Finally a financial breakout?

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We’ve been waiting for a financial breakout now for a while — we were too early in the game.  Finance isn’t like tech — it often needs more basing, more time.    Are we seeing a rotation out of hot tech into old stodgy stocks (like the BA CMI we’ve been talking about?)  Maybe.  Let’s see how weekly closes on Friday but this sure does look like it is the one.

BRK.B we talked about in our last post — a beauty we found in MarketSmith Near Pivot scan 

Full breakout mode here — old man stocks taking the baton from hot tech?  Very well could be.  Note lack of FB buyers on 160 — a major support —  and AAPL failing 20sma again a second time as  tells for big tech appetite waning.

 

XLF weekly — finally getting going.

Like this BAC potential swing with entry here at 31, stop on 30 break.

For tells — QQQ at 181 is a great one — if buyers don’t show up this could mean a longer rotation into Dow type and finance vs social media/old tech.  Stay sharp!

 

 

The 3 second slide show

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In our job there’s one thing that never stops and that’s the hunt for new ideas.  Over the years we’ve honed our mental recognition skills and now only need around 3 seconds to discern between a chart we instantly have potential interest in and a chart that is an instant pass.

What we like to do at least 3-4x a week is to go through MarketSmith’s G250 pattern recognition stocks, in slide mode, timer on 3 seconds.  As soon as a name interests us we write it down without pausing slide.  Once we’ve gone through the scan (also use this for our favorite Near Pivot) we take a closer look at the names we have jotted down and do another cleanse.

Here are a few ideas for your lists:

NVDA was on our newsletter last night for trend-line break and doing well today.   We liked how it held the 20sma and then set up a trend-line break.

 

LULU high level base here — add this to your watch-list for a move to 160 hopefully soon or even better if she pulls back to that green line (20sma)

BRK.B fantastic longer term base here that breaks out over 217

 

BA we like this pattern — all these notes on chart are done via MarketSmith automatically.  Over 364.5 gets interesting.

 

PGR just adding to show what a nice quick trade that pullback to ascending 20sma would have been — we didn’t see this on time last week to have participated.

 

IDXX nice hold on the 50sma — looking for a move back to highs.

 

And MSCI which we talked about in our stream last night — what an incredible trend.  Why haven’t we been long this stock?  As Howard Lindzon says, “it’s all about data”.  We missed the latest entry on the pullback to the 20sma. We won’t miss the next one.

 

 

See you on the streams.  HCPG

 

 

 

 

 

 

 

 

 

IBD 50 non-extended ideas

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Market at highs trending on upper Bollinger Bands mean that trends are strong but new entries are tough to find.  If you are riding a swing, fantastic, be patient.  If you are looking for a new entry and don’t want to chase up — well, that’s more difficult.   We looked through IBD50 scan in MarketSmith for new ideas and this is what we came up with:

Most stocks in the IBD 50 look fantastic, but they all look like continuation moves on high trends, not set-ups for new bases.  But we did find some potential candidates.   Let’s review:

At #13 we have KEM (Kemet- Electronic Parts) with a decent base at 27.  Under the 50sma right now so not much interest until it gets near 27 for potential breakout.

 

BZUN at IBD #38 (Baozun Inc – Computer Sftwr-Enterprise) in one of the hottest sectors of the year  up 47% YTD.  BZUN earnings in August disappointed but stock found support on the 200sma.  However, last week the descending 50sma acted as resistance — if it can get over and into the 58 range we’d get interested long.  No interest in buying weakness on this stock.

MA (Mastercard, #36) is one of our current swings we talked about in our previous post, long on the 206 breakout.  Great example of most of the stocks we are seeing right now:  gorgeous trend, but no entry right here without chasing.   However if you are already long like we are, well, then just trail stops and sit.

 

Financials are starting to look interesting and we have our eye on SIVB (#27 in IBD 50 list).   As you can see in the MarketSmith pattern recognition — we have a flat base here which breaks out near 334.

 

We traded NFLX last week (#14 on IBD list) on the 50sma breakout at 368 but we didn’t have enough cushion to swing it into the long weekend.   However, sometimes (actually quite often) it takes us two tries to get it right and NFLX stays on the list.   We are looking for a move away from that 50sma.

 

 

Add these IBD 50 ideas to your lists — getting to be a challenge out there finding new entries in this runaway tape.    See you on the streams. HCPG

 

 

 

 

 

End of summer ideas

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To put it at the most basic level we use MarketSmith scans  to effectively shorten the time it takes us to find candidates for trading.   We usually do this via two strategies.  One is to scan for specific criteria — such as our China scan last week that netted some great winners such as current position in ZTO TCEHY.

ZTO entry post this scan last Thursday was a riding momentum back from support reversal — meat and potato HCPG type trade — long 18.9 zone.  We have 1/4 left from swing .

 

TCEHY  long under 42 on that bounce on weekly 40 level last week — also have 1/4 left from swing.

BILI we didn’t go long but some of our subscribers did from the scan last week, up currently 16% from our post.

The second way we use MarketSmith scans is to narrow down patterns — instead of blanket scans according to our own criteria, we use their criteria — mostly “Near Pivot” which we’ve discussed before, and for the following “Tight Areas”:

VRTX into interesting zone right now and if it can get over 180 will attract even more momentum trader eyes.

MA we got long yesterday on this tight area looking for lift-off but so far it’s still in basing mode.  Very close to our stop and quite possible it hits it today, and then do we delete? No, not unless it breaks down.    It’s not uncommon for us to get it right on second try.  Don’t worry about being right, wrong, getting revenge.   There’s no room for ego in this job. 

 

ROKU good example.   We had a decent swing trade in it before exiting on trailing stop (remember the gap up post earnings 52 idea from two weeks ago).  It set up again, we tried it last week but got scratched out on Friday.  We put it back in our newsletter on the weekend and last night with specific 58 breakout alert.   Today it offered a great quick 2 point trade and if it can close near 59 we would swing a partial.  Max stop 58 break.

Quick takes: be versatile, especially in the summer.   And if it stops you out the first time but stock does not breach the pattern, don’t delete it and keep it on watch-list.   We’ve been trading for over 20 years and writing this newsletter for over 12 years.  We’ve had countless interactions with traders — and the most noticeable pattern of all is that if you can’t check your emotions in this job you will not make it.

Everything else is infinitely easier.  Risk management?  Trade Ideas?  Easy, easy.

Patience to wait for right time to strike? Emotionally grounded enough not to engage in irrational behavior?  Oh so Much  Harder.

See you on the streams. HCPG

 

 

 

Summer Trading

IBD, strategy

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We usually are less active in the summer as

a) for our type of trading there usually are fewer set-ups

b) when there are set-ups the momentum for a breakout is lacking.

The exception to this is trading immediately post earnings.  We’ve had 3 good post earnings swing trades this summer: NFLX on reversal on 20sma weekly support, AMD on 17 breakout, and TSLA on 332 breakout (all positions closed).  ROKU TWLO ZTO  three more examples from this week that we stalked for days before breakouts.  We sometimes buy the breakouts on the next day (often they don’t set-up, but when they do it can be excellent risk/reward) but usually focus on  for mini bases on the following days.  These trades often last from few days to a few weeks and all worked thanks to the earnings push.    All together in one earnings season we probably focus on only 10-15 stocks out of ALL the stocks in our universe — suffice it to say they have to fit pretty strict criteria.

Summer schedule:

Using MarketSmith we scan for upcoming, look for set-ups for day after earnings.  This is the stage we have been focusing on these last two months.

Note Tabs Earnings- Reported, Earnings Upcoming.

Next stage, mostly likely in September, a) will go through Reported and look for bases on the winners, or for those of you who like no gap fills, you can scan specifically for them (not our thing but a lot of traders like that).     b) go back to Near Pivot and look for set-ups that are about to trigger.

Rinse, repeat, back and forth.   During earnings season — focus on earnings.   All other times– look for bases in the Near Pivot section.

 

Remember kids, in the end trading is just a job.  Lots of homework and preparation, lots of humility, and lots of grind.  See you on the streams. HCPG