Monday, May 16, 2011

Monday, May 16: Timers in CASH, GGT + EV Stock Candidates Explained

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I'm traveling on the west coast for the remainder of the week and will not arrive tonight until very late. Correspondingly, my entry tomorrow (Tuesday, May 17) will be delayed (hey, I have to sleep some time).


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As established this weekend at our monthly face-to-face meeting, we are clearly in an intermediate down-trend according to numerous slices of the market:

1) 20d Money Flow is cash/short
2) Elder's 13d Force Index timer on the GGT universe of stocks is solidly in cash
3) A simple 5d / 65d EMA on the GGT universe of stocks moved to cash on 5/11
4) GGT's pricing slope model is 100% in cash through the 65d EMA (we are losing $/day on every time frame through the 65d)
5) GGT's long-cash ratio (LCR) slope model has been contracting for a large number of days (as the database contracts, indicating poorer performing stocks, your stock picking abilities must improve dramatically)

Given this, it's really not in our interest to move long into stocks.

Despite that statement, we have a number of GGT + EV candidates worthy of consideration. I will not be providing a detail like what follows every day, but will do so when I have time. You should be able to follow everything I am doing (teach a man to fish and .... ) Here's how I break each one down:















CHS: CHS has improving stats on a short-term basis but is lacking longer term EV support. GGT has this as a CASH-ranked stock, and it simply is not meeting historical volume levels, which is keeping it in a CASH-ranked status. AB is lower than I prefer -- I like 80 and above, and this one is coming in at 57, indicating that the R/R is poorer but still around a 2:1 upside. 2d thrust and Extension EV are positive, so money flow is inward. CHS is not providing any earnings guidance as of 5/13.

CPWR: CPWR is a technical stock and the sector is presently been in the weeds. LEV looks good on an 8d and 40d scale, showing institutional support. LEV held nicely on 5/11 with downward price pressure, so there was no selling to speak of from the big boys. SmEV has been decreasing, shaking out the weaker positions. AB is a 97 which indicates a favorable R/R ratio provided this one continues to move upward. CPWR has been ranked LONG by GGT for 4 days, which means that it is outperforming it's historical levels. 2d thrust and Ext EV are both negative, which most likely reflects the sector performance as well as the individual stock performance. Note that CPWR is guiding down on earnings, which is problematic for longer-term institutional support and needs to be watched.

DGX: DGX is in the healthcare sector which is a favored sector. 2d thrust and extension EV are indicating a new-found breakout, and AB = 72 indicates that upside and a favorable R/R ratio are available. Longer-termed LEV is showing solid institutional support. Volume is increasing in the stock and GGT has had it LONG for 6 trading days, showing a relatively new breakout. On the negative side, DGX is guiding down in EPS but inline with earnings, but it doesn't report until 7/21.

EL: EL has been on the list for several days and is experiencing a bit of outflow as measured by the 2d thrust and Ext EV, both of which are negative. This being said, it is in retail, and as a whole this is a favored industry. Volume has been steadily increasing over the last 4 weeks which is contrary to the overall trend of the market. EL has reaffirmed earnings inline to lower than consensus, but this should not impact the stock until August. GGT has had this stock long since 4/27.

ENDP: ENDP has favorable longer-termed LEV support, and is seeing minimal downward pressure over the last two days as measured by 2d thrust and Ext EV. This stock is in the IBD50 list. With an AB = 53, R/R is lower than I like, but it is in heathcare, which is a favored sector. The stock is guiding inline as of 4/28, which I consider positive. The stock has been LONG in the GGT universe since 3/29 if you consider the whipsaw it experienced, and if you disregard the whipsaw, since 2/28. In this time it has moved 18%. It recently cleared a Darvas box of $42.37 but has pulled back below the threshold, so we need to see strength here in both pricing and EV.

HOG: HOG is GGT-ranked as CASH because volume is poor compared to historical levels, but everything else looks good in the GGT universe. The AB = 100 suggests favorable R/R, but note that this is railed against the lower level for this indicator and I'd want to see it drop from 100 towards 80 before I move on HOG. The stock fits into consumer discretionary, which is a favored sector overall. The stock has seen three days of solid accumulation in terms of LEV while the price has moved sideways, which I consider very positive. It is presently within a Darvas box with a ceiling of $38.75 so I need to see it clear this level and sustain a move upward before entry. Harley Davidson is not offering guidance on HOG but the stock has met or beat estimates QoQ since this time last year. Latest YoY revenue growth is 53%.

IR: IR is in a difficult sector that is tied to expansion of infrastructure. Despite this, GGT has the stock ranked LONG and as important, we've seen a 3d expansion of LEV while price has seen downward pressure. Longer-termed LEV is solid, showing institutional support. Volume has been increasing but is relatively low, slowing my excitement. IR is within a Darvas box and is contained from $49.08 on the low side to $52.33 on the high side. I'd like to see it move above the $52.33 level prior to entry, simply because the sector is underperforming.

JBL: JBL closed a Darvas box on Friday, May 13th, and it will be interesting to see what it does from here. The ceiling is $21.87 and it was tested at least 3 times this past week, establishing a firm resistance. Shorter-termed LEV is improving but weaker than I like, and longer-term LEV is wishy-washy. 2d thrust shows some money flow inward, and an AB value of 76 shows a favorable R/R ratio. JBL has products in consumer discretionary, which is a favored sector. They are guiding up on both earnings and revenues, and are due to report June 22nd.

MENT: MENT has experienced a 2d breakout on short term LEV, and this is indicated by the 2d thrust and Extension values. The AB value of 86 is quite favorable. GGT has the stock as CASH because it is not seeing significant moves to the upside compared to historical levels when it broke out, indicating a weaker stock at the present time. The stock moved to a GGT CASH status on 4/29. MENT is guiding up in both earnings and revenues, and reports on May 27th. Note that the 1-year ago report showed a declining YoY revenue number, but since then, every YoY revenue number has been positive. The stock has longer-term LEV institutional support. Note that it is in a weaker sector, so we need to watch the group as a whole.

MYL: MYL has solid LEV on both short term and long term scales. The AB value of 74 suggests favorable R/R ratios. 2d thrust and Ext EV are showing an inward money flow. The stock is in a favorable sector (healthcare), but is a GGT ranked CASH stock due to poor volume, compared to historical breakout levels, as well as poor pricing, again compared to historical breakout levels. The stock is in the lower range of a Darvas box with a floor at $23.41 so this combined with the LAB could provide a very good R/R potential. MYL is guiding inline.

NSM: NSM is a takeover candidate from TXN and is essentially a safe haven. It gets a pass from me.

RAD: RAD is in the retail group which is presently favorable. It has a GGT LONG ranking, which means that it is above it's historical, favorable thresholds. AB = 82, which is in my sweet zone. While 2d thrust is positive, Ext EV is negative showing some short-term downward movement in EV. Despite three days of downward price movement LEV has remained intact, which I consider positive. RAD is guiding up on revenues only, and is due to report June 23rd. Note that they have not had a stellar report card in terms of revenues on a YoY basis so be watchful.

SYK: SYK was covered in detail at my seminar this past weekend and is a solid buy candidate in a strong sector.

XRAY: XRAY looks good as of recent but has lacked institutional support, at least on the 40d scale. It just cleared a Darvas box of $38.74 but has fallen back below that level, indicating some weakness. It's in a good, favored sector (healthcare) so it is a good candidate. XRAY is guiding down on earnings, so be watchful of this. 

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Remember, you are responsible for your own investment decisions, and I am not.  Please do your diligence, and please take ownership for your actions.

Regards,

pgd