Archive for

Take Advantage of Biotech’s Bear Market Bounce (IBB, CELG)

The biotech sector is waking up after a long slumber and could move higher in coming weeks.

Biotech stocks are bouncing off deep lows after underperforming other market groups in the first quarter. While it’s likely the sector has entered a bear market, recovery waves within downtrends can be fast and furious, generating healthy profits for well-timed long positions. Just don’t stick around too long, or turn a trade into an investment by refusing a profitable exitwhen one’s offered.

Stick with funds and higher capitalized companies that show narrow support and resistance levels when picking biotech trade candidates. This will make it easier to identify low-riskentry points as well as the most advantageous exits. In between, keep stops tighter than usual because aggressive sellers could return at any time and end the nascent recovery effort.

iShares Nasdaq Biotechnology Index ETF (IBB) topped out near 400 in July 2015 and sold off to the long-term support in the first quarter. It bottomed out in February and entered a basing pattern that broke to the upside this week. The fund is setting its sights on major resistance at the 200-day EMA, currently declining from 305. The 50-day EMA has aligned tightly with the base breakout.

This pattern supports long-side entries on pullbacks to the 50-day EMA and breakout level, currently between 267 and 270. A high tight consolidation pattern will also work in finding a low-risk entry, using a 60-minute chart to buy pullbacks within that small-scale price action. The current bounce will run into short-term resistance just below 290.

Celgene Corp. (CELG) hit an all-time high at 141 in July 2015 and entered a downtrend that found support in the low 90s. Tests at that level in February and March have found willing buyers, contributing to this week’s three-month base breakout above a declining trendline at 103. The stock is already approaching resistance at 110 that should slow or stall the recovery effort.

A pullback to the trendline can be bought, with short-term profits taken at or near the 200-dayEMA. A more interesting opportunity may develop if the biotech bounce turns into something more enduring. The declining trendline off the July high is slowly converging with the 200-day EMA, making a breakout above that level a significant event, setting the stage for a larger scale rally that could reach the 120s. …read more

Read more here: Take Advantage of Biotech’s Bear Market Bounce (IBB, CELG)

Category: IBB, CELG, BXLT

Adobe Systems Well Positioned For All-time Highs (ADBE, AAPL)

Adobe Systems may offer a buying opportunity in the upper 80s, ahead of a strong rally into triple digits.

Adobe Systems Inc. (ADBE) has provided quiet Nasdaq-100 and big tech leadership for more than four years and is currently one of its hottest performers, trading near an all-time high. The stock transacts just 3.6-million shares per day on average, near the midpoint of index activity, while a $47-billion market capitalization takes the 26th spot among the 104 current components.

It’s now achieved the status of the must-own position in tech and growth portfolios, posting stronger gains than widely held Apple Inc. (AAPL) since 2011, rising more than 400% compared to AAPL’s 207%. It’s also better positioned to resume its strong uptrend after a volatile first quarter dropped the iPhone maker into the midpoint of a massive 22-month trading range.

Is now a good time to buy ADBE, given its lofty position, or should market players wait for aselloff that offers a more advantageous reward: risk ratio? Fortunately, first quarter earnings won’t impact that decision because the company already reported on March 17, with the next confessional scheduled for June. Given this beneficial timing, charting technicals should take precedence in determining the best time and price to add this winner to your portfolio.

The stock entered a powerful uptrend in 1998, rising from 2.95 (post three stock splits) to 43.65 in just two years. It topped out in November 2000 and joined the rest of the tech universe in a severe bear market, spiraling lower in three selling waves that relinquished more than 80% of the prior rally. It finally bottomed out in single digits in the summer of 2002.

The subsequent recovery reached to the prior high in 2006, but the rally momentum fizzled out, yielding sideways action into a minor 2007 breakout that added just 5 points. It turned lower in a failed breakout just one month later, entering a downtrend that coincided with the 2008 to 2009 bear market. The decline ended at a 5-year low near 16 in March 2009, giving wave to a renewed uptrend that remains in force, more than seven years later.

It took four years for the stock to reach horizontal resistance generated by the 2000 and 2007 highs. A 5-month basing pattern yielded a 2013 breakout that attracted widespread buying interest, lifting price into a series of all-time highs. The last rally wave peaked at 96 in December 2016, setting up major resistance in triple digits.


…read more

Read more here: Adobe Systems Well Positioned For All-time Highs (ADBE, AAPL)

Category: ADBE, AAPL

Southwestern Energy Still Broken After Bounce (SWN)

Selling Southwestern Energy short at or near 2-year channel resistance should mark the most profitable trading strategy.

Southwestern Energy Co. (SWN) looks like an ideal equity proxy to the natural gas futures contract, with 92% reserves reported in 2015, but misaligned hedging practices and mistimed acquisitions have altered the equation. In fact, the company has significantly underperformed the commodity in the last two years, losing more than 80% while futures have fallen less than 70%.

Natural gas has been engaged in a major bear market since 2008, falling from 13.70 to 2.00, but the rate of decline has eased considerably since 2012, with a sturdy bounce followed by a test of the downtrend low that’s still in progress. This four-year sideways action may signal the start of a new uptrend or an extended pause ahead of further downside.

Many traders mistakenly believe that natural gas tracks the crude oil market but the two commodities show markedly different price patterns that should yield unique outcomes in coming years. In fact, the longer and deeper natural gas decline may be closer to the start of a secular upturn than crude oil and offer greater upside. …read more

Read more here: Southwestern Energy Still Broken After Bounce (SWN)

Category: SWN

Wal-Mart Faces a Major 2016 Challenge (WMT, AMZN)

Bearish signals suggest Wal-Mart’s recovery effort will fail and yield a test of multiyear support in the 50s.

Wal-Mart Stores Inc. (WMT) has struggled in recent years, playing catch up with its online sales portal while quarterly revenues stagnate across its worldwide brick and mortar empire. The effort has produced mixed results despite massive e-commerce investment, comprising less than 3% of total sales and raising well-founded doubts about future growth.

The company is now the second-largest retailer on the planet, at $216 billion market cap after Amazon Inc. (AMZN) grabbed the top slot in July 2015. WMT online sales grew by 12% in 2015, compared to 20% for AMZN, but fourth-quarter results failed to impress, rising a paltry 8% while decelerating from 17%, 16% and 10% in the past three-quarters.

Market players have dumped shares in reaction to the online slowdown, with the stock now trading more than 25% below the all-time high, posted in January 2015. Does the current price represent a buying opportunity or should market players focus on the short side, capitalizing on the continued failure to transition into the high-tech age of e-commerce?…read more

Read more here: Wal-Mart Faces a Major 2016 Challenge (WMT, AMZN)

Category: WMT, AMZN

3 Round Number Setups at 100


These three stocks should enter trend advances, higher or lower after they resolve conflicted price action at 100.

Price action near round numbers generate all sorts of trading opportunities because these levels denote support and resistance in the same way as trendlines, moving averages and Fibonacci retracements. Big round numbers, i.e. 100 and 1000, tend to yield broader directional swings than small round numbers and their half sized cousins at 5, 15, and 25, etc..

Gold offered a perfect example when it rallied into 1000 for the first time in March 2008. The yellow metal sold off at that level and dropped into a sideways pattern that carved the outline of an inverse head and shoulders pattern, with a horizontal neckline right at the magic number. It broke out six months later and nearly doubled in price in the next two years.

Rallies and selloffs into round numbers tend to show common characteristics. First, look for the initial penetration to fail and yield a reversal. Expect the second test to make progress, perhaps crossing the number and establishing a basing pattern. Finally, watch for wide range bars lifting well above the number in an uptrend or below the number in a downtrend, indicating that support has become resistance or vice versa.

Celgene Corp. (CELG) topped out at 140 in July 2015 after a long uptrend and sold off to 93 in the August mini flash crash. It posted a lower high into 2016 and tested the low in February. 100 has become a pivot point since that time, with a 7-week trading range grinding out nearly equal price swings above and below that level. OBV has held firm since the start of 2016, carving a sideways pattern that matches price action.

This is a bilateral setup in which the trading range has generated a complex test of support at the August low. Given equal extensions on both sides of the round number, it makes sense to stand aside and wait for a rally above 107 or decline through 93 to initiate a long or short position, depending on the outcome. Technical signals favor bears at this point, with reward potential into the low 80s after a breakdown.…read more

Read more here: 3 Round Number Setups at 100

Category: NFLX, CELG, ITW

3 Low-priced Stocks Set to Head Higher

These low-priced stocks can offer outstanding profits but higher risk needs to be managed aggressively.

The retail crowd dominates trading in low-priced stocks, while institutions avoid these issues due to low liquidity and the lack of earnings visibility. This at-home population generates a unique environment in which these humble issues can rise and fall rapidly, often in the same session. Their participation also produces strong trends that offer excellent profit opportunities.

There are two types of low-priced stocks. Small companies growing revenues through hot products or services comprise the first group, often plowing capital back into businesses to expand operations. Formerly high-priced stocks compose the second group, driven lower by weak revenues, lost opportunities and outdated products. Both of these groups carry greater risk than higher priced stocks.

Two structural factors add risk to positions in low priced stocks. First, many of these companies issue secondary offerings that dilute ownership, often triggering high percentage declines. Small biotechs are the biggest culprits because they need cash flow to keep the lights on while working through drug applications. The second factor is so simple it’s often overlooked, i.e. these companies show consistently weak revenues, makingquarterly earnings reports a roll of the dice.

Energy Recovery Inc. (ERII) came public near 10 in 2008 and entered a vicious downtrend that bottomed out below 2.00 in 2012. It posted a lower high near 8 in 2013 and rolled over once again, testing the all-time low in September 2015. The stock shot higher just one month later, nearly tripling in price in one session and printing the highest volume in its history.



…read more

Read more here: 3 Low-priced Stocks Set to Head Higher

Category: SID, ERII, VCEL

Up and Coming Food and Beverage Plays

Food and beverage stocks have taken the leadership mantle in 2016, offering slow and steady profits.…read more

Read more here: Up and Coming Food and Beverage Plays

Category: FDP, COT, ANFI

3 Nasdaq-100 Stocks With Bullish Crossovers

50/200 moving average crossovers can detect trend changes before price action sets off broad based buy or sell signals.

50- and 200-day EMA crossovers can generate predictive patterns that tell observant traders when downtrends have ended, allowing them to open positions that take advantage of new uptrends, often before traditional buy signals attract the attention of the broad market. The trick is to enable price action to interact with the moving averages, highlighting the best entry prices.

These early signals have specific requirements. First, the 50-day EMA must penetrate the 200-day EMA, with both moving averages pointed lower. Then, the short-term average needs to turn higher and cross above the long-term average. The 200-day can turn higher before or after the crossover, but the trade entry doesn’t come until both slopes point higher while price pulls back to test new support. The strongest signals come when moving averages are tightly aligned, and price touches that alignment.

Let’s look at three Nasdaq-100 components that recently flashed buy signals with this technical methodology. Keep in mind; the best entry comes near the moving average convergence because that level allows placement of a relatively tight stop loss in case the trade fails to work as expected. Patience is a virtue with this process because pullbacks to new support can unfold many weeks after the initial signal requirements are met.…read more

Read more here: 3 Nasdaq-100 Stocks With Bullish Crossovers

Category: CHKP, INTU, ADP

Palo Alto Networks at Technical Crossroads

Palo Alto Networks is stuck between a rock and the hard place, trading above the February breakdown but below even stronger resistance.

Network security applications continued to grow rapidly in 2015 after well-published data breaches increased awareness of the ever present danger of hacking and identity theft, initiated by both governments and individuals. According to Garner, sector spending may have topped the $75-billion mark last year, with allocations expected to rise over the next decade.

Palo Alto Networks Inc. (PANW) has emerged as a top player in this tech subsector, with annual revenues now exceeding $1-billion. Its market cap has risen to nearly $13-billion, highlighting bullish prospects for continued growth. Despite marquee numbers, the stock has lost significant ground in the last few months, with many shareholders abandoning positions and walking away.

More than 50% of high-tech decision makers advised they would increase security spending this year, according to a recent survey. These findings suggest that sellers may be erred in exiting positions because this level of commitment is tough to find in this volatile 2016 environment. With this in mind, let’s examine PANW’s long and short term price action to see where sidelined market players may wish to open new positions.

…read more

Read more here: Palo Alto Networks at Technical Crossroads

Category: PANW

3 Beaten Down Stocks With Bullish Volume Patterns (PWR, FIS)

This bullish volume divergence predicts that price will catch up, often heading higher at a rapid rate of advance.

On Balance Volume (OBV) measures accumulation-distribution by adding up buying and selling activity to determine whether bulls or bears are winning the battle for higher or lower prices. Trendlines can be drawn on OBV while the sequence of highs and lows can be analyzed in a process reminiscent of Dow Theory. It also works well as a convergence-divergence tool, comparing indicator to price and seeing which output is leading and which is lagging.

OBV probing a new high while the price is stuck in the mud signals a bullish divergence that predicts the price will play catch up in an advance that eases or ends divergent readings. The conflict is also useful in predicting when a resistance level will yield a breakout, allowing early positioning that rises into a profit when late-to-the-party trend followers see the breakout and chase new entries.

Let’s look at three SP-500 components with notably bullish OBV divergences, indicating that beaten-down shareholders are willing to hold on, despite stiff headwinds. Each of these issues resides below the index’s relative strength midpoint but the loyalty revealed in this conflict can be powerful enough to end corrections and downtrends, and lift securities into new uptrends.
…read more

Read more here: 3 Beaten Down Stocks With Bullish Volume Patterns (PWR, FIS)

Category: PWR, FIS, NFX

%d bloggers like this: