Take on the Market, June 23rd 2019

Notes;

  • Market & market leaders continue in an uptrend with the market acting well post the Fed meeting.
  • Market and market leaders setting new highs, with market leaders holding up well during the recent market correction.
  • NASDAQ up 20.4% YTD, S&P up 16.7% YTD, Russell 2000 up 15.5% YTD and the IBD50 is up 25.4% YTD.
  • NASDAQ almost back to its 52 week and all time high.
  • S&P 500 has set an all time high.
  • NASDAQ (and S&P 500) are showing a giant cup with handle pattern.  The NASDAQ was down 31% from it’s October high (cup), followed by a 12% correction in May (handle).
  • Russell 2000 still continues to lag the S&P 500.  If the index can hold and build from it’s 50 day line and participate in the rally then signs are good for a continued uptrend.
  • The AAI Sentiment Survey shows 30% Bullish, 38% Neutral and 32% Bearish.  This shows a slightly more bearish outlook vs last week.
  • Don’t start chasing stocks if you’re late to the rally.  If it’s a genuine rally we are just at the beginning of the move, be patient and let the market pull you in.

Technical view;

NASDAQ

NASDAQ JUNE 21

S&P 500

S&P 500 JUNE 21

Trade analysis : WC June 17th

$MDB Analysis (Technology / Software) / Buy

Fundamental analysis yields a score of 72%

Technical review

$MDB

$VCYT Analysis (Technology / Software) / Watch

Fundamental analysis yields a score of 70%

Technical review

$VCYT

$EPAM Analysis (Technology / Software) / Watch

Fundamental analysis yields a score of 67%

Technical review

EPAM

$PEN Analysis (Healthcare / Medical equipment) / Watch

Fundamental analysis yields a score of 65%

Technical review

PEN

Watch-list;

$ETSY, look for declining volume leading to a possible reversal and a retest of $70.

$FIVN, Squeeze pattern developing.

$WDAY, Squeeze pattern developing.

Take on the Market, June 14th 2019

Notes;

  • Market remains in an uptrend after the day 4 follow through day.  Note, follow through days (if they fail) tend to fail within the first 2 weeks.
  • NASDAQ up 18.1% YTD, S&P 500 up 15.4% YTD, IBD Top 50 outperforming up 22.3% YTD.
  • Fed meets on the 18th and 19th of June, G20 Summit on 28th and 29th.  Expect both to be market moving events.
  • Semiconductors showing short term weakness, watch how they handle support at the SMA 200.
  • “No one can fool you as easily as you can fool yourself”, must be careful of overriding logic and convincing ones self that the market or a trade is positive.
  • The two components of a successful trader are 1) the ability to manage capital ie.  be ready to change you opinion on a trade, take small loses and move on, and 2) the ability to back your winners and let winners run ie. if you know you are right then back yourself and let the investment run.

Technical notes;

S&P 500

S&P 500 JUNE

S&P 500 JUNE

NASDAQ

NASDAQ JUNE

The S&P and NASDAQ indices appear to show a market making a decision.

The S&P daily shows consolidation with a flag pattern forming on declining volume.  The double support seen at the 50 day MA and the 2875 level could foreshadow a move to the upside.

However the S&P weekly shows a an indecisive market with a potentially bearish reversal forming via the (gravestone) doji.

The daily NASDAQ is finding resistance at the 50 day MA, but also appears to have found support at 7770.  If support holds and the the 50 day MA can be broken then a retest of 7900 is possible.

Video;

Trade analysis : WC June 10th

$TEAM Analysis (Technology / Software) / Buy

Fundamental review

  • Passed all 4 fundamental screens (4Q, 3Q, 2Q and William O’Neil).
  • Earnings acceleration in each of the last 5 quarters (13%, 44%, 54%, 92%, 133%).
  • Earnings surprise at 17% for March 19.  Next earnings date is July.
  • Earnings guided up for the remainder of 2019.  EPS expected to be at an all time high.
  • Stable sales growth between 37-44% in each of the last 8 quarters.
  • Number of funds has steadily increased over the last 8 quarters.  Still only at 526 in March 2019.
  • Funds own 57%, management at 3%.
  • Ownership across the 526 funds is light, only 3 funds own more than 1% (Ax2 and A-).
  • 237M shares outstanding so price can be moved substantially by mutual funds increasing their position.
  • Industry group ranked 12/197.
  • $TEAM is the number 1 ranked stock in the industry group for EPS and Composite rating.  There are 33 stocks in the industry group.
  • Acc/Dis rating is 13/33.  Does this mean that there is upside yet to be realised by the funds?
  • RS rating is trending up.
  • Price is at an all time high.
  • 30 day Put/Call ratio at 0.4852 and falling.

Technical review

$TEAM June 10th

$MSFT Analysis (Technology / Software) / Buy

Fundamental review

  • Quarterly earnings surpassed same quarter last year for each of the last 3 quarters.  This is part of the $MSFT turn around driven by Sataya Nadella.
  • Earnings surprise at 14% for March 19.  Next earnings date is 17th July.
  • Earnings guided up for the remainder of 2019 and 2020.  EPS expected to be at an all time high and showing significant growth over prior years.
  • Stable sales growth between 12-19% over the last 7 quarters.
  • Number of funds has steadily increased over the last 8 quarters.
  • Funds own 43%, management at 1%.
  • Huge numbers of A+ funds have a position.  The top 10 funds own positions that put them in the top 40 on ownership terms.  Opportunity for additional ownership?
  • Industry group ranked 69/197.
  • $MSFT is the number 3 ranked stock in the industry group for EPS, RS and Composite rating.  There are 8 stocks in the industry group.
  • Acc/Dis rating is 4/8.  Does this mean that there is upside yet to be realised by the funds?
  • RS rating is trending up and is at an all time high. BLUE DOT.
  • Price is at an all time high.
  • 30 day Put/Call ratio at 0.631 and falling.

Concerns

  • Failed each of the 4 fundamental screens (4Q, 3Q, 2Q and William O’Neil).
  • Significant fund ownership at 6518.
  • 7.6 billion shares outstanding!

Technical review

$MSFT June 10th

$ZEN Analysis (Technology / Software) / Watch

Fundamental review

  • Passed 3 fundamental screens (4Q, 3Q & Q2).
  • Actual earnings per share have been increasing quarter vs same quarter last year for the last 4 quarters.  EPS has been positive for 6 straight quarters.
  • Earnings surprise at 33% for March 19.  Next earnings date is July 29th.
  • Earnings guided up for the remainder of 2019 and 2020.  EPS expected to be at an all time high.
  • Stable sales growth between 38-41% in each of the last 8 quarters.
  • Number of funds at an all time high in March 2019.
  • Funds own 70%, management at 5%.
  • 572 funds hold a position.  8 hold over 1%.
  • The top 10 funds rank within the top 29 in terms of position size.
  • 109M shares outstanding so price can be moved substantially by mutual funds increasing their position.
  • Industry group ranked 3/197.
  • RS rating is trending up.
  • Price is 1.3% it’s all time high.
  • 30 day Put/Call ratio is falling, moved from 1.49 to 1.08.

Concerns

  • Failed the William O’Neil screen as EPS rating is below 80 (currently 76).
  • Fund ownership has increased in 5 of the last 8 quarter.
  • Of the 64 stocks in the industry group, $ZEN has a Composite ranking of 10.
  • Acc/Dis rating is 21/64.
  • 30 day Put/Call ratio at 1.0803 but falling.

Technical review

$ZEN June 10th

$NOW Analysis (Technology / Software) / Buy (small position)

Fundamental review

  • Passed all 4 fundamental screens (4Q, 3Q, 2Q and William O’Neil).
  • Earnings surprise at 24% for March 19.  Next earnings date is July.
  • Earnings guided up? for the reminder of 2019 and up for 2020. for the remainder of 2019.  EPS expected to be at an all time high.
  • Stable sales growth between 30-42% in each of the last 8 quarters and appears to be accelerating.
  • Number of funds has steadily increased over the last 8 quarters.  Sits at 1608 as of March 2019 and appears to be accelerating.
  • Funds own 64%, management at 2%.
  • Only 6 funds own more than 1%.
  • 185M shares outstanding so price can be moved substantially by mutual funds increasing their position.
  • The top 10 funds rank within the top 29 in terms of position size.
  • Industry group ranked 3/197.
  • $NOW is the number 1 ranked stock in the industry group for Composite rating.  There are 64 stocks in the industry group.
  • Acc/Dis rating is 25/64.  Does this mean that there is upside yet to be realised by the funds?
  • RS rating is trending up and is at 96.
  • Price is within 2.6% of an all time high.
  • 30 day Put/Call ratio is falling, moved from 4.43 to 1.14.

Concerns

  • Earnings per share appears to be decelerating over the last 2 quarters (79% to 20%).
  • 30 day Put/Call ratio at 1.14 and falling.

Technical review

$NOW June 10th

Trade analysis : $ATRO

Like many investors I have a nasty habit of making emotional trades.  It’s a weakness that I’m aware of and one that I really, really want to fix.

One such trade occurred on Friday 7th June, where I made a rushed decision on $ATRO.  As the market turned from it’s recent correction I saw $ATRO had broken above it’s pivot on Wednesday, held the break on Thursday and that was all that was needed for FOMO to take over!

Needless to say as soon as my trade executed $ATRO turned right around and ran down 2%!  So it’s time to take a little look at the chart and work out whether the trade was good or there were signs that I simply overlooked or ignored.

$ATRO Analysis (Aerospace & Defense)

Fundamental review

Positives;

  • Group RS Rating of 16 which is up 23% YTD.
  • Earnings surprise was +50%.
  • The stock met my longer term screen, meaning it had 4 quarters of EPS and Sales growth, as well as meeting a number of other industry and price criteria.

Negatives or positives that were really negatives;

  • Of the 48 stocks in the group $ATRO had a composite rating of 10; as such $ATRO was outside the top 20% of stocks in the group.
  • $ATRO had an RS rating of 93 putting it 13/48 in the defense & aerospace group; the RS rating was tracking at a very slight incline and slowly flattening.
  • March 19 EPS was up 500% in the last quarter; however it wasn’t an all time high, June 18 had a higher EPS.  EPS then declined for 2 straight quarters before bouncing back in March 19.
  • 2019 EPS was expected to be +44%; but still significantly lower than 2014 and 15.
  • March 19 sales were up 16%; this is on the low side and again this wasn’t a new high.  June and September 18 sales were higher.  Revenue growth was also slowing with the last 3 quarters tracking at 42%, 18% and most recently 16%.
  • The stock was breaking above the lip of a 41 week cup with a depth of 41%; there was no obvious handle on the weekly chart.  On the daily chart the handle was 6%.
  • The breakout occurred on +75% volume; the breakout was no to an all time high, there is a significant amount of overhead resistance tracking back years.
  • There were 8 consecutive quarters of stable / increased fund ownership; however fund ownership was only at 260.  Only 19 A+ funds have a position.
  • The stock didn’t meet my mid or short term growth screens and also failed to meet the William O’Neil screen, missing on 2 of 9 criteria (77%).

Technical review

Notes can be found on the daily and weekly charts below.  The weekly tells a more positive story however the eventual failure of the breakout vs the upper trend line is a real concern and probably enough of a reason to liquidate the position.

The daily chart is scrappy and there are enough warning signs to pass.

Daily chart

$ATRO Daily

Weekly chart

$ATRO Weekly

 

 

 

Watch List W/C June 3rd

The trade war rumbles on and I’ve been patiently sitting on the sidelines.  My only holding at the moment is a NASDAQ index fund.  Beyond that I went to fully to cash 3 weeks ago.

Some may say that’s a rash decision, however given the extreme uncertainty surrounding tariffs and their recent weaponisation, I prefer book / protect a return rather than hope everything gets resolved quick smart.

Leading into next week however there are a couple of set-ups that I’m interested in;

$DOCU / Buy entry a $57.06

  • Meets my long-term fundamental screen criteria covering positive EPS growth, positive sales growth and positive guidance.
  • Fund ownership has increased for the last 3 quarters.
  • 160 A+ rated funds have a position.
  • Management owns 25% of the company, so no caretaker leaders.
  • It sits in the number #1 industry group, Computer Software.
  • It’s composite rating is 96, however it sits 15 within its group.
  • Cash flow looks positive.
  • That said, debt is a little high, although the positive sales growth off sets this.

Earnings are due on June 6th.  We’ll be looking for an earnings surprise and strong guidance.  Given the recent price action, any earnings pop needs to be held for 3 days before entry.

$DOCU