Monday, February 23, 2015

RTN: Bull play, shorter-term rules

The defense-technology contractor Raytheon Co. (RTN), headquartered in Waltham, Massachusetts, broke above its 20-day price channel on Friday and traded still higher on Monday.

[RTN in Wikipedia]



RTN has been in an uptrend since the 2009 Great Recession low. Elliott wave analysis places the rise in a 4th wave sideways correction within the 1st major leg up of its rise from that low. the correction began on March 6, 2014.

The Elliott wave framing isn't entirely clear. The price set a higher high on Dec. 22, 2014 (marked with a yellow oval). However, the trend channel suggests that it was an overshoot within a continuing sideways move,

If the price again moves upward and sets still higher highs over the next days or weeks, then then my count on the chart will be confirmed. If not, then wave 4 is not complete.

Click on chart to enlarge.
RTN 90 days 4-hour bars
Decision for My Account

At this point I can break off the count and make a decision. RTN may be in an uptrend, but it won't be certain until there is a decisive break above $111.47, the Dec. 22, 2014 high.

That hasn't happened yet, and I'm passing on the trade

-- Tim Bovee, Portland, Oregon, Feb. 23, 2015


My volatility trading rules can be read here. For a discussion of the rationale behind the rules, see my essay, "Rules for very short term trades".

The directional score is calculated as the sum of the following:
  • Zacks rating --The Zacks ratings are translated as follows: 1=2, 2=1, 3=0, 4=-1 and 5=-2.
  • Enthusiasm rating --: A single percentage derived from the number of analysts whose opinions are in one of five categories: Strong buy, buy, hold, sell and strong sell.
  • Strong buy share -- The percentage of all analysts who rank the stock strong buy. If the share is 60% or greater, the score is 1; if 40% or less, then the score is -1; otherwise, the score is zero.
  • Ethusiasm momentum -- The score is 1 if today’s enthusiasm rating is larger than the rating 30 days earlier; otherwise, the score is zero.
  • 30-day direction -- The trend that best describes the 30-day chart: 1 for an uptrend, -1 for a downtrend and zero for a sideways trend.
  • One-day direction -- The trend that best describes the one-day chart: 1 for an uptrend, -1 for a downtrend and zero for a sideways trend.

From time to time I use the number 68.2% in using applied volatility to calculate the expected trading range. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis 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.


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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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