Wednesday, November 19, 2014

Wednesday's Finalists: BPL, MWE, CBSO, PHG

Four symbols made it to the finals after giving trading signals in Tuesday's trading. (See "Wednesday's Prospects" for the early rounds of analysis.) They are:
  • The Houston, Texas master limited partnership in the oil pipelines business, Buckeye Partners L.P. (BPL).
  • The MLP MarkWest Energy Partners (MWE),  a Denver, Colorado natural gas and crude oil transportation company.
  • CBS Outdoor Americas Inc.  (CBSO), a billboard advertising company headquartered in New York City.
The two energy companies, BPL and MWE, gave bull signals; CBSO gave a bear signal.

In addition, one symbol from my list of innovative companies gave a bull signal, Koninklijke Pjillips NV (PHG), the Amsterdam, Netherlands parent company of the Phillips Group, which does business in healthcare, consumer lifestyle and lighting.

PHG is on my list because it appears as 50th on a list of 2014's most innovative companies published by the magazine Fast Company.

Out of the six survivors of the early rounds of analysis, three failed confirmation by moving back within their 20-day price channels: RGLD, GOLD and CAR. The four finalists confirmed their bull and bear signals.

One, the bear signal CBSO, was discarded because it has been trading for less than a year. Its initial public offering was on March 28. I require at least a year's worth of history before trading a stock.

None of the others made it past what has proven to be the most challenging test of late: The preliminary chart assessment.

The charts of many companies hit a post-recession high in late summer and then declined. Among them were the blue chips, as represented by the S&P 500.

The blue chips quickly reversed and continues to make higher highs, putting it in the up trending category.

However, many companies -- maybe even most companies -- remain below their late-summer highs, so any bull signal has to be classified as an upward countertrend correction within a downtrend.

If the "correction" carries the price above the late summer high, then the "countertrend correction" would get a new label, as "uptrend".

One tenet of my trading is that I don't know the future, and indeed, that the future is unknowable. So I categorize charts by what I see today. If the future proves to be different, then the category of the now changes. But I never try to guess the future, beyond the basic imperative of a trend trader, which assumes that the present trend will continue for an unknowable amount of the time.

BPL, MWE and PHG remain below their most recent highest highs, and so are in upward countertrend corrections.

I wouldn't hesitate for a minute to take such a trade under my very short term volatility rules. For those trades, I don't even look at the chart except to determine whether to structure a bullish or a bearish position.

But for my shorter-term trading rules, which should probably be called mid-term rules, I don't trade countertrend corrections. I live by the old and hackneyed maxim, "The trend is your friend". No one should disrespect their friends.

I won't be trading any of the signals that came out of Tuesday's markets.

Also, there are three earnings announcements that come within today's window: BBY, DLTR and JKS, all publishing on Thursday prior to the opening bell.

DLTR's implied volatility is in the 42nd percentile of the rise to its most recent peak and so is disqualified because it is overly low for a volatility play.

However, BBY and JKS are both in the mid-60s percentiles and so qualify. JKS, however, is disqualified because of its double-digit bid/ask spread. I'll post an analysis of BBY today.

-- Tim Bovee, Portland, Oregon, Nov. 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. My very short term volatility trading rules 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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