The Next Leg

Thrust

Over the past few trading sessions the dam burst and a sizable breadth thrust is under way.  There have been numerous price swings of magnitude to the upside that, should price action compress through time over the next 5 to 10 trading sessions, will set many of them up for their next pivot swing.  This is the time to focus on curating a stock list of extreme price/volume expansions.

One of the simplest means of scanning for these moves is to refer to the collective trading wisdom of traders past and focus upon 100% moves.  This knowledge of this phenomena has been passed down for generations long before it had been quantified.  The more tried an true variant of this is to scan for stocks that are up 100% year over year, however there are some flavors for shorter time frame traders that are worth investigating.  One of these is noted by Mark Minervini in his book, 'Trade Like a Stock Marker Wizard.'  On page 253 he writes about his Power Play which describes a stock that moves up 100% in under 2 month period and to follow this for two to three weeks thereafter.

Stocks That Double

Studies of momentum trading inform us that stocks that have high velocity moves over shorter periods have a strong tendency to revert.  This helps act as a filter to separate the wheat from the chafe.  Stocks that persistently maintain a double ratio are worth keeping on a focus list while those that revert can be pruned.

Persistently Doubles

Spike and Reverts

Scanning list of multiple moves over varying time frames can assist in curating a focus list of stocks that are participating in the current thrust and will persist and compress through time or revert in price.  For myself I look at stocks that are up 20% over my standard time frame and stocks that are up 25% for the month, continually looking to exploit 4 to 5 20% moves as they make their way to 100%.

20-25% Moves

First Five Days of Trading and the January Effect

The January effect is a hypothesis, and like all calendar-related effects, suggests that the markets as a whole are inefficient, as efficient markets would naturally make this effect non-existent. The January effect seems to affect small caps more than mid or large caps because they are less liquid.

Since the beginning of the 20th century, the data suggests that these asset classes have outperformed the overall market in January, especially toward the middle of the month.

-- Investopedia

The January effect offers an opportunity to curate watchlist for the year based upon stocks that have a tendency to outperform.  In order to take advantage of this I've opted to screen and take the top 250 stocks from each list during the first, second, and final trading week of the month.  In addition to candidates likely to outperform, clusters will emerge from these lists offering clues to potential themes to exploit over the trading year.

One of the first screens I is the accumulation of price * volume over a 5 day period on the IWM specifically, and my complete universe overall.

IWM:

ROKU,LOXO,WTW,FIVE,RH,ETSY,TTD,IDTI,DECK,CIEN,MEDP,ESL,SWN,MB,CBRL,BBBY,AEO,CLF,TNDM,PLNT,TDOC,WWE,GME,OLLI,NTRI,OAS,ZS,ENTG,HUBS,SAVE,P,PTLA,NXST,BOX,LGND,LITE,AYX,PLCE,INGN,COUP,ICPT,PENN,HQY,CVNA,YELP,ARRY,CLVS,IRBT,ESPR,ANF,SAFM,EAT,DK,TVPT,GMED,PLAY,TREE,STMP,CREE,CRC,PCRX,LPX,MTDR,CPE,KBR,NYT,IMMU,PEB,NEWR,FNSR,CUZ,CAR,HAE,TREX,TECD,SAM,CLDR,AMED,IMPV,VAC,FOLD,MNK,DSW,JACK,CAKE,SIG,ISBC,WMGI,MYGN,NUVA,HTZ,LIVN,CADE,INSM,CRUS,CROX,AAXN,BXMT,BEL,MTZ,FGEN,THC,SBRA,TXRH,GBT,GKOS,HRTX,ERI,WING,SFLY,PDCE,MDSO,ATRA,DDS,DNR,ELLI,MTG,FIVN,ENDP,ATI,I,BYD,GDOT,RARE,MDGL,AVA,SBGI,SNX,HELE,CRZO,MUSA,SEAS,MYOK,ESIO,ABM,LAD,ACAD,LANC,BIG,SLCA,MED,RAMP,PDCO,DORM,SBH,EVBG,CHDN,KBH,DIN,APTI,SYNH,MDR,GPOR,TMHC,BJ,SGMS,RLJ,DO,PTCT,CACI,BEAT,AKS,CRCM,SHAK,NVRO,SKT,CHGG,RETA,BECN,FFIN,MMS,AXGN,MRTX,VKTX,SEND,VSH,BCO,NTGR,TGNA,CMC,NSP,ARWR,CVLT,IDA,MDCO,LGIH,IBTX,MBFI,FR,NJR,STAG,ILPT,IIVI,BDC,FIT,MRT,EBS,BLMN,COLD,ASGN,KMT,NVAX,AMN,SHO,AAN,POR,BTU,RCII,HOME,BID,ARLO,DAN,GHDX,FIZZ,BJRI,WWW,ALRM,IDCC,ATGE,CDNA,IRTC,BPMC,IPHI,JCOM,FII,DY,EGP,OPK,ARNA,VG,ARI,MMSI,IBKC,CHS,HWC,TVTY,OSTK,HZNP,EDIT,WWD,ADC,MNRO,EYE,SRCI,UNFI,SAIC,SF,PDM,PBYI, AMBA

Universe:

SPY,AMZN,QQQ,AAPL,NFLX,IWM,MSFT,FB,EEM,EFA,TSLA,HYG,CELG,BABA,GOOGL,NVDA,TLT,AMD,GOOG,VXX,IVV,BAC,BMY,JPM,XLF,GLD,DIA,V,LQD,BA,TQQQ,FXI,XLE,XLV,EWZ,T,INTC,BRKB,C,XLK,VOO,AVGO,XLI,GE,SQ,GDX,XLU,CSCO,IEF,XOM,WFC,MU,UNH,IYR,XLP,PFE,MRK,AGG,IEMG,JNJ,DIS,VNQ,IEFA,CRM,VZ,VEA,CMCSA,MA,PG,SQQQ,PYPL,ORCL,JNK,VWO,VTI,HD,ADBE,WMT,CVX,SBUX,TVIX,IWD,SLB,MDT,ROKU,GS,XLY,QCOM,XOP,EWJ,GILD,SMH,AMGN,TXN,MDY,ABBV,XBI,BKNG,DWDP,CAT,BIL,FRC,KO,TMO,PEP,SHV,UVXY,ABT,UTX,LLY,TWTR,EMB,BIDU,CI,LOXO,UNP,NKE,MCD,MO,AABA,IBM,IWF,MS,DAL,CVS,AMAT,COST,IJH,SH,D,MMM,KRE,TWLO,PM,XLB,BIIB,JD,FDX,SHY,STZ,IJR,ANTM,CHTR,GDXJ,ACWI,NEE,LOW,AGN,RHT,WBA,EA,NOW,ATVI,BND,HON,BSV,PBR,AXP,ISRG,F,COP,MPC,BKLN,IVE,VTV,WDAY,IWB,CMG,VALE,FOXA,CSX,SPXL,DLTR,USMV,EOG,CME,USO,TGT,TSM,DE,SSO,USB,EBAY,AMT,OXY,GM,SHPG,VGK,SDS,KHC,LMT,XRT,ALGN,WYNN,REGN,HUM,HAL,BDX,ACN,PXD,AZO,NXPI,VLO,SCHW,AMLP,ILMN,SHW,ORLY,IVW,IBB,INTU,VMW,MDLZ,CL,TJX,BLK,HES,LULU,ADP,UPS,AAL,IAU,UGAZ,MCHI,UAL,DELL,BP,PCG,BAX,SPXS,TNA,XLRE,DGAZ,STI,SPXU,RTN,SO,DG,LIN,EL,PSX,KSS,NSC,TMUS,PNC,SYK,NOC,EMR,WMB,KMB

5 Day % Change IWM:

  LOXO,PIR,INSM,BW,AAC,CTIC,IO,VRCA,LCI,ROKU,CNST,EQ,RETA,MGEN,CRR,BAS,TTPH,AKAO,BRS,EPZM,EPE,SNDX,NEOS,FTK,EOLS,TWI,AGEN,FATE,NVTA,AXDX,NH,IMDZ,ARQL,SPRO,SURF,LTS,GTXI,LGIH,NE,TXMD,CRBP,AGE,CLVS,PLUG,HPR,ACHN,CBIO,PYX,ENDP,ESTE,JCP,BPMC,KALA,NSTG,GTT,STRO,RMTI,SNNA,ADMA,CPE,CHRS,AREX,CBAY,ARDX,MLNT,MARK,IDRA,AUBN,WTI,FET,AVEO,RDC,INO,TTI,FPI,JNCE,TRXC,ASNA,PFNX,GME,CPRX,ARRY,OSG,KOPN,YRCW,PFIE,GEN,PES,CWH,OCN,KEG,VTL,DMRC,PTLA,HLX,CENX,CRC,SRCI,AYX,DCPH,LLEX,SGRY,MDR,HCHC,MPAA,PENN,IMGN,ROSE,OII,DRQ,NVAX,MTDR,TLGT,ALNA,OVID,EVC,BZH,XOMA,YMAB,BRY,GERN,HOME,MRNS,SSTI,RARX,TWST,SFS,FTR,DNR,SEND,ZGNX,TGTX,NCSM,RCM,GMS,LQDT,IIIV,OIS,ARVN,AXAS,RAD,CWBR,BBGI,CARA,REI,OPK,ONCE,OPTN,PBYI,SUM,UNT,TK,VSTM,DF,WLH,MCRB,NOG,AQST,AROC,AMWD,CDMO,RTW,ETM,DWSN,NYMX,ASNS,CRVS,MNLO,CCS,SEMG,AMPE,GNK,VCYT,ZEUS,ARWR,CHUY,IRWD,FOSL,BOLD,ICPT,AKRX,IOTS,INSP,SWN,INAP,VHC,TCI,SN,SPN,QHC,HRI,GRTS,TPHS,SPPI,RECN,OSTK,PGNX,CNCE,OLLI,PDCE,KOP,MNK,DO,MXWL,VHI,MRT,FI,CNSL,NWHM,NNBR,TGH,HK,FIVE,IMH,ESCA,RPD,SVMK,BOOT,CLF,MBIO,CTT,VRAY,SYRS,SGMO,ALDX,NR,CBL,MHO,IBP,RYAM,TIVO,CVIA,REPH,ICD,SLDB,AMR,UEIC,KDMN,PKE,BLCM,BTX,MRTX,RRGB,HEES,SGYP,ASC,GBL,CLNE,MRC,GPOR 

 

Universe:

  AXSM,LXFT,LOXO,PIR,ADXS,INSM,BW,MYND,SAGE,IPIC,QEP,TMDI,HAIR,EDGE,SCYX,AAC,MICT,CTIC,HSGX,IO,GNCA,ASV,VRCA,LCI,DDMX,ROKU,CNST,CLMT,CLPS,OXBR,EQ,CNET,RETA,CAPR,SNSS,CGIX,JAGX,BLPH,SPHS,MGEN,LABU,SXE,NDRA,CRR,BAS,SITO,TTPH,PRT,YTEN,AKAO,CHKE,LPTX,EPZM,BRS,SMMT,LEU,LGCY,FLGT,EPE,GUSH,DRIOW,DXR,SNDX,BPMX,NEOS,SUNW,TLC,LENS,TRCH,HYRE,WPRT,NMM,NNA,HHS,IPWR,RWLK,NVUS,FTK,MTNB,IZEA,EOLS,CNAT,CELGZ,MXC,CVEO,AZRX,TWI,AGEN,FATE,FGP,NAVB,NVTA,HZN,AXDX,NH,IMDZ,CDTX,BTAI,SOLO,CHAP,PMTS,GALT,CPAH,CRK,ARQL,SCKT,DCAR,SPRO,SURF,AUMN,DISCB,CRIS,LTS,SHIP,CRMD,GTXI,AVXL,LGIH,NE,PLL,NEPT,TXMD,NBR,ARC,SEED,CLIR,CRBP,INS,EFOI,AGE,HTBX,CLVS,TCON,ACET,PLUG,HPR,ACHN,EXAS,CBIO,CELG,PYX,ENDP,STON,ESTE,DMPI,JCP,CIFS,HOS,INSG,KOOL,BPMC,PSTI,PETZ,VISI,SQNS,VRML,IGLD,EVER,ESV,KALA,GEVO,CRSP,ESEA,NSTG,NVFY,BE,PVL,GTT,URGN,SORL,BLDP,WKHS,APRI,APPS,DVCR,STRO,GSM,RMTI,CKPT,TOPS,DPW,SNNA,ADMA,OPI,CPE,WFT,CHRS,CFMS,AREX,TSQ,PRVB,AMID,ALT,BVXV,DLNG,ECT,CBAY,ARDX,LONE,MLNT,MARK,IDRA,AUBN,WTI,FET,NAUH,IFMK,PLYM,HUYA,CHEK,VLRX,AVEO,SNDE,DXYN,RDC,INO,PULM,TTI,FPI,BKYI,AVP,JNCE,CSBR,CLRB,VBLT,BCOM,ISR,DNJR,CNFR,CCLP,MVIS,TRXC,ASNA,PFNX,DRYS,VVUS,BPT,MN,GME,TIS,CPRX,AMCN,ARRY,MBRX,CTRV,XENE,CUR,OSG,WLL,KOPN  

Screening High PE for Watchlist

According to the studies of William O'Neil:

based on 50 years' data research to include several bear/bull cycles, which proved that on average the top-performing stocks started their upturn on a P/E of 20X or above...

Mark Minervini echos this when discussing high P/E ratios:

The top 100 best-performing small- and mid-cap stocks of 1996 and 1997 had an average P/E of 40. Their P/Es grew further to an average of 87 and a median of 65. Relatively speaking, their initially “expensive” P/Es turned out to be extremely cheap.

With this in mind, screening for high P/E offers traders fertile hunting grounds for stocks with potential for outsized moves.  Using FinViz, a first pass offers a universe of 1119 stocks.

FinViz High P/E

Clearly this is too many.   Further screening by 20/20 Earnings: 

High P/E 20/20 Earnings

A much more manageable 151 stocks.  This can be sliced and diced, but the main starting point is to use a high P/E then filter from there to create a trackable universe to focus on.

Top 40 Hits

Top 40 Stocks greater than $3 using anchored momentum from October 03, 2018

Top 40 Stocks

Top 40 IPOS grater than $3 using anchored momentum from October 03, 2018

Top 40 IPO

Top 100 Stocks greater than $3 using anchored momentum From October 03, 2018

GRTS ASNS AEZS PTI INTX NETE FLNT IMMY TSRO ESIO CYH PACB ALLK ANY AMSC TYME NTEC ARII HMHC SAVE ECYT CVON RHT ITG IDT BNFT EHTH ESL LRN GBT ICAD GNE CROX LTRPA ACIU SEND MITK TAHO VNDA VCYT JE LFVN CDXS ABCD INOV VIRT TVTY BKS HCCI CREE CALX VIVO BDSI SHEN LOCO VTR TRIP SCG USM KODK CRNT TSLA XBIT IMPV ARCO MPW BCRX ENSG MLNX LANC MKTX CBRL FNSR ADC WELL MNRO VCTR SSRM SCWX CZZ NSA ARRS SBUX UA CRAY RUBI TR BIOS RH TREE FEYE HCP MDB ENPH DATA CTB TWLO DENN DIN VCEL

Scanning For Resiliency

After a significant daily decline I begin my research for the next wave of market leadership using a simple TeleChart scan for anchored momentum.  Currently there are 634 stocks populating this scan.  Should there be a deeper pullback this number will surely prune further leaving a select few candidates to focus on during the next upturn.

Anchored Momentum March 21, 2017

Creating the scan is very straight forward with TeleChart.  Simply create a condition:

PCF Condition

Then create an easy scan to rank by the top 15% plus other desired parameters.

Easy Scan: Anchored Momentum Price > 3

Hunting for 100%

For some reason unbeknownst to me, back testing is considered a viable means of study, but forward testing is dismayed as paper trading and therefor inconsequential if not outright detrimental.  I've come to the conclusion that these are not mutually exclusive strategies for trading improvement if you identify their strengths and weaknesses and how the information gleamed is personally applicable.

Highly successful traders tout the idea of studying past winners.  This is a common them past down from one generation to the next like a family yarn, but one thing I've observed is that there is a lot of effort placed in the fantasy of focusing on the unicorns.  In addition, there is a lack of attention paid to how these traders of yore modified their techniques over time accounting for varying market conditions.  While the winners of the Dot Com era may have net 100% gains over night, the study of them from a swing trading perspective to eke out a 10% gain over a week or two under current market conditions is somewhat misplaced.

While there is nothing wrong with studying past winners, and these studies can lead to future benefits, the issues I've noted that often arise is attributing incorrectly one's time frame, risk tolerance, capital allocation --among other biases-- to the chart in question.  In realizing the star gazer within me I've made focused effort in moving my market studies to real time so that moving forward I can more accurately access the past I've experienced.

For 2017 I've given myself a challenge of isolating stocks making 100% moves in real time.  The goal is not to capture these 100% moves, but one or two slices of 20% gains from them.  I want to isolate what makes these moves tick as they're unfolding to reinforce what the current market conditions favor as well as have data to back up whether or not I was able to capture these moves.  It's one thing to believe you would have been in a rocket stock of the past, but another to find your future self looking successfully backwards knowing you were.  

Through forward testing both in theory and in practice one of my aims is to dispel the charms of past patterns and the delusion of being in 1000% moves in stocks and focus these dreamer periods into actual effort of churning out 20% gains on a more frequent basis.  If I'm consistently aware of stocks that are on their way to making such moves in real time and not capturing a slice then there is a completely different issue to address.  Holding myself accountable for missing these is a priority in 2017.

Hunting 100% Movers in Real Time

Potential Change of Character

Two positive breadth developments today worth paying attention.

First, there was a thrust in the number of stocks above their 20 period moving average.

% Stocks > 20 Period Moving Average

Second, the number of new highs - new lows is positive across multiple time frames.

New Highs - New Lows

Four stocks on my primary watch list for tomorrow:

IPXL

PWRD

SONC

VIMC

Scanning For Extreme Momentum Burst Pull Backs

Short term momentum extremes over a month period tend to mean revert.  A recent example of this is CUBA which went parabolic with gains in excess of 100% over a 4 day period.  Another example from last September/October is LAKE which gained nearly 400% over month.

CUBA

LAKE

One approach to these types of extreme moves is to devise tactics for shorting, particularly if there is a high degree of emotional based speculation, which in the first example was the thawing relationship between the US and Cuba, and in the second example, Ebola.  Even though CUBA has very little, if anything at all to do with the country Cuba, it has a cute ticker and sometimes that's enough.

Personally, what I will begin to focus my attention on this year is curating an anticipation watch list of stocks that have exhibited moves of 25%+ over a month period and have had constructive consolidation thereafter without imploding.  The fundamental premise behind this is to isolate stocks that have shown themselves capable of moving quickly through an up swing followed by range contraction while exhibiting characteristics of linearity.  What I'm scanning for is the following:

• Price > $3 
• Price %Change from 40 to 20 days ago > 25%
• Sort by Average Close 2/Average Close 20
• Visually identify linearity, use BB width squeeze for contraction, focus on Nr7 or 1% days
• Focus on minimal Price %Change over the previous 5 to 10 sessions

One of the better looking candidates I've identified for this week is OVAS

OVAS

Another biotech that looks like an interesting candidate is TTPH

TTPH

A stock that moves 200% over a year must first move 100%.  By prioritizing my anticipation list and stalking momentum candidates that have proven themselves capable of moving between 25 to 50 percent I'm looking to increase my odds of taking a sliver of the burst between 100% to 150%.

Pullbacks Welcomed

Market pullbacks and corrections are excellent times to prune and rebuild watch list and add to our model book.  During these periods a search for stocks that meet our set up criteria can assist our edge when the dust settles and we're in sync when the next leg up occurs.  I tend to focus upon tight price patterns that are flat and have resisted the greater market undulations.  Ideally I'd like to see this occur after there has already been a leg up in the particular stock before flat lining with contracting price volatility.   To assist visually I use a 10 period moving average.  If it's static it informs me that the stock has undergone a period of price agreement and should this balance shift to the upside with range expansion and volume I want to be involved and ride the tide of the path of least resistance.

KANG

LQ

TEDU

ZEN

Time Slice Analysis

Lately I've been increasing effort in the study and analysis of what stocks do on my time frame.  My standard time horizon is between 5 to 10 days.  In placing effort into the actual behavior of what stocks are doing new insights can be gleamed about what is actually working such as: sector themes, patterns, are stocks near highs or beaten down, are they highly shorted etc...

Looking at the past ten days from a sector perspective, more defensive oriented stocks are beginning to populate the 52 Week High list.

Sectors on the Move

Looking at sizable moves over the past five days we can note that there are a cluster of Latin American Regional Banks to pay attention to, as well as some defensive plays in Silver and Utilities.

5 Day Moves

The list for 10 days is slightly larger, but two segments worth noting are Gold and Minerals and Mining are in play.

10 Day Moves

Keeping aware of what is moving on our time frame can assist in trade ideas by finding sectors that money is flowing into, the stocks that are in play, and give a clue as to general market sentiment based upon the action of aggressive or defensive stocks populating the list and not opinions. From my perspective I'll begin investigating the metal related stocks for set ups.

ANV

$PPP

RGLD

TAHO

Hiccups and Hyperventilation

With the Russell down nearly 2% today the cacophony of collapse reverberated yet again.  A familiar theme has been when the market hiccups the masses hyperventilate, and today was no different.  Is this a cause to be alarmed or is this merely the ebb, flow and the natural order of things?  How many licks does it take to get to the center of a tootsie roll pop?

There were warning signs that the market was becoming extended from a breadth perspective and that it might be wise to in the least anticipate anticipation and be on alert.  One of the more pertinent and reliable indicators that I use in my tool box is the $MTMW which informs us of the number of stocks on the $NYSE that are above their 20 period moving average.  On a shorter term horizon this suggest that there is an extension of breadth that historically is not tenable on this time frame and we should expect some reversion in stocks.

$MTMW July 07, 2014

On a longer term time frame the primary indicator I use reached a level that in the recent past has acted as a ceiling to broader rallies and led to a lesser number of participating stocks which increased the significance of proper vehicle selection or even avoidance due to an increased risk of churning.

Primary

In addition there were signs in the overall Market Monitor suggestion that the current bullish move was losing steam.

Market Monitor

Under the current environment I consider the prudent form of speculation is increasing cautiousness and decreasing risk.  From a swing trading perspective, time in the market is not time on my side.  Being aggressive has not paid well under these scenarios so trading under my normal position size and expected value should be muted.  Cons aside, there are still a number of set ups that are piquing my interest and a number of stocks on my watch are still valid in formation even with today's dip in small caps.  Two of note are CODE and PEGA.

$CODE

$PEGA

Weekend Review 02/21/2014

One of the characteristics for much of 2013 was the tendency of the general market indexes to be in lock step with each other.  There was a high propensity for V-Shaped bounces to make a marginal new high that was followed by a dip or digestion.  While there wasn’t perfect harmony, and outside of short windows where one would outperform, there was unison in that if one made new highs the others would follow shortly thereafter.  Since the January pullback and bounce the COMPQ has been the first to make a new marginal high, the SPX is within a whisker, and the $NYA, $RUT, and $INDU are still trying with the later two struggling slightly.  This may simply be a period of outperforming by two while the others play catch up, but if there isn’t unison in new highs, a change of market character should be noted.

COMPQ

$NYA

$RUT

$SPX

$INDU

Based upon what has been the norm since 2013 I’ve jotted down a few things to pay attention to in the near future.  1) Will the lagging indexes catch up and make new highs or will the leading draw down?  2) The SPX is in a zone where it churned from December through January.  It is a concern if this does not break and run through convincingly.  3) December and January are seasonally strong for small caps and they are now beginning to lag.  4) There are breadth divergences occurring.  Will they matter this time?

The breadth divergences that I have jotted down are the following:  The number of stocks in the NYSE above their 20 period moving average is in a zone where pullbacks or digestion zones occur.

$MMTW

The T2108 has been showing divergence with fewer stocks participating with each bounce:

T2108

The number of 100 day highs on the SPX has been diverging as well showing a divergence as fewer stocks participate.

SP % 100 Day Highs

This is also shown on the NYSE where the percentage of stocks at 52-Week highs has been steadily declining.

NYSE % at 52-WK Highs

I believe that we are currently in a stock pickers market, especially due to decreasing participation from a narrowing basket of choices. One of the focal points of my chart review session this week was newer issues that are setting up on the weekly time frame near their 10-WK MA or their all time high, as well as those that have gone up 100% from their low.  As the meat of earnings season is winding down and catalyst will be fewer, I suspect there will be some good risk/reward trades from many of these newer issues.

BFNT

SBGL

ADHD

CTRO

LEAF

STAY