Wednesday, August 27, 2014

Wednesday's Finalists: QEP

Tuesday was an up day in the markets, as the S&P 500 closed above $2,000, a level considered (by headline writers, at least) to be significant.

On Wednesday, markets were intent on providing a case study in the Law of Gravitation: What goes up must come down.

Only one symbol emerged as a finalist out of the 21 symbols that survived my first round of analysis. (See "Wednesday's Prospects".)

The finalist is QEP Resources Inc. (QEP), a natural gas and petroleum exploration company in Colorado. It gave a bull signal on Tuesday and confirmed it today.

Most of the other 20 first-round survivors, all having given bull signals, either failed confirmation or showed marked downside intraday momentum in the first hour of trading today.

Six, including AMZN -- the most liquid of the batch -- have charts that are insufficiently bullish to support a trade. The other five are EDU, SPN, ENTA, BIND and CYCC.

That left QEP as the sole symbol standing, and frankly, I don't like it as a trade.

The options have a 23% bid/ask spread on front-month at-the-money calls, with spotty open interest on the slightly out-of-the-money strike prices. I would find it hard to construct a leveraged/hedged position.

Plus, fossil fuels? I'm not in the market for that at this point unless I'm getting a huge dividend. If I were buying in to fossils, it would be a longer-term play in something like BP, with large proven reserves and the power to dominate markets.

Also, the chart is at the top of what has been a sideways movement, with a $26 to $34 range, dating back to 2011. Maybe it's a breakout, but maybe not. I'm unwilling to risk it at this point.

Click on chart to enlarge.
QEP 3 years 2-day bars
Given all of that, I'm passing on any QEP trade today.

My supplemental list of highly liquid potential bear plays also came a cropper. DLTR gave a bear signal, but the chart is insufficiently bearish.

AMZN, mentioned above as having an insufficiently bullish chart, is on my supplemental list of innovative companies.

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