EXPR: A bull chart, with reservations

Express Inc. (EXPR) broke above its 20-day price channel on Tuesday and confirmed the bull signal today by trading above the breakout level, $22.18.

The stock has been stair-stair-stepping higher from $10.47 in October 2012, touching a higher high of $22.90 today. The peak since EXPR went public in May 2010 was $26.27 in March 2012.

EXPR 2-year weekly

EXPR is nearing the top, $23.09, of a 22% downside gap that occurred on May 21, 2012 after the company missed earnings estimates by 2 cents a share. At the time, that was still the third best quarter the company had recorded since going public, but even so, it prompted the sell-off.

This means that EXPR is in archaeological panic territory, like the layer of ashes found when excavating an ancient city that was set ablaze in a long-forgotten war. In archaeology, ashes are but ashes. On a stock chart, ashes can be major resistance at best and a reversal point at worst.

On the other hand, EXPR has moved into blue-sky territory in terms of the present rise. It is an extremely bullish chart within that limited time frame, and the Elliott wave count appears to leave room for at least one more leg up.

It's very much a mixed chart, depending upon which analytical methods I use.

EXPR was among nine symbols that survived my initial screening last night. (See "Wednesday's Prospects".)

An high proportion of the signals were from inverse or ultra exchange-traded funds tracking indexes. I rejected those immediately, as I don't trade inverse or ultra funds. Why complicate my life with someone else's algorithms?

The two high-volume household names on the list, WMT and HD, failed confirmation. I turned away from DISCB, HLDCY and JMPLY because of low volume.

That left three. NDSN has a strongly bearish rating from Zacks, my favorite analytical service, so I tossed it.

EXPR and IRF both have had nothing but profitable bull signals since their preset trends began. IRF, actually, has the better average yield at 10.4%, compared to 7.8% for the three EXPR signals.

However, EXPR has double the liquidity of IRF, and IRF's breakout really doesn't move past near-term resistance. EXPR's is a true breakout.

Express, headquartered in Columbus, Ohio, runs 609 clothing stores, mainly in the United States with some outliers in Canada. It's products are aimed at men and women of the younger demographics. Today's slogan headlining its website is, "A date with denim", with the inner headlines playing off of "skinny" -- not generally a sales point for the middle-aged.

The handful of analysts tracking the stock collectively give it a 67% enthusiasm score. And no wonder! The company reports return on equity of 38%, which is quite high. The debt level, however, is also a bit on the high side, at 49% of equity.

Earnings peak in the 4th quarter, as is common for retailers. This year's 4th was the highest of the past three years. Earnings in 10 of the last 12 quarters surprised to the upside, and one to the downside. One was surprise-free.

Institutions own 93% of shares, and the price is below sales parity. It takes only 90 cents in shares to control a dollar in sales.

EXPR on average trades 1 million shares a day. It supports a very narrow selection of option strike prices with open interest running to the double digits. The front-month at-the-money bid/ask spread on calls is 11.1%, very much on the high side.

The low options liquidity means I would only trade this symbol as long shares, foregoing the opportunity for leverage and hedging.

However, the options can provide some analytical insight. Implied volatility stands at 33%, near the bottom of the six-month range. Volatility has been tracking sideways since the beginning of June.

Options are pricing in confidence that 68.2% of trades will fall between $20.52 and $24.80 over the next month, for a potential gain or loss of 9.5%, and between $21.63 and $23.69 over the next week.

Options today are skewing heavily toward the bull side, at 65 times the five-day average volume, compared to only 35% of average for puts.

The fair-price zone on today's 30-minute chart runs from $22.66 to $22.81, encompassing 68.2% of transactions surrounding the most-traded price, $22.73. The price rose above the zone ceiling in the first half hour of trading but has since dropped to near the floor, with three hours left before the closing bell.

Express next publishes earnings on Aug. 19.

Decision for my account: The major resistance point on the chart, discussed above, gives me pause. So does the intra-day decline in trading today. And frankly, so does the outsized volume in call options. Who knows what's really going on there?

Also, my preference always is for hedging and leverage, which the lack of tradeable options denies me in the case of EXPR.

So rather than trade EXPR today, I'm adding it to my watchlist and will see what it looks like over the next day or two. At that point I'll make a final decision.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. 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. StockCharts has a good explainer. The principal practioner 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. 

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 decision decisions for his or her own account, and take responsibility for the consequences.

Wednesday's Prospects

On Tuesday, July 9:

Of 2,302 stocks and exchange-traded funds in this week's analytical universe, 157 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 147 to the upside and 10 to the downside.

Eight symbols that are traded over the counter broke out, all to the upside.

The five highest-volume symbols to break out are SIRI, XLF, FB, XOM and PG.

Within my analytical universe, 7% of symbols gave bull or bear signals, up from 4% the prior trading day.

The ratio of bull to bear signals is 16:1, compared to 21:1 the prior trading day, a weakening of the bullish bias.

Nine of the major-exchange symbols survived my initial screening, seven having broken out to the upside and two to the downside. The bull signal symbols are DISCB, EXPR, FAS, HD, IRF, NDSN and WMT. The bear signal symbols are SDS and SH, both of them bear exchange-traded funds

Two of the over-the-counter symbols survived my initial screening, both having broken out to the upside. They are HLDCY and JMPLY.

Thirty symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. They are ACM, AWR, BMS, CBRL, CCJ, CHH, DPZ, ECL, GWW, HR, INFA, IP, IRC, JLL, JNS, LECO, LOGI, MD, NRG, OMC, OSK, PBH, PRA, RCL, SUI, WDC, WFT, WM, WTR and XXIA.

I'll do further analysis of the surviving symbols on Wednesday, July 10.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

MT closed

I've closed my bear position in ArcelorMittal (MT) and updated my entry post, "MT: Stock Descending a Staircase", with the result.

References
My 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 decision decisions for his or her own account, and take responsibility for the consequences.

SEMG: The chart trumps doubt

Update 7/12/2013: SEMG moved below its initial stop loss on July 11 and I closed the position on July 12 for a 1% loss. The position was structured as long shares.

On July 5 I analyzed SemGroup Corp. (SEMG), concluding, "I'll wait for a breakout above the $58.08 level before opening a position on SEMG, and even then, I may not go there." (See "SEMG: Art thou mad!")

SEMG's price broke above the $58.08 level on Monday and confirmed it today by trading still higher. 

Unlike the S&P 500, the push moved the price above the May 21 high, the peak from which the broad markets have undergone a correction.

That gives SEMG's chart a more bullish tinge than the blue chips have, and that has overcome my reluctance to open a position in SEMG, based in part on the weak financials.

Decision for my account: I've opened a bull position in SEMG, structuring it as long shares.

References
My 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 decision decisions for his or her own account, and take responsibility for the consequences.

XRT: Bullish on retail

Update 8/15/2013: XRT has been on the shelf awaiting a roll into a new position since my option spreads were closed on Aug. 9 as expiration neared. The ETF gave a close signal today, ending the possibility of a roll.

I held only one position in XRT; there were no rolls. Shares during the 31 days that position was open rose by 1.5%. The options spreads yielded 15.2% on risk.

The exchange-traded fund that tracks the retail sector, XRT, moved above its 20-day price channel on Monday, sending a bull signal that it confirmed today by trading still higher.

ETF break-outs that meet my criteria are a rarity. Generally, they lack sufficiently high yields to make the cut.

ETFs, after all, represent the net performance of many stocks, and that tends to iron out the extremes.

XRT tracks the S&P Retail Select Industry Index, which is composed of 97 stocks. The 10 having the highest weighting are GRPN, SFLY, GME, AWAY, FRAN, ANN, ULTA, EXPE, DLTR and JOSB.

As a trader, I have little interest in ironing the outliers. I seek the extremes. That's where the bigger profits are.

XRT has been in an uptrend since late 2008, when the markets began to recover from the Great Recession crash. The most recent leg up began at the end of 2012, from $60.66, and carried to a high in May of $79.56. A five-week correction carried the price down to $73.85 in late June, and the ensuing three-week recovery has brought XRT to a higher high today
(so far) of $80.25.

This is XRT's third bull signal since the present leg up began. Both of the two completed signals were profitable, yield 6.2% on average over 44 days.

Since the last major correction in October 2011, XRT has completed six bull signals, five of them successful for a 5.4% average yield over 42 days, and one unsuccessful, for a 3.4% loss over 17 days.

The resulting 2% win/lose yield spread is on the low side, but that flaw is largely overshadowed by the 83.3% win rate.

XRT 90-day 2-hour

Over the past year XRT has shown a nearly perfect correlation with the S&P 500 -- +0.98. Only since June has that high correlation begun to falter. The 50-day correlation now stands at +0.75, which is still high.

So to buy XRT, arguably, is to buy the S&P 500, but with a bit more yield and volatility.

XRT, unlike the S&P 500, has pushed above the May 22 peak that kicked off the subsequent market correction that has inspired so many scary headlines. That higher high gives XRT's Elliott Wave count a decidedly bullish cast.

XRT tracks the S&P Retail Select Industry Index, which is composed of 97 stocks. The 10 having the highest weighting are GRPN, SFLY, GME, AWAY, FRAN, ANN, ULTA, EXPE, DLTR and JOSB.

The ETF is one of six symbols to survive my initial screening last night. (See "Tuesday's Prospects".)

XRT has the highest volume of the six, and it's the only one I looked at today. The diversification and shielding from individual earnings announcements and news surprises that ETFs provide is too compelling for me to forego.

XRT on average trades 2 million shares a day and supports a wide selection of option strike prices with open interest running to two and three figures. It's tradeable, but only if I bend the rules slightly. I generally require three-figure open interest.

The bid/ask spread on front-month at-the-money calls is a miniscule 1.1%.

Implied volatility is running at 18% and has been declining since late June. Options are pricing in confidence that 68.2% of trades will fall between $76.21 and $84.49 over the next month, for a potential gain or loss of 5.2%, and between $78.36 and $82.34 over the next week.

Today's option trading is heavily skewed toward the put side, which is running at more than five times the five-day average volume. Calls are running at a bit more than twice average volume.

The fair-price zone on today's 30-minute chart runs from $79.89 to $80.21, encompassing 68.2% of transactions surrounding the most-traded price, $80.05. XRT opened today near the most-traded price, dropped below the zone subsequently rose above the zone, where it stands with a bit less than three hours to go before the closing bell.

XRT goes ex-dividend in September for a quarterly payout yielding 1.32% annualized at today's prices.

Decision for my account: There's little to dislike about XRT, beyond the very near term put skewing of the options. My time horizon is somewhat longer, so it's not a deal-killer. 

I've opened a bull position in XRT, structuring it as short vertical options spreads expiring in August, short the $80 puts and long the $75 puts. The structure provides a 1.9% cushion between the entry price of the underlying and the break-even point of the spread. It has 4.3:1 leverage with a potential maximum yield of 19%.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. 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. StockCharts has a good explainer. The principal practioner 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. 

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 decision decisions for his or her own account, and take responsibility for the consequences.

Tuesday's Prospects

On Monday, July 8:

Of 2,302 stocks and exchange-traded funds in this week's analytical universe, 85 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 81 to the upside and four to the downside.

Four symbols that are traded over the counter broke out, all to the upside.

The five highest-volume symbols to break out are IWM, BRCD, MGM, COP and JNY.

Within my analytical universe, 4% of symbols gave bull or bear signals, down from 6% the prior trading day.

The ratio of bull to bear signals is 21:1, compared to 45:1 the prior trading day, a weakening of the bullish bias but still high.

Six of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are AMCX, CSC, MSG, SJM, XRT and ZQK.

None of the over-the-counter symbols survived my initial screening.

Twelve symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. They are AMP, DLPH, EDU, HMN, HTZ, ICON, JNY, K, MAT, SPR, TRGP and UPS.

I'll do further analysis of the surviving symbols on Tuesday, July 9.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

CREE: A shaky bull signal

Cree Inc. (CREE) broke above its 20-day price-channel on Friday, producing a bull signal that has been confirmed in trading today but with a decline after the open that has brought the price back below the breakout level.

CREE has been in an uptrend since the end of 2011. This is the ninth bull signal since the uptrend began. Half of the completed signals have produced a profit averaging 10.6% over 38 days, and half have been unprofitable with an average loss of 5.1% over 14 days. The resulting 5.5% win/lose yield spread meets my preferences for a trade.

The most recent leg up, from October 2012, has produced similar results: A 50% success rate with an ever larger spread, 8.1%.

There are, however, several things I dislike about the chart, in addition to today's intra-day decline.

CREE
5-year weekly

The price, at today's high so far of  $69.47, is nearing a major reversal level dating back to December 2010, when the price peaked at $72.85 before beginning a sickening slide down to $20.25 a year later. 

That is old resistance, but I'd be willing to bet that there is some money out there that hung on through the decline and is just itching to sell into a rise and get out with whatever face-saving profit they can manage.

Looking at the chart in terms of Elliott waves, I can analyze the present long-term move as a C-wave within an zig-zag correction, a pattern that argues against a bbreak above $72.85. 

The caveat, of course, is that Elliott wave analysis is best applied to a whole-market index. Most individual stocks lack the long data timeline that indexes provide, and they also tend more toward malformation of the ideal Elliott patterns.

Five symbols survived my initial screening over the weekend. (See "Monday's Prospects".)

I rejected FAZ because it is an inverse exchange-traded fund, something I don't trade because the algorithms don't always produce precisely inverse results compared to the underlying.

CCOI had a negative win/lose yield spread, TCEHY failed confirmation and TIBX had losing odds.

Cree, headquartered in Durham, N.C., is an upstream semiconductor manufacturer, concentrating on lighting products, LED components and semis for power and radio-frequency applications.

A downstream product that has the air of a consumer hit is the Cree LED light bulb for homes -- 84% more efficient than the incandescent bulbs. Plus, unlike the incandescents, it doesn't explode when it wears out.

Analysts are all over the map on CREE but in aggregate come down to a negative 6% enthusiasm rating; not loathing, but more like "Meh!"

The financials do little to inspire, with return on equity of 3.6%. On the brighter side, the company reports no long-term debt.

And brighter still, it has been profitable for at least the past 11 quarters, with a steady rise the past four quarters compared to the quarter before. It has surprised five times to the upside the past 11 quarters and five times to the downside. Analysts nailed the results the most recent quarter, for no surprise.

Institutions own 87% of shares, and the price has been bid up to a high level. It takes $6.20 in shares to control a dollar in sales.

CREE on average trades 2.2 million shares a day, enough to support a moderate selection of option strike prices with open interest running to three and four figures. The front-month at-the-money bid/ask spread on calls is quite narrow, at 1.7%.

Implied volatility stands at a very high level, 51%, at the middle of the six-month range. It has been rising gently since mid-May.

Options are pricing in confidence that 68.2% of trades will fall between $57.54 and $77.28 over the next month, for a potential gain or loss of 14.6% (!), and between $62.67 and $72.15 over the next week.

Options today are skewed toward calls, at 29% above the five-day average volume. Puts are trading at 14% above average volume.

The fair-price zone on today's 30-minute chart runs from $67.28 to $68.39, encompassing 68.2% of transactions surrounding the most-traded price, $68.08. The stock opened well above the zone and has mainly declined throughout the day. With two hours before the closing bell, it is trading near the zone floor.

Cree next publishes earnings on Aug. 13.

Decision for my account: The price has dropped out of confirmation, trading below the breakout level, so I won't be opening a new position today. 

None of the other reservations I had about the chart is a deal killer, principally because of the age of the resistance and because I'm not totally confident about the Elliott wave count. But in combination the two are enough to give me pause.

I'll add CREE to my watchlist pending a break above the $72.85 resistance level and shall reconsider a trade if that break does in fact occur.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. 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. StockCharts has a good explainer. The principal practioner 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. 

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 decision decisions for his or her own account, and take responsibility for the consequences.

Monday's Prospects

On Friday, July 5:

Of 2,302 stocks and exchange-traded funds in this week's analytical universe, 131 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 129 to the upside and two to the downside.

Eight symbols that are traded over the counter broke out, seven to the upside and one to the downside.

The five highest-volume symbols to break out are DELL, EWJ, WFC, TNA and HST.

Within my analytical universe, 6% of symbols gave bull or bear signals, up from 1% the prior trading day. It is the highest rate since June 22.

The ratio of bull to bear signals is 45:1, compared to 3:1 the prior trading day, by far the strongest bullish bias seen in recent trading and the first day to top 20:1 since the present market downturn began on May 22.

Four of the major-exchange symbols survived my initial screening, three having broken out to the upside and one to the downside. The bull signals are CCOI, CREE and TIBX. The bear signal is FAZ.

One over-the-counter symbol survived my initial screening, TCEHY, having broken out to the upside.

Twenty-five symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. They are ASML, AXL, BKH, CHKP, DFS, EA, ETN, FIRE, FNP, GLT, GPI, HNI, MOH, NR, NUS, PGR, PL, PLXS, PZZA, SBUX, SNI, SSYS, TSCO, TWTC and WFC.

Earnings season officially begins Monday when AA publishes earnings, so expect increasing numbers of breakouts to run up against my 30-day exclusion rule.

I'll do further analysis of the surviving symbols on Monday, July 8.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

The Week Ahead: Fed clues

The first installment of price data, Federal Open Market Committee minutes and a speech on history by Chairman Ben Bernanke punctuate the week in econ reporting.

The producer price index will be published at 8:30 a.m. New York time, an overture to the full opera, the consumer price index, to be released Tuesday of next week. I expect a heightened sensitivity to prices, as there has been for jobs, as traders try to divine when the Fed will yank away the punchbowl of growing prosperity out of fear of the sour lemons of looming inflation.

Another clue to the Fed's hive mind will come Wednesday at 2 p.m., when the FOMC releases minutes of its June 19 meeting. That was the day Bernanke gave a measured, post-meeting news conference saying that the FOMC might, just might, conditions permitting, let up slightly on the monetary gas pedal, without even thinking of tapping the breaks.

Traders, of course, reacted as thought Bernanke had shrieked "Inflation" thrice and then jammed the brake pedal to the floor, causing a spin-out over the cliff at the side of the road.

The markets, I've come to realize, are not always rational.

Speaking of the chairman, Bernanke gives a speech at 4:10 p.m. Wednesday with the grand title, "A Century of U.S. Central Banking: Goals, Frameworks, Accountability". Could there be clues in that speech, to the National Bureau of Economic Research conference, regarding the Fed's future course?

He's talking about Fed history, Fed history included the Great Depression, we're coming out of the Great Recession, and so by the process of analogy, a built-in penchant of our species, I suspect there may be a clue or two to be found, at least in the mind of the clue-seeker.

The National Bureau of Economic Research, by the way, is best known to the public for being the quasi-official arbiters of the business cycle, determining its peaks and troughs, which puts its mission squarely in the middle of the Fed-watchers' playing field.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Thursday.

Index of consumer expectations from the Reuters/University of Michigan consumer sentiment report, at 9:55 a.m. Friday.

Other reports of interest:

Wednesday: Petroleum inventories at 10:30 a.m.

Thursday: Import and export prices at 8:30 a.m., and the Treasury budget, showing the federal deficit, at 2 p.m.

I also follow the Baltic dry index, released daily, tracking the volume of global maritime shipments of coal, iron ore, grain and other raw materials.

Fedsters

Besides Bernanke, two Federal Open Market Committee members will make public appearances: Fed Gov. Daniel Tarullo on Thursday and St. Louis Fed Pres. James Bullard on Friday. San Francisco Fed Pres. John Williams, who isn't sitting on the FOMC this year, also speaks on Friday.

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,302 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter. My universe is selected from mid-cap stocks and larger, defined as market capitalization of $1 billion and greater.

Trading calendar

By my rules, I'm trading August options for the short legs of vertical, diagonal and butterfly  spreads, iron condors and covered calls as well as October options for single calls and puts. Of course, shares are good at any time.

Posting schedule

Beginning Thursday, I'll be traveling in East Asia for several weeks, and during that period I'll adjust my posting schedule to conform to local time. Analyses of individual stocks and my daily prospects list will be posted after the markets close in New York and sometimes deep in the night U.S. time. I won't post on travel days.

Good trading!

SEMG: Art thou mad!

SemGroup Corp. (SEMG) gave a bull signal on Wednesday, breaking above its 20-day price channel at  $56.21, and confirmed it by trading beyond the channel boundary today.

The breakout comes amid a shallow correction of an uptrend that began in October 2011 from $37.61 and carried the price to a peak of $58.08 on May 21.

SEMG, along with most stocks, began to fall the next day, and the correction has so far carried the price to a low of $50.28 on June 4.

The question, as always when playing a correction, is when can a trader have confidence that the correction is indeed over.

From the June 4 low, SEMG rose to a lower high of $56.21 on June 18, declined to a slightly higher low of $50.54 on June 24, and has since pushed up to a new correction high of $57.47 (so far) today.

In pushing to a new high SEMG has diverged from the S&P 500, which remains below its mid-June high.

SEMG is trading at around $57 with three hours plus change left before the closing bell. That's only 1.9% below the May 21 peak and presents a good argument for delaying entry on the bull side until the price has closed above the $58.08 level.

This is SEMG's second bull signal in its current leg up. The first produced a 36.7% profit over 100 days. Of the five bull signals since the current trend began in 2011, four have made money, averaging 16.9%, and the one that failed to produce a profit lost only 3.8%.

SEMG was one of two symbols that survived my initial wave of screening. (See Wednesday night's post "Friday's Prospects".) The other breakout, also the upside, was RAX. However, it had poor performance in its current leg up from August 2012, with a negative 12% win/lose yield spread, and a spread of only 3.5% since its uptrend began in October 2011.

SemGroup, headquartered in Tulsa, Oklahoma, provides services to oil companies in the Midwest and Rocky Mountain regions of the United States, Canada and the United Kingdom. It primarily is involved in transporting oil and natural gas from refineries to end users. It also makes asphalt.

The company filed for Chapter 11 bankruptcy in 2008, as the recession took hold, and emerged in 2009 as a restructured and smaller company.

SemGroup is followed by fewer than a handful of analysts, but those who do follow it love it. Perhaps its the economic macro-story that accounts for their love affair: As the recovery takes takes hold, demand for fossil fuels increases and a restructured, leaner and more efficient SemGroup will be well positioned to profit.

But that is clearly a forward-looking position that moves beyond what is known. SemGroup reports return on equity of only 4.6% from its last profitable quarter, the 4th of 2012, although long-term debt is low, at only 16% of equity.

The most recent quarter was a loss, the worst of three losing quarters out of the last six. The prior quarter, the 4th of 2012, was the most profitable of three money-makers out of the last six quarters.

The company has missed earnings estimates four times out of six for negative earnings surprises. It has surprised to the upside twice.

So there's no trend to earnings, and no confidence to be placed in pre-earnings estimates. At this point a fundamentalist like Warren Buffett would look up from his book (Twelfth Night by Shakespeare) and exclaim, with Olivia, "How now! Art thou mad?"

But we are chart traders here, followers of the trend and players of the odds. Madness is a virtue that courses through our veins. Let us pursue the analysis to its end.

Institutions own nearly all of SEMG shares, and the price has been bid up to where it takes $1.97 in shares to control a dollar in sales.

SEMG on average trades 440,000 shares a day, sufficient to support a moderate selection of option strike prices, but with mainly no open interest in my current front month, August. The front-month at-the money call options have a bid/ask spread of 50%.

The open interest is in the two and three figures for July with a 30% spread, but my calendar has me trading August spreads for short positions at this point.

In any case, I won't trade options that are so illiquid and that carry such a ridiculously high bid/ask spread. For me, it's long shares or nothing with SEMG.

But the options have some analytical uses. Their implied volatility stands at 25%, about the middle of the six-month range. It has been subject to wide swings as a traced a shallow rise from mid-May.

Options are pricing in confidence that 68.2% of trades will fall between $52.92 and $61.42 over the next month, for a potential gain or loss of 7.4%, and between $55.13 and $59.21 over the next week.

Volume on options is running heavily to the call side today, at nearly triple the five-day average. Put volume is merely 14% of the average.

The fair-price zone on today's 30-minute chart runs from $56.96 to $57.40, encompassing 68.2% of transactions surrounding the most-traded price, $57.19. Trading began this morning below the zone floor and has since fluctuated around the most-traded price, with a few brief forays through the ceiling.

SEMG next publishes earnings on Aug. 5. It goes ex-dividend in August for a quarterly payout yielding 1.33% annualized at today's prices.

Decision for my account: I'll wait for a breakout above the $58.08 level before opening a position on SEMG, and even then, I may not go there. The lack of an ability to hedge using options, the state of earnings and the sparse following of analysts give me pause. I shall, however, add SEMG to my watchlist and keep an eye on it for awhile.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. 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.

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 decision decisions for his or her own account, and take responsibility for the consequences.

Friday's Prospects

On Wednesday, July 3:

Of 2,284 stocks and exchange-traded funds in this week's analytical universe, 23 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 17 to the upside and six to the downside.

No symbols that are traded over the counter broke out.

The five highest-volume symbols to break out are APA, ARNA, STI, SEE and CBS.

Within my analytical universe, 1% of symbols gave bull or bear signals, down from 1.8% the prior trading day. It is the lowest level since June 25 and unsurprising on a day when the markets closed early for a holiday.

The ratio of bull to bear signals is 3:1, compared to 9:1 the prior trading day. It is the lowest bullish bias since June 26.

Two of the major-exchange symbols survived my initial screening, both having broken out to the upside. They are RAX and SEMG.

Six symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. They are AYR, CBS, CBS.A, DISCA, LNKD and LPNT.

Earnings season officially begins July 8 when AA publishes earnings, so expect increasing numbers of breakouts to run up against my 30-day exclusion rule.

I'll do further analysis of the surviving symbols on Friday, July 5.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

KKD: A doughnut is more than a doughnut

Updated 8/30/2013: KKD gave a bull signal on Aug. 30. It gapped sharply to the downside at the open and in the first half hour traded as much as 8.7% below the prior day's close following a negative 14.1% earnings surprise.

My bull position in KKD was structured as short vertical spreads sold for credit. They expired Aug. 16 without value and have since been on the shelf waiting for a fresh buy signal that would allow me to roll them to position with a later expiration.

That buy signal never came, and so the Aug. 30 decline became a signal to calculate my profits and remove KKD from the shelf.

I held KKD for 44 days, and in that time the shares rose 11.8%, or 97.7% annualized.

The options produced a 17.7% yield on risk, or 146.8% annualized.

Krispy Kreme Doughnuts Inc. (KKD) has been on a sugar high, stairstepping upward toward a swing high, $19.12. Tuesday's break above the 20-day price channel and subsequent high produced a bull a signal that was confirmed in early trading today.

The break also initiated a five leg up for the stock, which has been rising since the markets began recovering in early 2009 from the Great Recession crash.

Normally before moving on to a deeper analysis of a stock I would give it a few hours to trade to see if it truly was confirming a signal. But this is not a normal day. The markets close at 1 p.m. Eastern and any trader who hopes to ply his or her trade must be an early bird.

KKD's chart shows such a bullish bias that an early start, in my book, poses little risk.

This is KKD's fourth bull signal since the present uptrend began in June 2012. The three completed signals were all profitable, with an average yield of 25.5% over 53 days.

Four symbols survived my preliminary analysis last night. (See my posing "Wednesday's Prospects".)

The most liquid of them, TWX, had a looming earnings announcement pop up on the calendar, running afoul of my 30-day exclusionary rule. I tossed KAR because its win/lose yield spread was the lowest of the three remaining symbols.

SPWR has good odds and an acceptable chart (and as a solar cell company a far more compelling backstory than KKD's doughnuts).

However, its break on Tuesday above $21.83 is shy of the prior higher high at $23.76. Rather than jump in now, I'm adding SPWR to my watch list pending a true breakout.

Krispy Kreme,  headquartered in Winston-Salem, North Carolina, operates nearly 700 stores in 21 countries under the mission statement, "To touch and enhance lives through the joy that is Krispy Kreme", and the vision statement, "To be the worldwide leader in sharing delicious tastes and creating joyful memories."

Gertrude Stein wrote that a "rose is a rose is a rose". But for Krispy Kreme, obviously, a doughnut is more than a doughnut.

Analysts are in aggregate neutral about KKD's prospects, giving it an enthusiasm rating of zero, despite the company having a product that holds a place in the American culinary heart second only to pizza.

Certainly fried dough and sugar have proven to be a money-maker for Krispy Kreme, which reports return on equity of 14% with debt equal to only 9% of equity.The company has been profitable 11 of the past twelve quarters, and the losing quarter was way back in 2010.

The 1st quarter of the year tends to be Krispy Kreme's earnings peak, and 1st quarter earnings have increased year by year since 2010.

Institutions own 69% of shares. The price stands well above parity; it takes $2.66 in shares to control a dollar in sales.

KKD on average trades 1.4 million shares a day and surprisingly supports a good selection of option strike prices with three-figure open interest. The front-month at-the-money bid/ask spread  on calls is fairly tight, at 5.3%.

Implied volatility is at 39% and has been declining since late May. It is in the lower half of the six-month range.

Options are pricing in confidence that 68.2% of trades will fall between $16.80 and $21.04 over the next month, for a potential gain or loss of 11.2%, and between $17.90 and $19.94 over the next week.

Today's trading in options is leaning toward puts, which are trading at 240% of their five-day average volume. But calls aren't far behind, at 200% of their average.

The fair-price zone on today's 30-day chart runs from $18.85 to $19.02, encompassing 68.2% of trades surrounding the most-traded price, $18.85. Note that this is less than an hour into the truncated trading day and so is really not enough data to draw conclusions about very near term momentum.

Krispy Kreme next publishes earnings on Aug. 19.

Decision for my account: I've opened a bull position in KKD, structuring it as a short vertical spread expiring in August, short the $18 put and long the $16 put. The position is profitable at expiration down to 7.7% below the entry price. Maximum profit is 17.7%. The leverage is 1.7:1.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. 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.

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 decision decisions for his or her own account, and take responsibility for the consequences.

Wednesday's Prospects

On Tuesday, July 2:

Of 2,284 stocks and exchange-traded funds in this week's analytical universe, 38 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 34 to the upside and four to the downside.

Three symbols that are traded over the counter broke out, all to the upside.

The five highest-volume symbols to break out are ZNGA, F, LINE, X and USO.

Within my analytical universe, 1.8% of symbols gave bull or bear signals, down from 3.9% the prior trading day.

The ratio of bull to bear signals is 9:1, compared to 10:1 the prior trading day.

Four of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are KAR, KKD, SPWR and TWX.

None of the over-the-counter symbols survived my initial screening.

Seven symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. They are ADP, ELS, FFIN, KRC, SNE, SVU and VRX.

Earnings season officially begins July 8 when AA publishes earnings, so expect increasing numbers of breakouts to run up against my 30-day exclusion rule.

I'll do further analysis of the surviving symbols on Wednesday, July 3. The U.S. stock markets close at 1 p.m. New York Time that day, in anticipation of the American Independence Day celebration. Such shortened trading days are often marked by lower volume and difficulty in getting good fills, making trading an iffy proposition.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

SPLK: Spelunking the data

Update 8/15/2013: SPLK, since its options were closed on Aug. 9 near expiration at a small cost, has been awaiting an opportunity for a roll into a fresh position. That opportunity disappeared today as the stock gave a close signal.

I only held one position on SPLK -- it was never rolled. The share price rose by 7% during the 38 days I held the position. The options produced a 21.5% yield on risk.

Splunk Inc. (SPLK) broke above its 20-day price channel on Monday and confirmed the bull signal by trading still higher today, to an all-time high so far of $49.29. It went public in April last year and in its short chart history has been in an uptrend since November 2012.

This is SPLK's third bull signal of the uptrend. The two completed signals split, with the successful trade yielding 33.2% over 997 days, and the unsuccessful trade losing 7.9% over eight days. The resulting 25.3% win/lose yield spread is quite high.

There was an inordinately large number of potential trades to choose from today (see "Tuesday's Prospects" posted last night). I concentrated on the higher volume potentials, SPLK and MTU, both of which also had highest win/lose yield spreads of the batch. SPLK won because of its higher spread and better options grid, although MTU remains intriguing as a shares play. Not so much. The price has dropped below the breakout level, putting MTU in a non-confirming position. Maybe some other day.

Splunk's name is, I'm guessing, a play on "spelunk", the exploration of natural caves. Splunk's caves are big data, its analysis and management. It's specialty is dealing with unstructured data, the hodge-podge of detrius knocked lose by the machines as they conduct us through our daily lives. The company's software is used by 3,700 customers in 74 countries.

Big data has been very much in the headlines of late, thanks to Edward Snowden and his leak of NSA's methods of data acquisition, with much of the debate focusing on how awful it is that governments and companies collect so much information about us.

But like it or not, big data is with us to stay, and can no more be rolled back than can any other core technology. It is, with a nod to Anthony Trollope, the way we live now. There is money to be made, and SPLK is attempting to make it.

Although not, it appears, very successfully. The company has five quarters of earnings history since going public and in only one has it made any money. The rest have been unprofitable, with the most recent having the largest losses.

Return on equity is a negative 14%. On the good side, Splunk has no long-term debt.

And yet, analysts are bullish on the stock. In aggregate they give it a 38% enthusiasm rating. Splunk, after all, is operating in a relatively new marketplace, and a rapidly moving one, which means continual development costs. Analysts look to the future promise, not the past results.

Institutions own nearly all the shares, and the price has been bid up to an extraordinary level. It takes $22.62 in shares to control a dollar in sales.

SPLK on average trades 2.3 million shares a day and supports a moderate selection of option strike prices with open interest running to the three- and four-figure range.  The bid/ask spread on front-month at-the-money calls is 7.7%, a touch high but not unexpectedly so for a stock of SPLK's liquidity.

Implied volatility stands at 38%, near the bottom of the six-month range. It has been trending sideways for a month.

Options are pricing in confidence that 68.2 of trades will fall between $43.61 and $54.40 over the next month, for a potential gain or loss of 11%, and between $46.41 and $51.60 over the next week.

Option trading is tending toward puts, whose volume is double the five-day average, compared to 37% above average for calls.

The fair-price zone on today's 30-minute chart runs from $48.15 to $48.92, encompassing 68.2% of transactions surrounding the most-traded price, $48.59. The price opened near the most-traded prie, fell to the bottom of the zone and has since risen above the zone, where it stands with 2-1/2 hours left before the closing bell.

Splunk next publishes earnings on Aug. 26.

Decision for my account: There is no doubt that SPLK is a speculative play. The chart and odds analyses show that it has momentum to spare, but the financials aren't there to support it, not yet at least. And it doesn't have much chart history, always a negative.

Yet it's an optionable trade and so I can hedge the risk. And as a trend follower, I also give more credence to the chart than the books.

I've opened a bull position in SPLK, structuring it as short vertical options spreads expiring in August, short the $47.5 put and long the $45 put. The position is profitable at expiration down to 4.8%  below the entry price and has a maximum yield of 23.1%. The leverage is 2:1.

References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

At several points in my analysis I use the number 68.2%. 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.

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 decision decisions for his or her own account, and take responsibility for the consequences.

TSN: Chicken no more

Update 8/29/2013: I'm a bit late in catching it, but TSN broke below its 10-day price channel on Aug. 26, busting a roll that has been on the shelf since Aug. 16 waiting for a new upside breakout.

My TSN bull position was structured as short vertical spreads expiring in August and sold for credit. They expired without value. Under my rules, I wait for a fresh breakout in the direction of the trade before rolling an options position forward to a new expiration. That breakout for TSN never came.

During the 45 days I held the position, TSN shares rose 18.9% for an annualized gain of 153.5%.

The options in my position yielded 19% on risk, or 154.3% annualized. 

A side note: The options and the shares had nearly identical results. The benefit of using options is that I can control the equivalent of many more shares by investing far less capital than would be required if I bought the shares themselves.

Tyson Foods Inc. (TSN) on May 21 broke above its 20-day price channel and confirmed the bull signal by trading higher the next day.

The trade looked good in my analysis, "TSN: Call me chicken", but I passed on it. The $25.22 breakout level was close to a major, if ancient, peak of $26. I decided to pass on the trade, but added, "I've put a marker down on that peak and will treat a break above that level as a bull signal, using my normal rules."

The break above that historic resistance level came yesterday, July 1, and was confirmed in trading today.

Nothing has happened to change my mind about TSN, so I've opened a bull position, structuring it as a short vertical options spread expiring in August, short the $26 put and long the $24 put. The position can fall 3.5% and still be profitable at expiration. The maximum potential yield is 19%. The leverage is 3:1.

References My 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 decision decisions for his or her own account, and take responsibility for the consequences.

Tuesday's Prospects

On Monday, July 1:

Of 2,284 stocks and exchange-traded funds in this week's analytical universe, 84 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 77 to the upside and seven to the downside.

Four symbols that are traded over the counter broke out, three to the upside and one to the downside.

The five highest-volume symbols to break out are DAL, BBY, GNW, CIE and ARIA. (I've excluded the top two, NWSA and ONXX, which had massive opening gaps on news.)

Within my analytical universe, 3.9% of symbols gave bull or bear signals, up from 1.7% the prior trading day. It is the highest breakout rate since June 24, when 5.9% of my universe gave signals.

The ratio of bull to bear signals is 10:1, compared to 5:1 the prior trading day, a doubling of the market's bullish bias.

Twenty of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are AIT, ALNY, DRC, DSW, DV, ERIE, ESGR, GNW, GWRE, HAR, IX, LFUS, MATX, MMP, MOG.A, MTU, OPK, PNG, SLH and SPLK.

One of the over-the-counter symbols survived my initial screening, MSADY, to the upside.

Eight symbols were excluded from consideration because they will publish earnings within 30 days of the breakout. They are ACIW, BPOP, CR, DAL, EEFT, FUJIY, HAS and ICA.

Earnings season officially begins July 8 when AA publishes earnings, so expect increasing numbers of breakouts to run up against my 30-day exclusion rule.

I'll do further analysis of the surviving symbols on Tuesday, July 2.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

Monday: No Trade

Two symbols, MGA and RHP, survived my first-wave screening over the weekend. (See "Monday's Prospects".) However, both potential bull faltered early in the next leg of analysis.

The MGA break above the 20-day price channel was confirmed in trading today. The bull signal is part of an uptrend that began in July 2012. It is MGA's sixth breakout of the trend.

Of the five completed breakouts, four were profitable, with an average yield of 6.5% over 34 days. The unprofitable trades lost 5.6% on average over 6 days, for a yield spread of only 0.9%. That's way too low for my taste. I generally prefer 3% or better.

RHP fell by the wayside much more quickly. The company was split from its parent in 2012 and has been trading independently only since last October. That's less than the year of history I require for a trade.

Neither symbol meets my criteria and preferences, so I won't be opening new positions today.

References My 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 decision decisions for his or her own account, and take responsibility for the consequences.

The Week Ahead: Employment closes the week with a bang

U.S. markets will be closed on Thursday for the American Independence Day. London, inexplicably declining to join in the celebration, will trade as usual, as will Tokyo and Sydney. The U.S. markets will close early on Wednesday, at 1 p.m. New York Time.

Like Thursday's fireworks displays, the econ week will end with a grand finale: The employment report, including the politically important unemployment rate. It will be published at 8:30 a.m.

The ADP employment report, from the leading U.S. payroll company, will provide a sneak preview of the jobs numbers on Wednesday at 8:30 a.m. Friday.

The week opens with another major report, the Institute of Supply Management manufacturing index, on Monday at 10 a.m.  The survey provides insight into how robustly the manufacturing sector is recovering, which in turn helps inform the Federal Reserve's decision-making on money policy.

International trade statistics showing the balance between imports and exports will be published Wednesday at 8:30 a.m.

Leading indicators (in descending order of importance):

The interest rate spread between 10-year Treasuries and the federal funds rate, reported continually during market hours.

The M2 money supply, at 4:30 p.m. Thursday.

Average hourly workweek in manufacturing from the employment report, 8:30 a.m. Friday.

Manufacturers new orders for consumer goods and materials from the factory orders report, at 10 a.m. Tuesday.

Vendor performance, or the delivery times index, from the Institute of Supply Management manufacturing survey, 10 a.m. Monday.

The S&P 500 index, reported continually during market hours.

Average weekly initial jobless claims, at 8:30 a.m. Friday, a day later than usual because of the holiday.

Manufacturers new orders for nondefense capital goods from the factory orders report, at 10 a.m. Tuesday.

Other reports of interest:

Monday: Purchasing Managers manufacturing index, just before 9 a.m., and construction spending at 10 a.m.

Tuesday: Motor vehicle sales throughout the day and factory orders at 10 a.m.

Wednesday: Institute of Supply Management non-manufacturing index at 10 a.m. and petroleum inventories at 10:30 a.m.

I also follow the Baltic dry index, released daily, tracking the volume of global maritime shipments of coal, iron ore, grain and other raw materials.

Fedsters

Two Federal Open Market Committee members will make public appearances on Tuesday,  New York Fed Pres. William Dudley and Fed Gov. Jerome Powell

Analytical universe

This week I'll be analyzing new bull and bear signals among 2,284 stocks and exchange-traded funds that have some analyst interest. They are traded both on the major U.S. exchanges and over-the-counter. My universe is selected from mid-cap stocks and larger, defined as market capitalization of $1 billion and greater.

Trading calendar

By my rules, I'm trading August options for short vertical  spreads as well as October options for single calls and puts. Of course, shares are good at any time.

Good trading! And have a Glorious Fourth!

Monday's Prospects

On Friday, June 28:

Of 2,284 stocks and exchange-traded funds in this week's analytical universe, 33 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 29 to the upside and four to the downside.

Five symbols that are traded over the counter broke out, three to the upside and two to the downside.

The five highest-volume symbols to break out are CMCSA, NKE, PPL, PPC and RHP.

Within my analytical universe, 1.7% of symbols gave bull or bear signals, down from 2% the prior trading day.

The ratio of bull to bear signals is 5:1, compared to 14:1 the prior trading day, a decline in the market's bullish bias.

Two of the major-exchange symbols survived my initial screening, both having broken out to the upside. They are MGA and RHP.

None of the over-the-counter symbols survived my initial screening.

Four symbols were excluded from consideration because they will publish earnings within the next 30 days. They are CNO, PPC, RYAAY and TRW.

Earnings season officially begins July 8 when AA publishes earnings, so expect increasing numbers of breakouts to run up against my 30-day exclusion rule.

I'll do further analysis of the surviving symbols on Monday, July 1.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

EPD and ETE: Band of brothers

Enterprise Products Partners L.P. (EPD) broke above its 20-day price and confirmed the bull signal by trading above the breakout level the next day.

Energy Transfer Equity L.P. (ETE) did the same.

Those two natural gas companies were the only symbols to survive my second-wave analysis. And in the end, I have chart problems with both.

The companies met my criteria for nearer-term odds, with EPD showing 16 completed breakouts to the upside with a 56% success rate and ETE having completed one breakout, which was successful.

ETE has a better yield on the winning trades and win/lose yield spread that EPD, but the latter's numbers are quite acceptable.

EPD has far higher return on equity and slightly lower debt than ETE, but neither is a deal breaker.

No, it comes down solely to the charts, and in that area the two are marching in lockstep like a band of  brothers.

EPD began a rise from the lower boundary of the 20-day price channel on June 24 and on the fourth trading day broke above the upper boundary at $61.26.

ETE began a rise from the lower boundary on June 21 and on the fifth day cleared the price channel at $59.33.

But in neither case was it a true breakout. EPD's most recent swing high is $63.56, just a bit more than a day's true range away from the current price, $61.93. ETE's is $61.99, also less than two days' trading range away from the present price, $59.76.

This illustrates a shortcoming of the Turtle Trading method's reliance on price-channel breakouts. They are excellent tools for screening, but in the end, the trading decision must come down to the individual chart.

The other survivors of the initial screening, reported in last night's post, "Friday's Prospects", fell by the wayside in the second wave of analysis.

EXLP and TGH failed confirmation. CEB has been traded publicly for less than a year and so is too young for me to trade. GRFS is an American depository receipt for a Spanish pharmaceutical company and suffers from the information scarcity that plagues most ADRs.

SBH and NGLS might have been tradeable, but their longer term odds were just even and I wasn't otherwise excited by either.

THO has low win/lose yield spreads both in the nearer term and the longer term.

That left the band brothers, EPD and ETE, which I'll add to my list of symbols that I'm monitoring and that I'll consider if they proceed on to true breakouts.

Decision for my account: I won't be opening a new bull position in EPD or ETE.

References
My 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 decision decisions for his or her own account, and take responsibility for the consequences.

Friday's Prospects

On Thursday, June 27:

Of 2,289 stocks and exchange-traded funds in this week's analytical universe, 45 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 42 to the upside and three to the downside.

One symbol that is traded over the counter broke out, to the upside.

The five highest-volume symbols to break out are AMX, CVC, CAG, UMC and INTU.

Within my analytical universe, 2% of symbols gave bull or bear signals, up from 1.3% the prior trading day.

The ratio of bull to bear signals is 14.3:1, compared to 2:1 the prior trading day, a strong increase in the market's bullish bias.

Ten of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are CEB, EPD, ETE, EXLP, GRFS, JOE, NGLS, SBH, TGH and THO.

The one over-the-counter symbol to break out, NDKAY to the upside, failed to survive my initial screening.

Two symbols were excluded from consideration because they will publish earnings within the next 30 days. They are CAG and PCP.

Earnings season officially begins July 8 when AA publishes earnings, so expect increasing numbers of breakouts to run up against my 30-day exclusion rule.

I'll do further analysis of the surviving symbols on Friday, June 28.

The symbols I'm analyzing are mid- and large-cap stocks having analyst coverage, as well as selected exchange-traded funds. I screened them for...

• the odds of a successful trades in the direction of the breakout since the present uptrend began on the S&P 500 weekly chart, on Oct. 4, 2011,
• a yield adjusted by those odds of 5% or greater,
• and absence of an earnings announcement within the next 30 days. 

For bear signals, I also screened to ensure the ability to do a trade, either because of the presence of options whatever their open interest or sufficient volume to allow for the short sale of shares.

My cut-off point for bullish bias is a ratio of bull to bear signals of 2:1 or greater, and for bearish bias, 1:2 or smaller, rounded to the nearest whole number.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.

Thursday: No Trade

None of the five symbols that survived my initial screening last night has made it past the second wave of analysis. So I won't be opening any new positions today.

The details of the first-wave analysis can be found in last night's posting, "Thursday's Prospects".

The breakouts came amid a very tentative return to a bullish bias after Federal Reserve Chairman Bernanke signaled a gradual slackening of financial stimulus next year. His nuanced remarks sent the markets into a mini-panic to the downside.

With a 2:1 ratio of bull to bear signals, I wouldn't exactly say the bull has returned, but the bear is napping, exhausted after its exertions a week ago, when its rampage produced bear signals at a rate 43 times the bull signals.

Here's how today's first-wave analysis survivors, all bull signals, fared in the second wave, in descending order by volume:

P has financials that don't match a bullish outlook, with return on equity of negative 45%. Ouch! P, of course, is the innovative Pandora music streaming service. It's price is approaching its $20 opening price in its 2011 initial public offering, and a break above that level might override the financials. But for now, the chart is still ensnared in the IPO congestion, which can cause some resistance.

NOW had a July 24 earnings announcement pop up on the calendar this morning, bringing it within my exclusion period. I don't open new positions in a stock within 30 days of earnings publication.

ITC has a bearish analytical rating from Zacks. This isn't always a barrier to entry, but I'm not otherwise excited by ITC, whose lower liquidity won't let me take advantage of the leverage and hedging provided by options.

NGL fell back within its price channel and so failed to confirm the bull signal.

DNZOY, an over-the-counter stock, lacks the financial data I need to assess it, as is often the case with foreign companies trading as American depository receipts. Its average volume is under 18,000 shares a day. If it were more liquid I would be tempted, but with such low volume I don't want to chance a financially blind trade.

References

My 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 decision decisions for his or her own account, and take responsibility for the consequences.