Two flavors of housing dominate the week's economic reporting, with a dose of big-ticket items to furnish those dwellings tossed in to add some spice.
Existing home sales data, encompassing the greater part of the market, will be published Monday at 10 a.m. New York time, followed by new home sales on Wednesday, also at 10 a.m.
Durable goods orders, which includes refrigerators and the like but also large industrial items, will be released Thursday 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.
The S&P 500 index, reported continually during market hours.
Average weekly initial jobless claims, at 8:30 a.m. Thursday.
The index of consumer expectations from the Reuters, University of Michigan consumer sentiment report, at 9:55 a.m. Friday.
Other reports of interest:
Wednesday: Purchasing Managers' manufacturing index just before 9 a.m. and petroleum inventories at 10:30 a.m.
Analytical universe
This week I'll be analyzing new bull and bear signals among 2,327 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
I am 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!
Thursday, July 18, 2013
VIPS: Online sales in China
Update 7/22/2013: VIPS hasn't exceed the chart breakout level -- the prior highest high. See my discussion in the "Decision" section below. With earnings less than a month away, I've removed VIPS from my watchlist.
Vipshop Holdings Ltd. (VIPS) broke above its 20-day price channel on Wednesday and confirmed the bull signal by trading still higher on Thursday.
The breakout is part of an uptrend that began from $4.76 in August 2012, five months after the company's initial public offering, and reached an all-time high of $38.46 on May 21, 2013.
On subsequent days VIPS followed the major stock averages down in a correction that lasted until $23.26 on June 24. The price, with the indexes, has since recovered and is a dollar plus change shy of challenging the May high.
In terms of Elliott wave analysis, VIPS on the 90-day 2-hour chart best counts as being in wave 3 up, which allows for a retracement no lower than $30.37 and then a subsequent rise to yet higher highs.
The problem lies with the bigger picture. To my eye the uptrending waves look like a counter-trend rise within a downtrend that began from $38.46 on May 21 -- a [B] wave upward correction beginning from $23.26.
If that is indeed the case, then the [B] wave must terminate below $38.46, and that doesn't give much room for a wave 5 to complete the pattern.
The S&P 500, which VIPS is tracking fairly closely, has in fact exceeded its May high, throwing the whole wave count on the index into uncertainty.
And, to add to the weakness of the argument, this discussion all comes with the usual caveat that Elliott wave counts on individual shares are notoriously fickle, so I'm treating that count in my own trading with a healthy dose of skepticism.
Yet, the count does counsel caution in jumping into this trade while the $38.46 level remains unbroken. The risk, it would seem, is mainly to the downside.
This is VIPS' fourth breakout to the upside since the present uptrend began nearly a year ago. All of the three completed bull signals were profitable, with an average yield of 51.3% (not a typo) over 59 days.
There have been no other upside breakouts since the correction began in May. The one downside breakout was unsuccessful, producing a 5.2% loss.
In terms of odds, then, this is an extremely robust play.
Vipshop Holdings, headquartered in Guangzhou, China, sells more than 360 brands of stuff online, including such names as Disney, FOX, Harry Potter, Mentholatum and Pepsi.
Online sales are a significant part of China's huge and sprawling market space, and that means profit for a company like Vipshop that has nailed down a suite of quality contracts.
Less than a handful of analysts track VIPS, so I'll refrain from calculating an enthusiasm index. Suffice it to say that they are on balance positive about the company's prospects.
Their assessment seems to be based more on future hopes than present reality. Vipshop Holdings reports return on equity of only 4%, albeit with no long-term debt.
It has reported a steady profit the last two quarters following a three-quarter ramp-up period that went from a big loss to a small loss to a small profit. All five quarters have surprised to the upside.
Institutions own 27% of shares and the price is running well above sales parity. It takes $2.19 in shares to control a dollar in sales.
VIPS on average trades 558,000 shares a day, sufficient to support a moderate selection of option strike prices, with open interest running to three and four figures. Front-month at-the-money calls have an 11.8% bid/ask spread, which is on the wide side.
Implied volatility is extremely high, at 81%. It has been fluctuating sideways since mid-June.
Options are pricing in confidence that 68.2% of trades will fall between $28.52 and $45.96 over the next month, for a potential gain or loss of 23.4%, and between $33.05 and $41.43 over the next week.
Options are trading near their five-day average, with a slight bias toward calls at 7% above average, vs. puts, at 12% below average.
The fair-price zone on Thursday's 30-minute chart runs from $36.36 to $37.48, encompassing 68.2% of transactions surrounding the most-traded price, $37.19. VIPS opened below the zone and in the next four hours rose to the most-traded price, where it fluctuated the rest of trading day.
VIPS next publishes earnings on Aug. 5. That indicates an error in my first-wave analysis, because it puts VIPS within my exclusion period for stocks announcing earnings within the next 30 days.
Yet, and yet, it is such a fascinating chart . . .
“He had the feeling that he must make a decision, and though he was used to making many decisions every day, this time he was beset with uncertainty . . .”
Decision for my account: The key to a decision on VIPS lies, I think, in the fact that the current price is so near the highest high, $38.46. A break above that level will suggest that my Elliott wave count is incorrect and that VIPS has the capacity to move to still higher highs.
With that in mind, I'll put off trading unless I see a break above $38.46 confirmed the next day by significant momentum above that level. That means I'll be looking for a break above that level on Friday and a confirmation on Monday, with a potential trade on Monday or Tuesday. If the confirmed breakout never occurs, then I'll drop VIPS from consideration until after earnings.
Fans of Turtle trading, upon which my trading rules are based: Note that $38.46 is the upper boundary of the 55-day price channel, one of two levels used to calculate breakouts in classic Turtle trading. (The other level is the more lentient 20-day channel that I use in my trading.)
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
Vipshop Holdings Ltd. (VIPS) broke above its 20-day price channel on Wednesday and confirmed the bull signal by trading still higher on Thursday.
The breakout is part of an uptrend that began from $4.76 in August 2012, five months after the company's initial public offering, and reached an all-time high of $38.46 on May 21, 2013.
On subsequent days VIPS followed the major stock averages down in a correction that lasted until $23.26 on June 24. The price, with the indexes, has since recovered and is a dollar plus change shy of challenging the May high.
 |
| VIPS 90 day 2-hour bars |
The problem lies with the bigger picture. To my eye the uptrending waves look like a counter-trend rise within a downtrend that began from $38.46 on May 21 -- a [B] wave upward correction beginning from $23.26.
If that is indeed the case, then the [B] wave must terminate below $38.46, and that doesn't give much room for a wave 5 to complete the pattern.
The S&P 500, which VIPS is tracking fairly closely, has in fact exceeded its May high, throwing the whole wave count on the index into uncertainty.
And, to add to the weakness of the argument, this discussion all comes with the usual caveat that Elliott wave counts on individual shares are notoriously fickle, so I'm treating that count in my own trading with a healthy dose of skepticism.
Yet, the count does counsel caution in jumping into this trade while the $38.46 level remains unbroken. The risk, it would seem, is mainly to the downside.
This is VIPS' fourth breakout to the upside since the present uptrend began nearly a year ago. All of the three completed bull signals were profitable, with an average yield of 51.3% (not a typo) over 59 days.
There have been no other upside breakouts since the correction began in May. The one downside breakout was unsuccessful, producing a 5.2% loss.
In terms of odds, then, this is an extremely robust play.
Vipshop Holdings, headquartered in Guangzhou, China, sells more than 360 brands of stuff online, including such names as Disney, FOX, Harry Potter, Mentholatum and Pepsi.
Online sales are a significant part of China's huge and sprawling market space, and that means profit for a company like Vipshop that has nailed down a suite of quality contracts.
Less than a handful of analysts track VIPS, so I'll refrain from calculating an enthusiasm index. Suffice it to say that they are on balance positive about the company's prospects.
Their assessment seems to be based more on future hopes than present reality. Vipshop Holdings reports return on equity of only 4%, albeit with no long-term debt.
It has reported a steady profit the last two quarters following a three-quarter ramp-up period that went from a big loss to a small loss to a small profit. All five quarters have surprised to the upside.
Institutions own 27% of shares and the price is running well above sales parity. It takes $2.19 in shares to control a dollar in sales.
VIPS on average trades 558,000 shares a day, sufficient to support a moderate selection of option strike prices, with open interest running to three and four figures. Front-month at-the-money calls have an 11.8% bid/ask spread, which is on the wide side.
Implied volatility is extremely high, at 81%. It has been fluctuating sideways since mid-June.
Options are pricing in confidence that 68.2% of trades will fall between $28.52 and $45.96 over the next month, for a potential gain or loss of 23.4%, and between $33.05 and $41.43 over the next week.
Options are trading near their five-day average, with a slight bias toward calls at 7% above average, vs. puts, at 12% below average.
The fair-price zone on Thursday's 30-minute chart runs from $36.36 to $37.48, encompassing 68.2% of transactions surrounding the most-traded price, $37.19. VIPS opened below the zone and in the next four hours rose to the most-traded price, where it fluctuated the rest of trading day.
VIPS next publishes earnings on Aug. 5. That indicates an error in my first-wave analysis, because it puts VIPS within my exclusion period for stocks announcing earnings within the next 30 days.
Yet, and yet, it is such a fascinating chart . . .
“He had the feeling that he must make a decision, and though he was used to making many decisions every day, this time he was beset with uncertainty . . .”
Decision for my account: The key to a decision on VIPS lies, I think, in the fact that the current price is so near the highest high, $38.46. A break above that level will suggest that my Elliott wave count is incorrect and that VIPS has the capacity to move to still higher highs.
With that in mind, I'll put off trading unless I see a break above $38.46 confirmed the next day by significant momentum above that level. That means I'll be looking for a break above that level on Friday and a confirmation on Monday, with a potential trade on Monday or Tuesday. If the confirmed breakout never occurs, then I'll drop VIPS from consideration until after earnings.
Fans of Turtle trading, upon which my trading rules are based: Note that $38.46 is the upper boundary of the 55-day price channel, one of two levels used to calculate breakouts in classic Turtle trading. (The other level is the more lentient 20-day channel that I use in my trading.)
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.
Friday's (Monday's) Prospects
I'm trading from East Asia for the next few weeks, and the time difference with New York adds a day to the interval between breakout and the placing of a trade. This has played hob with the titling of recurring posts, such as Prospects and No Trade. The hybrid titling in this post is my solution: I would trade on Friday if I were stateside, but my first trading opportunity while traveling will be on Monday.
On Thursday, July 18:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 88 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 83 to the upside and five to the downside.
Fifteen symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are MS, JPM, SRC, MTG and JCI.
Within my analytical universe, 4.5% of symbols gave bull or bear signals, up from 2.1% the prior trading day.
The ratio of bull to bear signals is 20:1, compared to 9:1 the prior trading day, an increase in the markets' bullish bias.
One of the major-exchange symbols survived my initial screening. It is UNF, to the upside.
None of the over-the-counter symbols survived my initial screening.
Twenty-nine symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. The top five by volume are MS, JPM, MTG, RDN and RBS.
I shall do further analysis of the surviving symbol on Friday, July 19 for a potential trade on Monday, July 22.
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...
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
On Thursday, July 18:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 88 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 83 to the upside and five to the downside.
Fifteen symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are MS, JPM, SRC, MTG and JCI.
Within my analytical universe, 4.5% of symbols gave bull or bear signals, up from 2.1% the prior trading day.
The ratio of bull to bear signals is 20:1, compared to 9:1 the prior trading day, an increase in the markets' bullish bias.
One of the major-exchange symbols survived my initial screening. It is UNF, to the upside.
None of the over-the-counter symbols survived my initial screening.
Twenty-nine symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. The top five by volume are MS, JPM, MTG, RDN and RBS.
I shall do further analysis of the surviving symbol on Friday, July 19 for a potential trade on Monday, July 22.
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.
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.
Wednesday, July 17, 2013
Thursday's (Friday's) Prospects
I'm trading from East Asia for the next few weeks, and the time difference with New York adds a day to the interval between breakout and the placing of a trade. This has played hob with the titling of recurring posts, such as Prospects and No Trade. The hybrid titling in this post is my solution: I would trade on Thursday if I were stateside, but my first trading opportunity while traveling will be on Friday.
On Wednesday, July 17:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 42 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 37 to the upside and five to the downside.
Six symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are DD, MAT, GGB, JBLU and HYG.
Within my analytical universe, 2.1% of symbols gave bull or bear signals, up from 1.3% the prior trading day.
The ratio of bull to bear signals is 8.6:1, compared to 8.7:1 the prior trading day, showing no significant change in the bullish bias.
One of the major-exchange symbols survived my initial screening. It is VIPS, to the upside.
Two of the over-the-counter symbols survived my initial screening, having broken out to the upside. They are GBOOY and MAKSY.
Eight 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 CBD, CLVS, INFN, PFG, PSB, SINA, SIRO and UAL.
I'll do further analysis of the surviving symbol on Thursday, July 18 for a potential trade on Friday, July 19.
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...
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
On Wednesday, July 17:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 42 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 37 to the upside and five to the downside.
Six symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are DD, MAT, GGB, JBLU and HYG.
Within my analytical universe, 2.1% of symbols gave bull or bear signals, up from 1.3% the prior trading day.
The ratio of bull to bear signals is 8.6:1, compared to 8.7:1 the prior trading day, showing no significant change in the bullish bias.
One of the major-exchange symbols survived my initial screening. It is VIPS, to the upside.
Two of the over-the-counter symbols survived my initial screening, having broken out to the upside. They are GBOOY and MAKSY.
Eight 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 CBD, CLVS, INFN, PFG, PSB, SINA, SIRO and UAL.
I'll do further analysis of the surviving symbol on Thursday, July 18 for a potential trade on Friday, July 19.
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.
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.
A modest change ...
I'm making two modest changes to my postings. Hitherto, I've linked symbols to their Google Finance page. I'm changing that to Yahoo! Finance. Better charts.
Also, I'm adding a link to the Wolfram Alpha curated data, accessible by clicking on the company name. It's a fairly rich data set with some interesting analysis that differs from what I use in my own analytical work. That extends our range of information, always a good thing.
Also, I'm adding a link to the Wolfram Alpha curated data, accessible by clicking on the company name. It's a fairly rich data set with some interesting analysis that differs from what I use in my own analytical work. That extends our range of information, always a good thing.
Wednesday (Thursday): No trade
I'm trading from East Asia for the next few weeks, and the time difference with New York adds a day to the interval between breakout and the placing of a trade. This has played hob with the titling of recurring posts, such as Prospects and No Trade. The hybrid titling in this post is my solution: I would have traded on Wednesday if I were stateside, but my first trading opportunity while traveling will be on Thursday.
The one symbol to survive my first round of analysis after Tuesday's session, Telstra Corp. (TLSYY), has failed confirmation. True, it traded for several hours on Wednesday above the breakout level, but in the end it closed at the level rather than displaying further upside momentum.
Also, TLSYY is an American depository receipt for a foreign company (Australia, in this case) and suffers from the failing of many such symbols: The normal distributions of financial information don't function in their case. That leaves me without such key figures as return on equity and debt/equity ratio from my usual sources.
True, with some further research, I could no doubt track down and calculate those values. But I rarely have a trade where that's worth the effort. I'm not like Warren Buffett. I'm not seeking a long-term relationship with the stocks I trade. I'm looking, really, for simply a brief fling, without a lot of commitment.
So, for those reasons, I won't be doing further analysis on TLSYY with an eye on a future 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
The one symbol to survive my first round of analysis after Tuesday's session, Telstra Corp. (TLSYY), has failed confirmation. True, it traded for several hours on Wednesday above the breakout level, but in the end it closed at the level rather than displaying further upside momentum.
Also, TLSYY is an American depository receipt for a foreign company (Australia, in this case) and suffers from the failing of many such symbols: The normal distributions of financial information don't function in their case. That leaves me without such key figures as return on equity and debt/equity ratio from my usual sources.
True, with some further research, I could no doubt track down and calculate those values. But I rarely have a trade where that's worth the effort. I'm not like Warren Buffett. I'm not seeking a long-term relationship with the stocks I trade. I'm looking, really, for simply a brief fling, without a lot of commitment.
So, for those reasons, I won't be doing further analysis on TLSYY with an eye on a future 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.
Tuesday, July 16, 2013
Wednesday's (Thursday's) Prospects
I'm trading from East Asia for the next few weeks, and the time difference with New York adds a day to the interval between breakout and the placing of a trade. This has played hob with the titling of recurring posts, such as Prospects and No Trade. The hybrid titling in this post is my solution: I would trade on Wednesday if I were stateside, but my first trading opportunity while traveling will be on Thursday.
On Tuesday, July 16:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 22 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 20 to the upside and two to the downside.
Seven symbols that are traded over the counter broke out, six to the upside and one to the downside.
The five highest-volume symbols to break out are WWAV, NGD, SWKS, CLX and PAAS.
Within my analytical universe, 1.3% of symbols gave bull or bear signals, down from 2.7% the prior trading day.
The ratio of bull to bear signals is 9:1, compared to 61:1 the prior trading day, a weakening of the bullish bias. It's the lowest bullish bias and first single-digit ratio since June 3, when the bias was 3:1.
None of the major-exchange symbols survived my initial screening
One of the over-the-counter symbols, the upside breakout TLSYY, survived my initial screening.
Three 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 NGD, PAAS and SI.
I'll do further analysis of the surviving symbol on Wednesday, July 17 for a potential trade on Thursday, July 18.
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...
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
On Tuesday, July 16:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 22 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 20 to the upside and two to the downside.
Seven symbols that are traded over the counter broke out, six to the upside and one to the downside.
The five highest-volume symbols to break out are WWAV, NGD, SWKS, CLX and PAAS.
Within my analytical universe, 1.3% of symbols gave bull or bear signals, down from 2.7% the prior trading day.
The ratio of bull to bear signals is 9:1, compared to 61:1 the prior trading day, a weakening of the bullish bias. It's the lowest bullish bias and first single-digit ratio since June 3, when the bias was 3:1.
None of the major-exchange symbols survived my initial screening
One of the over-the-counter symbols, the upside breakout TLSYY, survived my initial screening.
Three 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 NGD, PAAS and SI.
I'll do further analysis of the surviving symbol on Wednesday, July 17 for a potential trade on Thursday, July 18.
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.
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.
Tuesday (Wednesday): No trade
I'm trading from East Asia for the next few weeks, and the time difference with New York adds a day to the interval between breakout and the placing of a trade. This has played hob with the titling of recurring posts, such as Prospects and No Trade. The hybrid titling in this post is my solution: I would have traded on Tuesday if I were stateside, but my first trading opportunity while traveling will be on Wednesday.
Two symbols, high liquidity TIF and low liquidity ISCA, survived initial screening to become final contenders for a trade. (See "Tuesday's Prospects" for details.) In the end, both failed upon a closer look at their charts.
TIF confirmed its bull signal by trading and closing above its breakout level, but it did so while managing a 2.4% intra-day decline. Quite a trick, when you think about it. Anyhow, I'm not about to play into that sort of near-term downside momentum, even on a chart that is in an uptrend. I'll keep an eye on TIF to see if there's a glitter of upside momentum to help me change my mind.
ISCA is tracking the S&P 500 fairly closely. It hit a swing high on May 28 (May 22 for the S&P 500), declined to a lower low on June 25 (June 24 for the S&P 500), and then resumed its rise. Neither the stock nor the index has yet moved up to a higher high, so that lower low on the daily chart puts both in a downtrend.
(I'm trading from East Asia and the time difference has added a day to my analytical cycle. Were I stateside, the trading decisions on these symbols would have been made during Tuesday's market session rather than prior to Wednesday's.)
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
Two symbols, high liquidity TIF and low liquidity ISCA, survived initial screening to become final contenders for a trade. (See "Tuesday's Prospects" for details.) In the end, both failed upon a closer look at their charts.
TIF confirmed its bull signal by trading and closing above its breakout level, but it did so while managing a 2.4% intra-day decline. Quite a trick, when you think about it. Anyhow, I'm not about to play into that sort of near-term downside momentum, even on a chart that is in an uptrend. I'll keep an eye on TIF to see if there's a glitter of upside momentum to help me change my mind.
ISCA is tracking the S&P 500 fairly closely. It hit a swing high on May 28 (May 22 for the S&P 500), declined to a lower low on June 25 (June 24 for the S&P 500), and then resumed its rise. Neither the stock nor the index has yet moved up to a higher high, so that lower low on the daily chart puts both in a downtrend.
(I'm trading from East Asia and the time difference has added a day to my analytical cycle. Were I stateside, the trading decisions on these symbols would have been made during Tuesday's market session rather than prior to Wednesday's.)
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.
SEP closed
SEP gave an exit signal during trading today. I've closed my position for a profit and updated my initial entry posting with details.
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
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, July 15, 2013
CONN: Bullish on durables for the home
Update 8/19/2013: CONN slipped below its 10-day price channel today, signalling that my bull position must be closed.
The position was structured as long shares and yielded 7.5% over 34 days, for an annualized yield of 80.8%.
Conn's Inc. (CONN) broke above its 20-day price channel on Friday and confirmed the bull signal by trading still higher on Monday, to an all-time high of $59.27.
CONN has been in an uptrend from $3.12 since November 2010 and has been rising continually, from $14.40, with no correction lasting more than three weeks since June 2012.
That's an attractive package of momentum buttressed by robust historical odds of earning a profit. Since June 2012 CONN as completed three bull signals, all of them profitable, with an average yield of 32% over 58 days.
CONN is also attractive to the school of traders that believes the markets are throwing one last party before the Federal Reserve takes away the punch bowl and slows its support of low interest rates.
That belief gained credence when the S&P 500 experienced a break to the downside from May 22 to June 24 in an outsize reaction to remarks by Fed Chairman Bernanke. CONN, however, has only a 0.18 correllation with the S&P 500, where -1 is perfectly uncoordinated and 1 is perfectly coordinated. (Zero on the chart is a random walk.)
The chart, certainly, shows that CONN had found a secret stash of Jack Daniels to keep the party going while the blue chips were staring sadly at an empty punch bowl.
Using Elliott wave analysis, I can count CONN as being in a fifth-wave up since March. However, the count is uncertain, as is often the case with lower-volume stocks, and even if it is a fifth wave, the scale gives room for profit in the coming weeks and months. However, the count cautions me as a trader to be ruthless in exiting if the chart turns against me.
CONN was one of three symbols from Friday that survived initial analysis. CPRT has clearly moved into a downtrend on the weekly chart, and HRL appears to be heading that way, although it has yet to set a lower low to confirm it. Both CPRT and HRT had lower winning yields than CONN's.
Conn's, headquartered in Beaumont, Texas sells big-ticket durable items for the home, such as dining room sets, refrigerators, mattresses and lawn tractors, through a chain of stores in Texas, Louisiana, New Mexico and Oklahoma.
Analysts are bullish on its prospects, in aggregate giving it a 67% enthusiasm rating.
The company reports a respectable return on equity of 15%, with long-term debt running at 58% of equity.
Earnings have been rising steadily since the 4th quarter of 2012 after six quarters of helter-skelter reports.
Institutions own 75% of shares, and the price has been bid up to the point where it takes $2.26 in shares to control a dollar in sales.
CONN on average trades 379,000 shares a day, sufficient to support a moderate selection of options strike prices with open interest in the double digits, except for the front month's first out-of-the-money calls, which have four-figure open interest, suggesting to me that traders are seeking bullish leverage rather than hedging their bets through spreads.
The front-month at-the-money call spreads have a 6.8% bid/ask spread.
If I trade CONN, it will be as shares. I don't trade unhedged options, and the open-interest pattern won't allow me to construct a spread that will meet my standards.
Fortunately for shares traders, CONN has relatively high implied volatility of 38%, compared to 14% for the S&P 500. That suggests that CONN has the basic ability to make money even without leverage.
Options are pricing in confidence that 68.2% of trades will fall between $52.00 and $64.70 over the next month, for a potential gain or loss of 10.9%, and between $55.30 and $61.40 over the next week.
In Monday's trading both calls and puts were running well above their five-day average volume, 9.5 times average for calls and 8 times average for puts. These are not levels that I've seen often.
The fair-price zone of Monday's 30-minute chart ran from $57.86 to $59.24, encompassing 68.2% of transactions surrounding the most-traded price, $58.76. CONN began below the zone, rose to its ceiling, and ended the day below the most-traded price.
Conn's next publishes earnings on Sept. 2.
Decision for my account: I intend to open a bull position in CONN on Tuesday, structuring it as long shares, unless its chart changes dramatically. I'll post an update should such a change 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
The position was structured as long shares and yielded 7.5% over 34 days, for an annualized yield of 80.8%.
Conn's Inc. (CONN) broke above its 20-day price channel on Friday and confirmed the bull signal by trading still higher on Monday, to an all-time high of $59.27.
CONN has been in an uptrend from $3.12 since November 2010 and has been rising continually, from $14.40, with no correction lasting more than three weeks since June 2012.
 |
| CONN 90 days 2-hour bars |
That's an attractive package of momentum buttressed by robust historical odds of earning a profit. Since June 2012 CONN as completed three bull signals, all of them profitable, with an average yield of 32% over 58 days.
CONN is also attractive to the school of traders that believes the markets are throwing one last party before the Federal Reserve takes away the punch bowl and slows its support of low interest rates.
That belief gained credence when the S&P 500 experienced a break to the downside from May 22 to June 24 in an outsize reaction to remarks by Fed Chairman Bernanke. CONN, however, has only a 0.18 correllation with the S&P 500, where -1 is perfectly uncoordinated and 1 is perfectly coordinated. (Zero on the chart is a random walk.)
The chart, certainly, shows that CONN had found a secret stash of Jack Daniels to keep the party going while the blue chips were staring sadly at an empty punch bowl.
Using Elliott wave analysis, I can count CONN as being in a fifth-wave up since March. However, the count is uncertain, as is often the case with lower-volume stocks, and even if it is a fifth wave, the scale gives room for profit in the coming weeks and months. However, the count cautions me as a trader to be ruthless in exiting if the chart turns against me.
CONN was one of three symbols from Friday that survived initial analysis. CPRT has clearly moved into a downtrend on the weekly chart, and HRL appears to be heading that way, although it has yet to set a lower low to confirm it. Both CPRT and HRT had lower winning yields than CONN's.
Conn's, headquartered in Beaumont, Texas sells big-ticket durable items for the home, such as dining room sets, refrigerators, mattresses and lawn tractors, through a chain of stores in Texas, Louisiana, New Mexico and Oklahoma.
Analysts are bullish on its prospects, in aggregate giving it a 67% enthusiasm rating.
The company reports a respectable return on equity of 15%, with long-term debt running at 58% of equity.
Earnings have been rising steadily since the 4th quarter of 2012 after six quarters of helter-skelter reports.
Institutions own 75% of shares, and the price has been bid up to the point where it takes $2.26 in shares to control a dollar in sales.
CONN on average trades 379,000 shares a day, sufficient to support a moderate selection of options strike prices with open interest in the double digits, except for the front month's first out-of-the-money calls, which have four-figure open interest, suggesting to me that traders are seeking bullish leverage rather than hedging their bets through spreads.
The front-month at-the-money call spreads have a 6.8% bid/ask spread.
If I trade CONN, it will be as shares. I don't trade unhedged options, and the open-interest pattern won't allow me to construct a spread that will meet my standards.
Fortunately for shares traders, CONN has relatively high implied volatility of 38%, compared to 14% for the S&P 500. That suggests that CONN has the basic ability to make money even without leverage.
Options are pricing in confidence that 68.2% of trades will fall between $52.00 and $64.70 over the next month, for a potential gain or loss of 10.9%, and between $55.30 and $61.40 over the next week.
In Monday's trading both calls and puts were running well above their five-day average volume, 9.5 times average for calls and 8 times average for puts. These are not levels that I've seen often.
The fair-price zone of Monday's 30-minute chart ran from $57.86 to $59.24, encompassing 68.2% of transactions surrounding the most-traded price, $58.76. CONN began below the zone, rose to its ceiling, and ended the day below the most-traded price.
Conn's next publishes earnings on Sept. 2.
Decision for my account: I intend to open a bull position in CONN on Tuesday, structuring it as long shares, unless its chart changes dramatically. I'll post an update should such a change 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.
Tuesday's Prospects
On Monday, July 15:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 57 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 56 to the upside and one to the downside.
Five symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are NTAP, NIHD, BK, BIDU and ACAD.
Within my analytical universe, 2.7% of symbols gave bull or bear signals, down from 3.3% the prior trading day.
The ratio of bull to bear signals is 61:1, compared to 75:1 the prior trading day, a weakening of the bullish bias.
Two of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are ISCA and TIF.
None of the over-the-counter symbols survived my initial screening.
Twenty-three symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. The five top-volume symbols are NIHD, ACAD, EXC, FLEX and ERIC.
I'll do further analysis of the surviving symbols on Tuesday, July 16.
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...
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
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 57 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 56 to the upside and one to the downside.
Five symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are NTAP, NIHD, BK, BIDU and ACAD.
Within my analytical universe, 2.7% of symbols gave bull or bear signals, down from 3.3% the prior trading day.
The ratio of bull to bear signals is 61:1, compared to 75:1 the prior trading day, a weakening of the bullish bias.
Two of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are ISCA and TIF.
None of the over-the-counter symbols survived my initial screening.
Twenty-three symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. The five top-volume symbols are NIHD, ACAD, EXC, FLEX and ERIC.
I'll do further analysis of the surviving symbols on Tuesday, July 16.
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.
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.
Sunday, July 14, 2013
GIS: Processed foods bull signal
Update 8/15/2013: GIS gave an exit signal today. The shares had been awaiting a breakout so I could roll into a new bull position. The exit signal eliminates the possibility of a roll and triggers a calculation of the results.
I only held one position in GIS -- there were no rolls. The options were closed on Aug. 6 at small cost near their expiration.
The shares gained 2% during the 22 day life of the position. The options produced a 9.7% yield on risk.
Update 7/15/2013; I've opened a position as described below in the "Decision" section. The leverage is 2.6x, with a potential maximum yield of 11.5% and a 2.7% cushion of profitability at expiration.
General Mills Inc. (GIS) broke above the 20-day price channel on Thursday, and the bull signal was confirmed on Friday by continued trading above the breakout level, with the high for the day reaching an all-time high of $51.40.
The stock's most-recent leg up began in June last year from $36.75, a move that has produced four completed bull signals. Three were successful for an average yield of 6.3% over 45 days, compared to a 2% loss over 15 days for the unsuccessful trade.
The glass-half-full crowd will marvel at the strength of the trend that continues to propel GIS to new heights. The glass-half-empty folk among us will fret that the stock has gone too far too fast and will use each new breakout as proof of the folly of trend chasing.
On the 2-year weekly chart, the upward move since last year can be counted using Elliott wave analysis as four waves with a fifth wave underway, suggesting a completion of the long upward move.
Elliott analysis, of course, can never speak authoritatively of when moves will happen, only what direction they are likely to be. So even a fifth wave completion can provide room for profit.
GIS was among 12 symbols that survived initial screening Thursday night. Three symbols failed confirmation on Friday. I limited my consideration of the others to symbols having sufficient liquidity for me to trade as options, leaving CIEN, SOS and GIS under consideration.
SOS is an 'ultra' exchange-traded fund, meaning it fund is leveraged, and options would produce further leverage. I don't trade such situations -- its more risk than I want to take on -- and so I removed SOS from the list.
GIS had better historical odds of success, and also a better chart of the glass-half-full variety. The CIEN chart shows a rise within a bull pattern. GIS also has far better financials than CIEN.
General Mills, headquartered in Minneapolis, Minnesota, is of course a household name in cereals, such as the iconic Cheerios and Wheaties, and also in other areas, such as Betty Crocker for baked-goods mikes and Green Giant for canned veggies.
The company has a wide following of analysts who, collectively, come down with a 40% enthusiasm rating, on the high side as these things go.
No doubt one factor fueling their enthusiasm is General Mills' return on equity of 25%, tempered by debt amounting to 83% of equity.
The companies earnings tend to peak in the last quarter of the year -- the company's second quarter -- and earnings in that period have risen consistently compared to its year-ago counterpart. Earnings have surprised to the upside eight times in the last 12 quarters, and to the downside four times.
Institutions own 67% of shares, and the price has risen above sales parity; it takes $1.84 in shares to control a dollar in sales.
GIS on averages trades 3.2 million shares a day, sufficient to support a good selection of option strikes prices with open interest running mainly to three figures. The bid/ask spread on front-month at-the-money calls is quite narrow at 1.3%.
Implied volatility is running at 16% and has taken an uptick the past two trading days after declining since mid-June.
Options are pricing in confidence that 68.2% of trades will fall between $48.70 and $53.48 over the next month, for a potential gain or loss of 4.7%, and between $49.94 and $52.24 over the next week.
In Friday's trading, options were tilted slightly to the call side, with call volume running 44% above the five-day average with put options running 30% above average.
General Mills next publishes earnings on Sept. 16. The stock goes ex-dividend in October for a quarterly payout yielding 2.98% annualized at today's prices.
Decision for my account: This trade meets my criteria for opening a bull position, although I've not yet done so. I'll look at it during Monday's session and if continues are unchanged, I'll make the trade and post notice here.
Using the information at Friday's close, I would structure the position as a short vertical options spread, short the $50 puts and long the $48 puts. The position provides a 2.9% cushion of profitability below the entry price.
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
I only held one position in GIS -- there were no rolls. The options were closed on Aug. 6 at small cost near their expiration.
The shares gained 2% during the 22 day life of the position. The options produced a 9.7% yield on risk.
Update 7/15/2013; I've opened a position as described below in the "Decision" section. The leverage is 2.6x, with a potential maximum yield of 11.5% and a 2.7% cushion of profitability at expiration.
General Mills Inc. (GIS) broke above the 20-day price channel on Thursday, and the bull signal was confirmed on Friday by continued trading above the breakout level, with the high for the day reaching an all-time high of $51.40.
The stock's most-recent leg up began in June last year from $36.75, a move that has produced four completed bull signals. Three were successful for an average yield of 6.3% over 45 days, compared to a 2% loss over 15 days for the unsuccessful trade.
 |
| GIS 2-year weekly |
On the 2-year weekly chart, the upward move since last year can be counted using Elliott wave analysis as four waves with a fifth wave underway, suggesting a completion of the long upward move.
Elliott analysis, of course, can never speak authoritatively of when moves will happen, only what direction they are likely to be. So even a fifth wave completion can provide room for profit.
GIS was among 12 symbols that survived initial screening Thursday night. Three symbols failed confirmation on Friday. I limited my consideration of the others to symbols having sufficient liquidity for me to trade as options, leaving CIEN, SOS and GIS under consideration.
SOS is an 'ultra' exchange-traded fund, meaning it fund is leveraged, and options would produce further leverage. I don't trade such situations -- its more risk than I want to take on -- and so I removed SOS from the list.
GIS had better historical odds of success, and also a better chart of the glass-half-full variety. The CIEN chart shows a rise within a bull pattern. GIS also has far better financials than CIEN.
General Mills, headquartered in Minneapolis, Minnesota, is of course a household name in cereals, such as the iconic Cheerios and Wheaties, and also in other areas, such as Betty Crocker for baked-goods mikes and Green Giant for canned veggies.
The company has a wide following of analysts who, collectively, come down with a 40% enthusiasm rating, on the high side as these things go.
No doubt one factor fueling their enthusiasm is General Mills' return on equity of 25%, tempered by debt amounting to 83% of equity.
The companies earnings tend to peak in the last quarter of the year -- the company's second quarter -- and earnings in that period have risen consistently compared to its year-ago counterpart. Earnings have surprised to the upside eight times in the last 12 quarters, and to the downside four times.
Institutions own 67% of shares, and the price has risen above sales parity; it takes $1.84 in shares to control a dollar in sales.
GIS on averages trades 3.2 million shares a day, sufficient to support a good selection of option strikes prices with open interest running mainly to three figures. The bid/ask spread on front-month at-the-money calls is quite narrow at 1.3%.
Implied volatility is running at 16% and has taken an uptick the past two trading days after declining since mid-June.
Options are pricing in confidence that 68.2% of trades will fall between $48.70 and $53.48 over the next month, for a potential gain or loss of 4.7%, and between $49.94 and $52.24 over the next week.
In Friday's trading, options were tilted slightly to the call side, with call volume running 44% above the five-day average with put options running 30% above average.
General Mills next publishes earnings on Sept. 16. The stock goes ex-dividend in October for a quarterly payout yielding 2.98% annualized at today's prices.
Decision for my account: This trade meets my criteria for opening a bull position, although I've not yet done so. I'll look at it during Monday's session and if continues are unchanged, I'll make the trade and post notice here.
Using the information at Friday's close, I would structure the position as a short vertical options spread, short the $50 puts and long the $48 puts. The position provides a 2.9% cushion of profitability below the entry price.
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 12:
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 71 that are traded on the major American stock exchanges broke beyond their 20-day price channels, all to the upside.
Five symbols that are traded over the counter broke out, four to the upside and one to the downside.
The five highest-volume symbols to break out are BAC, C, YHOO, AIG and XLE.
Within my analytical universe, 3% of symbols gave bull or bear signals, down from 12% the prior trading day.
The ratio of bull to bear signals is 75:1, compared to 134:1 the prior trading day, a weakening of the bullish bias.
Three of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are CONN, CRPT and HRL.
None of the over-the-counter symbols survived my initial screening.
Twenty-eight symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. The five top-volume symbols are C, YHOO, AIG, FSLR and ABBV.
I'll do further analysis of the surviving symbols on Monday, July 15.
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...
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
Of 2,317 stocks and exchange-traded funds in this week's analytical universe, 71 that are traded on the major American stock exchanges broke beyond their 20-day price channels, all to the upside.
Five symbols that are traded over the counter broke out, four to the upside and one to the downside.
The five highest-volume symbols to break out are BAC, C, YHOO, AIG and XLE.
Within my analytical universe, 3% of symbols gave bull or bear signals, down from 12% the prior trading day.
The ratio of bull to bear signals is 75:1, compared to 134:1 the prior trading day, a weakening of the bullish bias.
Three of the major-exchange symbols survived my initial screening, all having broken out to the upside. They are CONN, CRPT and HRL.
None of the over-the-counter symbols survived my initial screening.
Twenty-eight symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. The five top-volume symbols are C, YHOO, AIG, FSLR and ABBV.
I'll do further analysis of the surviving symbols on Monday, July 15.
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.
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.
Saturday, July 13, 2013
The Week Ahead: Prices, housing and the Fed
Consumer prices and housing starts headline the week's economic reporting. They both factor into decisions on the agenda of the Federal Reserve and its chairman, Ben Bernanke, who makes his semi-annual pilgrimage this week to testify before committees of each house of Congress, concurrent with the release with the Fed Beige Book describing economic conditions in each of its regions.
Consumer prices will be published on Tuesday at 8:30 a.m. New York time. This is the measure of inflation or deflation. Inflation: Feds decelerate stimulus. Deflation: Feds accelerate stimulus. Monetary policy is so easy.
The sector that, it is said, leads economic recoveries is housing, and a key measure of the sector, housing starts, will be released at 8:30 a.m. on Wednesday. A housing start today means construction jobs and ultimately a bump up in sales of beds, sheets, towels and refrigerators.
Bernanke testifies first on Wednesday at 10 a.m. before the House Financial Services Committee. The Beige Book will be released at 2 p.m. the same day. His second round of testimony and questioning comes Thursday at 10:30 a.m. before the Senate Committee on Banking, Housing and Urban Affairs.
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.
Building permits for new private homes from housing starts, at 8:30 a.m. Wednesday.
The index of leading indicators at 10 a.m. Thursday. While it is itself a trailing indicator, the index aggregates the leading indicators and so gives a convenient one-number way to track them.
Other reports of interest:
Monday: Retail sales and the Fed's Empire State Manufacturing Survey tracking conditions in New York, both at 8:30 a.m., and business inventories at 10 a.m.
Tuesday: Treasury's report on international capital flows at 9 a.m., industrial production at 9:15 a.m. and the Home Builders' housing market index at 10 a.m.
Wednesday: Petroleum inventories at 10:30 a.m.
Thursday: The Philadelphia Fed survey of conditions in the mid-Atlantic region at 10 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
Besides Bernanke, another Federal Open Market Committee member, Kansas City Fed Pres. Esther George will make a public appearance, on Tuesday.
Analytical universe
This week I'll be analyzing new bull and bear signals among 2,317 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
I am 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!
Consumer prices will be published on Tuesday at 8:30 a.m. New York time. This is the measure of inflation or deflation. Inflation: Feds decelerate stimulus. Deflation: Feds accelerate stimulus. Monetary policy is so easy.
The sector that, it is said, leads economic recoveries is housing, and a key measure of the sector, housing starts, will be released at 8:30 a.m. on Wednesday. A housing start today means construction jobs and ultimately a bump up in sales of beds, sheets, towels and refrigerators.
Bernanke testifies first on Wednesday at 10 a.m. before the House Financial Services Committee. The Beige Book will be released at 2 p.m. the same day. His second round of testimony and questioning comes Thursday at 10:30 a.m. before the Senate Committee on Banking, Housing and Urban Affairs.
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.
Building permits for new private homes from housing starts, at 8:30 a.m. Wednesday.
The index of leading indicators at 10 a.m. Thursday. While it is itself a trailing indicator, the index aggregates the leading indicators and so gives a convenient one-number way to track them.
Other reports of interest:
Monday: Retail sales and the Fed's Empire State Manufacturing Survey tracking conditions in New York, both at 8:30 a.m., and business inventories at 10 a.m.
Tuesday: Treasury's report on international capital flows at 9 a.m., industrial production at 9:15 a.m. and the Home Builders' housing market index at 10 a.m.
Wednesday: Petroleum inventories at 10:30 a.m.
Thursday: The Philadelphia Fed survey of conditions in the mid-Atlantic region at 10 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
Besides Bernanke, another Federal Open Market Committee member, Kansas City Fed Pres. Esther George will make a public appearance, on Tuesday.
Analytical universe
This week I'll be analyzing new bull and bear signals among 2,317 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
I am 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!
Friday, July 12, 2013
A most unusual day
Regular readers will know that I was unable to trade or analyze on Friday because of a flight to East Asia. As it turns out, Thursday -- the day that produced potential trades for Friday under my procedures -- was a most unusual day. Here's the write-up for the record, published a day late. Had it been published on the normal schedule, it would be titled "Friday's Prospects".
On Thursday, July 11:
Of 2,302 stocks and exchange-traded funds in this week's analytical universe, 236 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 234 to the upside and two to the downside.
Thirty-three symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are SPY, QQQ, CX, XLI and VOD.
Within my analytical universe, 11.7% of symbols gave bull or bear signals, up from 3.4% the prior trading day and the highest since I began this form of analysis in early May. The closest approach was 11.3% on June 20.
The ratio of bull to bear signals is 134:1, compared to 10:1 the prior trading day, also in my experience a high in either direction.
Twelve of the major-exchange symbols survived my initial screening, 11 having broken out to the upside and on to the downside. The upside signals are on AZPN, CIEN, CPB, EDZ, GIS, KEP, OXM, PLL, SSO, VNQ, VTI and WPPGY, and the downside signal is on EDZ, a short exchange-traded fund tracking emerging markets.
The highest-volume symbol on the U.S. exchanges, the fund SPY, which tracks the S&P 500, failed to survive screening after breakout because of lower than acceptable historical returns, a condition that isn't unusual for highly diverse funds.
None of the over-the-counter symbols survived my initial screening.
Fifty-four symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. I won't list them all. The five top-volume symbols in the list are DIS, CELG, AEP, BKD and HCN.
Earnings season began July 8 and will continue at a high pace for several weeks to come.
In the normal course of things, I would have done further analysis of the survivors on Friday, July 12, but I was cooped up in a trans-Pacific airliner and so missed all the fun. I'll put at least some of them into the mix when I analyze Friday's breakouts to find prospects for Monday.
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...
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
On Thursday, July 11:
Of 2,302 stocks and exchange-traded funds in this week's analytical universe, 236 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 234 to the upside and two to the downside.
Thirty-three symbols that are traded over the counter broke out, all to the upside.
The five highest-volume symbols to break out are SPY, QQQ, CX, XLI and VOD.
Within my analytical universe, 11.7% of symbols gave bull or bear signals, up from 3.4% the prior trading day and the highest since I began this form of analysis in early May. The closest approach was 11.3% on June 20.
The ratio of bull to bear signals is 134:1, compared to 10:1 the prior trading day, also in my experience a high in either direction.
Twelve of the major-exchange symbols survived my initial screening, 11 having broken out to the upside and on to the downside. The upside signals are on AZPN, CIEN, CPB, EDZ, GIS, KEP, OXM, PLL, SSO, VNQ, VTI and WPPGY, and the downside signal is on EDZ, a short exchange-traded fund tracking emerging markets.
The highest-volume symbol on the U.S. exchanges, the fund SPY, which tracks the S&P 500, failed to survive screening after breakout because of lower than acceptable historical returns, a condition that isn't unusual for highly diverse funds.
None of the over-the-counter symbols survived my initial screening.
Fifty-four symbols that survived the odds and yield analysis were excluded from consideration because they will publish earnings within 30 days of the breakout. I won't list them all. The five top-volume symbols in the list are DIS, CELG, AEP, BKD and HCN.
Earnings season began July 8 and will continue at a high pace for several weeks to come.
In the normal course of things, I would have done further analysis of the survivors on Friday, July 12, but I was cooped up in a trans-Pacific airliner and so missed all the fun. I'll put at least some of them into the mix when I analyze Friday's breakouts to find prospects for Monday.
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.
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.
Wednesday, July 10, 2013
Posting Schedule
Beginning Thursday, July 11, 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.
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.
Thursday's Prospects
On Wednesday, July 10:
Of 2,302 stocks and exchange-traded funds in this week's analytical universe, 75 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 69 to the upside and six to the downside.
Three symbols that are traded over the counter broke out, two to the upside and one to the downside.
The five highest-volume symbols to break out are HPQ, MCP, GM, MO and FDO.
Within my analytical universe, 3% of symbols gave bull or bear signals, down from 7% the prior trading day.
The ratio of bull to bear signals is 10:1, compared to 16:1 the prior trading day, a weakening of the bullish bias.
Four of the major-exchange symbols survived my initial screening, three having broken out to the upside and one to the downside. The upside signals are on AG, SAFM and WOR, and the downside signal is on QID, an ultra short exchange-traded fund tracking the NASDAQ 100.
None of the over-the-counter symbols survived my initial screening.
Sixteen 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 AEE, ALR, ANGI, BEAV, CZR, GM, ING, MDAS, MDRX, OI, PDLI, PEB, RHHBY, SYNT, TPX and WR.
I'll do further analysis of the surviving symbols on Thursday, July 11.
I'll be flying to Asia on Thursday, July 11, and won't be doing any follow-up analysis on that day. I'll keep the prospects for Thursday in mind when I resume analysis, on Friday, July 12, or more likely over the weekend.
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...
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
Of 2,302 stocks and exchange-traded funds in this week's analytical universe, 75 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 69 to the upside and six to the downside.
Three symbols that are traded over the counter broke out, two to the upside and one to the downside.
The five highest-volume symbols to break out are HPQ, MCP, GM, MO and FDO.
Within my analytical universe, 3% of symbols gave bull or bear signals, down from 7% the prior trading day.
The ratio of bull to bear signals is 10:1, compared to 16:1 the prior trading day, a weakening of the bullish bias.
Four of the major-exchange symbols survived my initial screening, three having broken out to the upside and one to the downside. The upside signals are on AG, SAFM and WOR, and the downside signal is on QID, an ultra short exchange-traded fund tracking the NASDAQ 100.
None of the over-the-counter symbols survived my initial screening.
Sixteen 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 AEE, ALR, ANGI, BEAV, CZR, GM, ING, MDAS, MDRX, OI, PDLI, PEB, RHHBY, SYNT, TPX and WR.
I'll be flying to Asia on Thursday, July 11, and won't be doing any follow-up analysis on that day. I'll keep the prospects for Thursday in mind when I resume analysis, on Friday, July 12, or more likely over the weekend.
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.
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.
JCP, MPEL closed
I closed two positions today with heavy losses and have updated my entry postings with details.
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
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.
Subscribe to:
Posts (Atom)