Open Long Positions:

CBOE Holdings (CBOE)
  • CBOE was a monster this week rising 9% on very, very impressive volume considering the overall condition of the market. The stock is definitely showing leadership characteristics on both up and down days. The volume increase this week was particularly impressive in relation to the volume across the market.
  • Equally as impressive as the run up this week is the firm hold on Friday. Volume increased signaling a bit of profit taking, yet the stock only gave up half a percent. Group (WWWW)
  • WWWW had a monster week showing some leadership in the market. Again, strong up moves on big volume was especially comforting considering the shaky state of the broad market.
Additional Longs:
  • Groupon (GRPN) (1/2 position)
  • Invensense (INVN) (1/2 position) -- Re-entered INVN on 6/28 after my first entry on 6/14 was stopped out. Excellent fundamentals and very strong breakout volume.
  • Omnicell (OMCL) (1/2 position) -- Very strong high volume breakout on 6/28.

I am remaining cautious as the market remains in a short-term downtrend. However, resilient leadership in some individual stocks is present in the market, which I'm taking as a positive sign. All positions entered this week were half-size positions and stops on existing longs continue to be adjusted to protect against another large sell-off.

Stay flexible and stick to your plan!

Economic Data Is Improving: SELL, SELL, SELL

Although the Fed will continue QE at its current rate, the market is apparently worried about improving economic data leading to a late 2013 taper. Since when did positive economic data become a negative indicator? What can we do other than follow the price action? I tightened stops on all equity positions going into the Fed's announcement on Wednesday, all of which held with the exception of WisdomTree (WETF). This ended up working in my favor because WETF's stock sold off about 12% today in massive volume. I've readjusted stops in some of my stronger performers in order to allow some fluctuation during these choppy times. That being said, none of my stops put me in a position to lose more than 1% of my total account equity on each position.

I'll start with some positive news, my stronger performers: (WWWW):
  • I entered WWWW on 6/7 as the sock looked poised to breakout of a tight, low-volume sideways pattern. This failed, but the pullback between 6/10 and 6/14 occurred on extremely light volume. The stock has advanced roughly 5% this week including an upside close today on an upside reversal with strong volume.
  • The reversal today on strong volume in a weak market can be taken as a strong sign of support.

CBOE Holdings (CBOE):
  • CBOE has performed well over the last couple of weeks. Today's drop on above avg volume was about par for the course. I'm slightly green on the position and holding a stop around 4% below my entry.

Hertz (HTZ):
  • After outperforming for the entirety of this year's uptrend, HTZ is showing some sideways consolidation around 50-day support with heavier volume on down days versus up days, probably signaling profit taking.
  • HTZ is due for consolidation. My stop is just under today's close and will not be adjusted. Should we catch a bounce tomorrow, I plan on using the opportunity to close the position.

Financial Engines (FNGN):
  • Very strong fundamentals and growth prospects. Suffering from a rough market.
  • Adjusted my stop to around 5% of entry.

Invensense (INVN):
  • Another fantastic potential growth stock with excellent increasing earnings and sales numbers. Increase in fund ownership also excellent.
  • INVN also has a strong "N" factor (N as in caN slim). They are strongly positioned for the trend in motion sensor technology for video game consoles, televisions, etc.
  • Stop is around 8% of entry.

Groupon (GRPN):
  • This is a purely technical play for me. GRPN looks to be breaking out of a long sideways consolidation. This is a smaller position that I'm giving some room as the stock looks poised for a steady uptrend.

Moving Forward

The short term direction of the market is clear. We're due for a correction and it looks like we might get one. Follow your routine -- these types of situations can create opportunities for entries into leading stocks coming out of brief consolidations.

Hold The Phone

I am a bit behind on my market review today, so I'll highlight today's action with a few bullet points:
  • The S&P rebounded very nicely off of its upward trendline and 50 day MA, both of which have acted as key support throughout this uptrend.
  • Today's price/volume action was enough to move IBD's Big Picture back into Confirmed Uptrend. However, I'm still approaching with caution.
  • As you can see on the chart below, tomorrow as well as next week's action will be pivotal to further determine the direction of the overall market. A break and hold above the resistance trend tomorrow or early next week could get things moving again.
  • The bounce we saw last Thursday and Friday is almost identical to what we could see if we move higher tomorrow. If we do move higher tomorrow, I would like to see that move confirmed by constructive action next week before showing any aggression.

A Few Breakouts To Keep An Eye On

While a large majority of leaders found support at key levels on average or below average volume, there were some good looking stocks breaking out on huge volume:
  • PVH Corp (PVH): 10% gap up on volume that was 250% above its 50 day average. PVH is just shy of a flat base pivot around 125.60.
  • Restoration Hardware (RH): November '13 IPO emerging out of a tight bull flag pattern on nice volume. Relative Strength rating of 97 is very positive.
  • Union First Market Bancshares (UBSH): Downside reversal from 5/10 breakout, but managed to keep extremely tight throughout a choppy market. Nice upside reversal on 6/10 followed by some strong up volume. Would like to see strong volume push it over the 21.00 range.

Follow The Leader

The hope inspired by Wednesday's opening gap up was quickly disposed of by a steady down trend in all major indexes, which took out yesterday's lows and position the S&P a fraction off of its 50 day MA. While the primary action definitely signals distributional selling, I've noticed several leading stocks holding up well relative to the broad market in terms of price/volume action:

Wisdomtree Investments (WETF)The constructive action in WETF goes back to the beginning of this correction on 5/22 and 5/23. 
  • First, what looks like a dramatic sell-off on 5/23 is actually a constructive reversal pattern as support came into the stock in the form of huge volume right at the 50 day MA support area.
  • Secondly, WETF bounced nicely off of it's 50 day MA once more last Thursday and Friday on it's two largest up volume days since early March. 
  • Finally, WETF has handled the market weakness we've seen over the last two days about as well as one could hope for. Although it has retraced back to support at its 50 day MA, it has done so in much lighter volume relative to its prior upward bounce. Notice the level of volume on 6/6 and 6/7 relative to the last two days.The next two days should provide additional clarity as WETF looks for support at its 50 day MA for the second time in under 10 trading days. A breakdown below the 50 day MA and the upward trend line will warrant concern. Group (WWWW): WWWW broke out of a 3 week tight pattern on 6/7 supported by strong volume. 
  • Notice the volume contraction on the chart during the tight consolidation prior to the breakout. This is constructive sign prior to a high-volume breakout.
  • If volume comes in to support this stock at its upward trend line, it could be poised to break upward resistance depending on broad market action.
Additional leading stocks holding their ground:
  • CBOE Holdings (CBOE): High volume 6/6 and 6/7 breakout holding up well on decreasing down volume.
  • Financial Engines (FNGN): Huge volume 6/10 breakout has retreated on light volume.
  • Standard Motor Products (SMP): Pullback on very light volume in the midst of a strong uptrend.
  • Chuy's Holdings (CHUY): Managed to hold its gains from a 6/10 breakout. Closed down yesterday in very light volume and closed up in the midst of downward pressure today.
  • Krispy Kreme Doughnuts (KKD): Up volume outweighing down volume convincingly.
  • Fiesta Restaurant Group (FRGI): Consolidating very constructively, even closing up today.
  • Texas Roadhouse (TXRH): Consolidating very tightly since gap up breakout on 4/30. Declining volume throughout the pattern into this week is a positive sign.

Leading stocks can serve as a great indicator to the action of the overall market, so the past few day's action in many leading names can be viewed as constructive. However, 75% of stocks follow the broad market on average, so necessary caution must be paid to the overall market action in the coming days.

Plan of action:
  • Hold off on new positions until the broad market confirms a direction. Should we see a break of support in the S&P, consider closing out winners.
  • Consider tightening stops below key support areas for your winning positions.
  • Continue your research routine. Opportunities often present themselves out of market corrections.
Today we saw the S&P gap down on central bank news out of Japan, recover losses, only to finally retreat and close just off of the day's low. Although investors received a favorable supportive bounce off of the S&P's 50 day MA last Friday in what seemed to be the beginning of the third resurrection of this uptrend, the amount of distribution days and price/volume action on down days relative to up days is not constructive and warrants caution.

Note: IBD's Big Picture issued a "Market in Correction" following today's (6/11) 7th distribution day for the S&P 500.

A couple of notes from the SPY daily chart:
  1. As mentioned, Friday's bounce off of the upward trend line was a positive sign, but today's market action is not conducive to retaking market highs.
  2. Ideally, as with previous tests of the upward trend line by the S&P, we would like to see a smooth move to new highs on convincing volume. Notice how easily the SPY retakes its highs off of the 2/25 and 4/18 pullbacks. Yesterday's stalling action and today's gap down are not constructive signs.
  3. Keep an eye on the upward trend line. If it is breached on the downside, we could be in for the pullback investors have feared for some time now.
Additional notes:
  • Although general market action is negative overall, leading stocks held up well today with most losses coming on lighter volume.
A few names I am watching:
  • Financial Engines (FNGN) saw heavy institutional support yesterday breaking out almost 4% on volume nearly 300% above its 50 day average. It kept most of its gains today retracing just 1% on volume lighter than average.
  • CBOE Holdings (CBOE) also reacted fairly well, even breaking into the green around mid-day before eventually closing lower on lighter than average volume. CBOE broke out of a 3 weeks tight pattern on 6/7 followed by a 3% move on 6/10 accompanied by high volume.
  • Group (WWWW) has retreated the last couple of days, but volume has been very light, which is a constructive sign after its 3 weeks tight 6/7 breakout on high volume.

Plan of action:
  • Consider taking profit off of the table in big winners. Tighten stops in recent purchases.
  • Market action is too choppy to safely buy pullbacks. Refrain from any new purchases until we see a convincing up move in the direction of new highs on high volume.
  • Keep an eye on leading stocks. Should we experience consolidation in the general market, leading stocks will have an opportunity to digest gains and prepare for the next leg up.


    This blog is aimed at performance review and routine development. I hope to pass along some useful market insights and ideas while building positive trading habits of my own. In addition to constructive commentary, I hope to provide an entertainment aspect in the form of book reviews, articles, trader profiles, etc.


    June 2013



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