Douglas Busch

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ChartSmarter Monday Game Plan 3/27/17

Markets enjoyed a decent morning run Friday only to give back all of their gains and then some in the late afternoon, but when all was said and done the averages were essentially flat. The Nasdaq has now made it 12 consecutive winning Fridays, but for the week fell 1.22% its worst drop of 2017. The S&P 500 gave up 1.44% and both of the aforementioned indexes CLOSED the week above their 50 day SMAs. The Russell 2000 was not as fortunate although a bullish hammer on Wednesday did successfully retest the area where the huge 15 session winning streak ended last November. There is not the euphoria one often looks for when calling market tops but the consensus that some kind of pullback may transpire does seem logical. Although we focus on price action and the transports have been signaling softness, retail has for awhile now too. But one has to respect how the benchmarks shrugged off the London attacks mid week and it held around Thursday when it looked like the healthcare bill was not going to be passed. I still think the ugly bearish engulfing candle on the Nasdaq in particular on Tuesday has meaning as it occurred at all time highs and the previous four session all CLOSED within less than TWO handles. Further evidence may be seen looking at where strength lied this week. It was the utilities which were the only group to advance on the week with the XLU advancing 1.3% and it was the staples which we the runner up, but still fell by .5%. The financials were by far the worst performer this week with the XLF slumping nearly 4%. Leadership is suspect and if one looks for longs as always demand best of breed, especially in this type of environment. Below is the chart of FMI and how it was presented in our Monday Game Plan last week. Healthcare has been a spot where investors have been parking their money recently.

ChartSmarter Tuesday Game Plan 3/21/17

Markets once again displayed laziness with the major averages close to the UNCH line, the S&P 500 slipped .2%, but the small cap Russell 2000 losing .5%. Looking at individual groups technology has been a slow and steady performer with the XLK higher 10 of the last 11 weeks and the lone down week ending losing just 5 pennies and CLOSING at the top of its weekly range and therefore we can conclude that the last 11 weeks behaved bullishly. Their is some jockeying within tech for who has been the best actor and semiconductors clearly deserve the top spot although software has been coming on strong as of late. Of course within the semis there have been winners ad loser, with the laggards being AOSL and EXPR down 27 and 18% from their respective 52 week highs. But being the optimist I am lets reflect on the winners and those that warrant special status. There are many under followed names that justify mention like a COHR or a new issue ICHR that has gained 76% this far in '17. Below is the chart of ENTG and how it was presented in our Wednesday 3/8 Game Plan. Last week it rose 9% on the second most active weekly trade in the last 22 months. It did encounter some trouble at the very round 20 number trading well above intraday on 2/2-3 by 2% but both sessions were unable to CLOSE above. If there was one positive to take from Monday it was the utilities the days worst actor with the XLU losing .7%.

Stocks that can be bought as they pill back into symmetrical triangle breakouts are QTNA. QTNA is a recent networking IPO higher by 34% YTD and 57% since inception. There is just a small sample of earnings reactions with just one delivered on 2/14 which jumped 6.1%. The stock is on a 7 week winning streak and sports very impressive action with 5 double digit weekly gains of 29.6, 17.3, 15.1, 12.6 and 11.9% ending 1/6, 11/18, 11/11, 12/9 and 3/17. It did have issues climbing above the very round 20 number between 11/21-12/6 and again between 2/2-10. It is now comfortably above 20 and recorded a nice break above a symmetrical triangle on 3/16 advancing 9.2% on very healthy trade. Enter on pullback into pattern at 23.75 and the breakout has measured move to 29.

Trigger QTNA 23.75.  Stop 22.50.

Stocks that can be bought after taking out bull flag patterns are KEM. KEM is an electronics play higher by 82% YTD and 508% over the last one year period. It has recorded four consecutive positive earnings reactions showing solid management up 5.9, 3.9, 5.9 and 9.4% on 2/2, 11/1, 7/27 and 5/3. The stock is higher 2 of the last 3 weeks, AFTER 36.5% weekly gain ending 2/24 which occurred in the best weekly volume in 5 years. That week announced a takeover and it, the acquirer, soared. Look to enter KEM here just above a bull flag pattern taken out Monday near 6 year highs. The breakout carries a measured move to 16.

Trigger KEM here.  Stop 11.

Stocks that can be bought as they take out bull flag patters are CGNX. CGNX is a tech play higher by 27% YTD and 96% over last one year period and sports a scant dividend yield of .4%. Earnings have been mostly higher with gains of 8.5, 8 and 16.1% on 2/17, 8/2 and 5/3 and it fell a scant .1% on 11/1. The last 3 weeks have all CLOSED within just .83 of each other (reminds me of very tight streak the 4 weeks ending between 8/12-9/2/16 which all finished within just .52 of each other) and it also recorded a very impressive streak gaining 40 of 62 weeks ending between 1/15/16 and last week going from 28 to 81. Enter CGNX with a buy stop above bull flag trigger of 81.25 which carries a measured move to 92 and a breakout easily achieves all time highs.

Trigger CGNX 81.25.  Stop 78.

Stocks that can be bought as they pullback into bullish inverse head and shoulders patterns are RPXC. RPXC is a patent play higher by 13% YTD and 9% over last one year period (one may say how is it holding up in this new age of deregulation and I say one just has to be impressed that it is technically). Earnings have been mostly lower with losses of 8.4, 3.2 and 11.3% on 2/15, 11/4 and 5/4 and it rose 12.4% on 8/3. The stock is higher 12 of the last 19 weeks and since week ending 11/11 15% jump (notice week ending 2/17 was a bullish hammer CLOSING at top of weekly range after tough earnings reaction). RPXC broke above a 16 month weekly inverse head and shoulders pattern week ending 3/10 up 9.8% in the second best weekly volume in one year. Notice week ending 2/10 did so too, but a retest and thrust back above 11.50 pivot very bullish. Enter on pullback at 11.75. On daily chart has look of bull flag after last Fridays bullish engulfing candle.

Trigger RPXC 11.95.  Stop 11.45.

Stocks that can be bought as they take out the round number are VECO. VECO is a semiconductor play higher by 1% YTD and 51% over last one year period. It has excellent earnings momentum with three consecutive positive reactions higher by 2.2, 6.6 and 10.3% on 2/17, 11/2 and 8/2 after a small loss of .3% on 5/5. The stock is on a current 5 week winning streak up a combined 13%. The cup base presently has digested a 16 of 25 week winning streak ending between 7/8-12/23 which doubled from top to bottom. VECO traded above the round 30 number intraday on 12/15, 12/20-21 and 1/4 but no CLOSES above. Enter with buy stop above round 30 number and 30.25 and add to above a cup base trigger of 30.55.

Trigger VECO 30.25.  Stop 29.

Stocks that can be bought through double bottom triggers are IDTI. IDTI is a semiconductor play up 5% YTD and 21% over the last one year period. Earnings have been mixed with gains of 10.4 and 5.2% on 11/1 and 5/3 and losses of 4.4 and 11.8% on 1/31 and 8/2. The stock is up 3.1% the last 2% and now trades 8% off recent 52 week highs and lost a combined 11% during a 5 week losing streak between weeks ending 2/3-2/3. Monday it nearly broke above its 50 day SMA and now look to enter with a buy stop above a double bottom trigger of 25.22. On the weekly chart one can see an add on point above a weekly cup with handle trigger of 26.76 pivot that began the week ending 12/4/15.

Trigger IDTI 25.22.  Stop 24.

Good luck.

The author owns SYMC ST.

There will be no Wednesday, Thursday or Friday Game Plan this week as I have the exam early next week. Thank you for the understanding.

Trigger summaries:

Buy pullback into symmetrical triangle QTNA 23.75.  Stop 22.50.

Buy after recent bull flag breakout KEM here.  Stop 11.

Buy stop above bull flag CGNX 81.25.  Stop 78.

Buy pullback into bullish inverse head and shoulders weekly breakout RPXC 11.95.  Stop 11.45.

Buy stop above round number VECO 30.25.  Stop 29.

Double bottom trigger IDTI 25.22.  Stop 24.

ChartSmarter Monday Game Plan 3/20/17

So much for the volatility associated with options expiration and S&P rebalancing. Markets barely budged although the Nasdaq did make it 11 straight winning Fridays, albeit less than one point Friday (the last 3 sessions of the week all CLOSED amazingly less than one handle from each other). For the week the Nasdaq added .67% and the S&P 500 rose .24%. The Russell 2000 finished above its 50 day SMA for the third straight day and it outperformed gaining 1.92%. Groups that continue to soften and are concerning would be the transports as the IYT is lower 9 of the last 12 days, but still off a relatively mild 5% from recent 52 week highs. The ETF lost 1.5% this week after descending 2.1% the previous week, pun intended. It is currently testing Wednesdays bullish engulfing candle but did meet precise resistance at its 50 day SMA Thursday. This group was instrumental in the beginning phases of the overall rally and their weakness may be some foreshadowing. Peeking at some individual names we all know the airlines have been fragile but the rails have been off as well. NSC lost value every day this week slipping more than 4% this week in the second heaviest volume of the last year slicing its 50 day SMA in the process. Looking at weekly returns was a bit suspect regarding leadership as the utilities led with the XLU rising 1.5% although it did shy away from the 52.10 cup with handle trigger that began last July. Some consumer plays are beginning to perk and below is the chart of IFF and how it appeared in our Wednesday 3/15 Game Plan. It displayed fantastic relative strength this week up 5.4% and is on a 5 week winning streak and the right side of the cup base has room to run after a break above a bullish inverse head and shoulders formation.

The Rounds Numbers Theory at Work

Healthcare has taken a well deserved pause this week with the XLV lower by .2% heading into Friday. It was preceded by a 6 week winning streak which rose by nearly 9%. Of course a rising tide lifts all boats, but the best of breed names advance more than most. Below we look at how the recent IPO AVXS could have been added to along the way pyramiding a position (I have NO position in the name).

In our Wednesday 10/12 the round 50 number was influential. Stocks that can be bought as they retest former breakout triggers are AVXS. AVXS is a recent healthcare IPO that has risen 171% since inception last February. It obviously has a small sample with earnings with last one higher by 16.4% on 8/12 and losses of 4 and 5.4% on 5/13 and 3/17. The stock is higher 2 of the last 4 weeks which is a bit misleading with gains of 26.7 and 15.3% ending 9/16 and 10/7 (the 3 weeks ending between 9/16-30 all CLOSED within just .51 leading to explosive last week jumping 15.3%). It screamed higher by more than 70% during a 7 week winning streak ending between 4/29-6/10. AVXS took out a cup base trigger of 47.86 in a 4 month base Monday and enter on a retest at 48. Notice the 50 number coming into play here.


Trigger AVXS 48.  Stop 46.

In Wednesday's 2/12 Game Plan the 60 number was examined. AVXS is a healthcare play higher by 24% YTD and 217% over last one year period (just turned one year old). Earnings have been mostly lower with losses of .9, 4 and 5.4% on 11/11, 5/13 and 3/17 and a big gain of 16.4% on 8/12 (it REPORTS 3/15 after the close). The stock is higher 5 of the last 9 weeks including a 15.9% gain week ending 1/6 and back to back 7% plus gains ending 1/27 and 2/3. It is now 18% off recent 52 week highs not long after an ugly bearish engulfing week ending 11/18 which fell 9.2%. The round 60 number has been problematic on a CLOSING basis with 4 session trading above intraday since 1/26 but no CLOSES. Enter above 60.25 and add to through cup base trigger of 72.82.

Trigger AVXS 60.25.  Stop 58.

Taking a present view on AVXS last night it rocketed higher and the 13 month old publicly traded name is up by 13% as of this writing. Since the week ending 12/23 it has benefitted from the rotation into healthcare rallying 35 handles top to bottom. The best course of action now is to wait to see if there is any digestion here of this big move and perhaps a flag formation at the round 80 handle will form over the next week. Be patient. Do not trade if there is no reason too.

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ChartSmarter Friday Game Plan 3/17/17

Markets spent the vast majority of Thursday in the red with the exception of the first half hour but losses were minimal. The Nasdaq was UNCH and the S&P 500 lost .16% and the Russell 2000 was higher by .2%. The latter is so far so good as it finished above its 50 day SMA for a second straight day, baby steps and the Nasdaq chart is looking more productive. It is now sporting a bull flag formation just above the round 5900 number and a break above 5920 carries a measured move of nearly 300 handles. Lets remember the tech rich benchmark is now going for a 11th consecutive Friday advance. For the week heading into Friday it has gained .6% and if it CLOSES in this area tomorrow it would form a bullish 3 week tight pattern. The S&P 500 is higher by .3% thus far this week and the Russell is looking to put an end to a 3 week winning streak and the week ending 3/3's bearish gravestone doji candle at all time highs looms large. Many traders I speak to are still looking for the pullback and the phrase I am hearing a bit if the old mantra that the markets take the staircase up and the elevator down. Truth is no one really knows but when I see guys I respect looking to back up their own bearish thesis mentioning 4 other well respected market participants confirmation bias is rearing its ugly head in a bad way. This was supposed to be a rocky week with Yellen, Dutch elections, but the markets keep beating to their own drum. Enjoy the ride while it lasts. Looking at individual sectors Thursday one would have thought the damage would have been more noticeable in the major averages as there were some sizable losses with healthcare and utilities falling in the 1% neighborhood. There was a bit more healthy leadership today with the financials and tech number one and two and below is a chart of a good looking tech chart that we highlighted in our Friday 3/10 Game Plan. It demonstrated solid relative strength today as it distances itself from the round 30 number.