott wave analysis, which 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.