The list was somewhat lackluster yesterday with only a few standouts that took off right from the open which made them hard to own; Google Inc (NASDAQ:GOOGL), Baidu Inc (NASDAQ:BIDU), Natus Medical Incorporated (NASDAQ:BABY) were the few that stood out.
The market is gapping higher this morning and will become officially overheated today by the close based on one of Pradeep Bonde most trusted indicator. What you usually see when this indicator flashes a caution signal is junk stocks start to fly for the next few days and then you see choppiness / retracement over the next week or so. So far this year this indicator has flashed a signal on (1/2-1/3), ( 1/8-1/23), (2/25), (3/3-3/12), (6/18-6/19),(6/30, – 7/2). This signal is most dangerous and actionable shorting wise when it persist for a few days like it did at the beginning of the year. But at the same time it provides a big opportunity for oversize gains in what many consider junk stocks. I will keep you updated on this indicator.
The watch-list today is rather short and based on this morning gap up I would assume not many will be actionable;
Tonix Pharm (NASDAQ:TNXP)
Harvest Natural Resources Inc (NYSE:HNR)
BofI Holding Inc (NASDAQ:BOFI)
Panera Bread Company (NASDAQ:PNRA)
TripAdvisor Inc (NASDAQ:TRIP)
lululemon athletica inc (NASDAQ:LULU)
Ulta Salon Cosmetics & Fragrance (NASDAQ:ULTA)
Whole Foods Market Inc (NASDAQ:WFM)
ChinaCache International Holdings (NASDAQ:CCIH)
Leju Hld Lt (NYSE:LEJU)
Kandi Technologies Group Inc (NASDAQ:KNDI)
Qihoo 360 Technology Co Ltd (NYSE:QIHU)
Care Com In (NYSE:CRCM)
Zillow Inc (NASDAQ:Z)
Every morning I go through a few of my scans to find buy candidates for the day. Depending on the current state of the market the size of the list will vary, usually its no more than 50 names. My process is based on market structure not on beliefs or myths of what works– or what doesn’t work. They are certain behavioral patterns that have been around for 100 years that are based on market structure, these behavioral patterns are recognizable, observable, and quantifiable. On daily basis we have 5,000 stocks that we filter based on certain market structures that gives us an edge of a higher probability than a random outcome. Once the list is narrowed to a handful of names the market will further narrow down the list by getting us in or keeping us out of these names with a range expansion move.
I don’t look at charts in your conventional cookie cutter manner, or have rules as to where the stock should be whether its 15% off its 52 week highs or above or below certain moving averages etc…
These are what I consider “tight set ups” that will trigger a buy signal for me if and only when they break the previous day’s high. On a regular trading day I would indiscriminately take every trigger because you just don’t know which one will be the big winner, you might have an idea but in the end you don’t know.
How much you put at risk per trade depends for the most part what your current outlook is for the market over the next 0-5 days.
Put these names on your trading platform, set the alerts at yesterday’s high for each name, once the alert goes off take a look at the chart, decided within 3 seconds whether or not you are going to buy it, decide how much you want to risk on the trade and your stop loss, hit the buy button, and leave the rest up to the market, wash, rinse, repeat.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.