Stock Picks

I went long ARM Holdings plc August 25 near the close for a momentum trade.  This stock has what looks like superhuman strength given the lousy bear market trend of the indices in recent months.  ARMH is a monster.

I have a protective stop just under today’s low at 15.24 and think this could get another thrust higher given its current strong momentum.  Even during the recent drop in the market ARMH went higher.  The stock has some amazing relative strength.  It has what seems to be a small head and shoulders bottom that formed after filling the recent big gap higher.

Apparently they have a big order backlog and fat profit margins from license revenue (they are in the semiconductor sector and benefiting from move to mobile gadgets and devices).

The MACD is moving into a buy signal and RSI may get a move into the power zone above the 70 range next week.  I am looking for an exit if and when ARMH can get its RSI (relative strength index between 70 and 75).

If I am right about the market bouncing higher then it might help ARMH make a new 52 week high in the weeks ahead.

ARMH is a pretty classic uptrend and since the May 6, 2010 flash crash has never looked back. . .

I went long Neurocrine Biosciences, Inc today at 6.07 with a protective stop at 5.70.  I was going to wait for a retest after a breakout but the robust volume today (so far at least) and the push forward into the 6 range combined with favorable oscillators and other factors made me take the plunge today.

I like the large tradeable void between 6 and 8 and I also like the longer term charts and levels above 7.4.    To me Neurocrine Biosciences, Inc still looks like an ideal position trade but that does not mean that it will not be very volatile.  The recent 1.5 month price action is a little bit deceiving in that it has been so tight and relatively calm.

6.19 looks like the last remaining swing high that needs to be overtaken to say that NBIX is clearly above the 3 year resistance line.

Volume may come in north of 1 million shares today which would be a great sign relative to the average over the last month.

So far so good.  But still have to take it a day at a time.

Daily MACD is initiating a bullish crossover today and if you look at the super long term chart you will see that Quarterly MACD is also initiating a bullish crossover for the first time in many many years.  That is one of several reasons why I am classifying this as a position trade.

I continue to watch NBIX like a hawk because it has what I consider to be both long term, intermediate term, and short term favorable technical analysis characteristics.

I did a short write up on Neurocrine Biosciences Inc before and this is the second follow up.

The ‘moment of truth’ for any stock, bond, index, or commodity future is when it is able to ‘jump the creek’ above a longer term significant resistance zone.  ‘Jump the creek’ is a term used by Richard D Wyckoff (perhaps one of the greatest traders that ever lived) to describe when a security is able to muster up enough courage to move beyond a significant previous technical resistance price level.  It is when price decides to ‘engage’ to the next price range and start to wage new battles.

The resistance price level can exist in any time frame (1 minute, 5 minute, 60 minute, daily, weekly monthly, yearly charts) and also cover any time distance.  Some ‘creeks’ are more famous than others.  For example the mid 1970’s Dow Jones Industrial Average resistance level of 1000 was a very very significant almost 15 year long creek.  The longer the creek length, the more significant it becomes as a support and resistance level.  It takes tremendous amounts of energy and success to break a 5 year or 10 year resistance level.  Even a 1 or 2 year creek can be tough to break through.  It all depends on the stock, index or future we are dealing with.

Currently Neurocrine Biosciences Inc is perched right under a 2.5 year long resistance level or ‘creek’ at a price of 6.00.  There is a large trading void above that level all the way up to 8.5  This is good because it suggests to me that if and when NBIX can get above 6, it should have plenty of leg room to move higher from there.

In addition to this significant ‘creek’ resistance level Neurocrine Biosciences Inc also has this long term down trending channel line that has defined its bear market trend.  Until and if NBIX can break above this level, it still needs to be assumed that NBIX is still in a bear market even if it does break above the 2.5 year horizontal creek resistance (at 6).  It is a bit difficult to come up with an exact level that defines a break of the 3.5 year down channel resistance because it will depend on how long price takes to get right under the channel line.  But roughly we are talking 7.4.

So a break above 6 to me is significant, but still not as significant as a break above the 7.4 down trending channel line.

I want to see a full price bar above 6.00 and preferably a nice long candle with heavy volume.  And then see more price above that range.

I don’t intend to chase NBIX right now.  I would rather sit and wait for the break out above this range and then wait for the first retest of the 6.00 range for a suitable entry.  There is always the risk that any stock after having ‘jumped the creek’ will fail and fall right back down under the new support (6.00).  So I will take a more ‘safe’ approach here and let the stock show me the way and hopefully prove the way.

SPU Sky People Fruit Juice appears to be in breakout mode at the moment or at least very close to it.  The stock has consolidated in a beautiful double bottom formation where the second bottom never managed to touch the first price bottom, a bullish sign.

SPU trades quite thin as there are very few shares tradable in the float.  Two days ago it made a high volume swing high near the 8 range and I suspect a move back up there is coming soon.

Above the 7.20 level resistance is almost non existent and we could see SPU trend higher gradually for the month of March to a first target of 10.

So far SPU is a well behaving China stock with decent growth prospects and good margins.  SPU has a habit of trading to a high point and then selling off near the end of the day.  So it is a somewhat cumbersome uptrending trading personality.  Having said that, as long as price can hold above the 7.34 level it remains a buy and hold in my opinion.

If you haven’t noticed yet, I can tell you with zero doubt that China Stocks are on fire, literally.  Many are trading in well developed uptrends and nice consolidation patterns.

They are not all created equal however, some are much more difficult to trade and the patterns are not so clear.  So despite the strength it is still a ‘stock pickers’ market for China Stocks in my opinion.

SPU Sky People Fruit Juice today pierced on an intra day basis the 6.60 level I mentioned in previous posts and it did it on volume of 267,000 shares.  The action is bullish and SPU has traded with a higher high and a higher low on increased volume.  A bullish sign.

The 267000 volume today was also equal to or greater than the two previous swings as pointed out in the chart.  SPU appears to be close to getting a new uptrend started on closing prices above the 6.60 range.

It is still possible that the march 15 to 17th time frame could serve as a rally point as they will be speaking at the Roth Capital Growth Conference.  In addition Sky People Fruit Juice Inc. is also overdue to release its end of fiscal year financials.  It would make sense to do so before this conference.

A small stock like this with a small float is the type that can get a move going into these types of events.

In any event regardless of that conference, SPU appears still to have a constructive price chart and a growth path that should support higher prices into later this year.

But the first order of business is a full price bar candle close above the 6.60 range.

I first talked about SPU Sky People Fruit Juice here.  I mentioned in that post that SPU did a nice bullish indicating volume test on a swing high in February that implied good odds that the 6.60 high would eventually be exceeded.  The volume on the retest was in the neighborhood of 50% higher than the previous swing.

Breaking 6.60 appears to be in the cards now now and I expect SPU to get a move going into the end of this week.  I don’ t expect that to be the end of the run however.  I think SPU could trend higher for months perhaps into some type of peak in the July August time frame, the traditionally hottest months in China and the rest of the globe.  Very hot weather is good for beverage companies (people get thirsty).

The other nice thing about SPU is that so far for the last month and a half SPU has only done a 38% retracement of the entire previous move which is a bullish sign and an internal sign of strength.

They are speaking at www.roth.com in mid March and price has a way of holding up good going into and around these conferences.  But I do expect SPU to trade higher on fundamentals as well as technicals for several months.

AXL has a very nice large pattern in the form of an inverse head and shoulders bottom.  This is a high reliability pattern and it is occurring over a time frame of 1.5 years which makes its breakout implications very significant.

The right shoulder portion of the pattern has a saucer or scalloping type formation and is set up for a nice breakout move above the key horizontal neckline level defined by the red dotted line on the chart.

In addition, it is noteworthy to point out that AXL has a short position in it that is somewhere north of 30% of the float.  This is important within the context of this large pattern because it could provide the necessary fuel and volume for a sustained meaningful breakout.

AXL is an auto parts supplier.  The entire auto sector still appears to be in recovery mode.  You just have to look at the shares of F Ford Motors or another auto parts supplier (DAN) to get the picture that this sector is in sustained recovery mode.

If AXL is able to get a breakout going above the red dotted neckline I would like to see it do it on greater than 12 million shares.

The FAZ Triple Inverse Financial Bear ETF looks extremely attractive to me right now based on everything I am seeing in the market.  The UNG performed as expected and is now getting to be a tired trade already and I suspect it will pull back some before building higher down the road.

But now the FAZ has flashed all sorts of buy setups and looks very good to me going into next week and end of year and early January.  I think we could see FAZ blast higher into the high 20’s range during the next 1 month time frame.

As I indicated in a previous post, the WEEKLY MACD has now turned down on the SPY and the SP500 index.  That means that the market will have weekly bearish headwinds going into next week.

(more…)

In my opinion YGE is just about ready for a breakout and a new trend development.  I am setting a buy stop at 14.51 and then a stop loss at about 13.74.  So if I am wrong about this trade then there will be losses of about 5.3%.  But if I am right about this trade then I think there is good chance of about 38% profits to be had with a possible target of 20.00

So YGE could be a great example of finding a SPECIFIC setup within an otherwise very overbought market that seems poised for trend change.

What? You said Dubai? To hell with Dubai!  Dubai is just a big distraction and smoke screen designed to distract you from a possible opportunity like YGE.  To be honest with you I have not read one press release about the Dubai situation and have not watched any news during the last week as well (either on CNN or CNBC).  So you could say I am ignorant and uninformed but I have to tell you it feels awfully good.  I would rather just focus my time and energy on the tape action and the setups. 

This is a new phase I seem to be in lately.  What I have found is that the more I pay attention to major media financial news and other market forecasters, the worse my trading performance is.  It is just the nature of financial media and other forecasters to report things in a RABID fashion that makes the news appear much much worse than it actually is.

The 2008 market crash and bear market was a great example of the hype of financial media screwing up clear headed trading decisions.  I have to admit during that time I had become extremely emotional about the market and the news at that time and I was spending about as much time watching and reading financial media as I was looking for trade setups and it was a huge mistake.  It skewed my emotions way out of line and caused me to make emotional trading decisions.  I suspect a lot of other people were doing the same thing at the time, but why? There is no need.  Read a headline or two but then go back to your charts and focus on those the most.

If this Dubai thing was such a big deal the Dow Industrials should have been down 300 points easily and probably much more… but once again no… so there is the tape telling the real story.

So I really think this YGE is a great setup for a December trade.  It may still need some more babysitting, but the parameters I wrote out at the beginning of this post are valid at the time of this writing to me.

Well Thanksgiving is over, the world is still turning and China is an economic powerhouse that needs lots of energy and food to keep its people and growing economy happy.  Can you imagine how many turkey’s they would need in China to feed every family there?  Hmmm lets see, the population of China is around 1.325 BILLION people.  So let’s say 1 turkey for every 3 people… so that would be four hundred and forty one million, six hundred and sixty six thousand, six hundred sixty six freaking turkeys!!! (441,666,666). 

Clearly China is the 100lb gorilla taking the world by storm.  I mean just look at the run that Baidu (BIDU) stock had, what an unbelievably huge run.  Chinese stocks can be huge runners and huge winners for the simple fact that there is such large untapped market potential for all sorts of products, everything from fertilizer to solar panels.

YGE is looking damn good right now as a potential setup.  YGE does solar panels in China.  Solar stocks from my experience seem to be somewhat of a bumpy and unpredictable ride sometimes.  They can have some occasional really good periods of outperformance and then just go into hiding for ages.  Part of that could be due to the ever changing oil price as perhaps a rising or spiking oil price can make solar seem more cost competitive.  And incidentally from what I have seen in the oil charts I would not be surprised to see another trend higher in the oil price soon as we have recently seen the dollar break down into a new free fall mode.  That should support higher oil prices for a while.

Anyway, regardless of the funny mentals, the chart of YGE seems to be saying that YGE could be preparing for a big sustained run perhaps into the 20 range or higher.

(more…)