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Swing Plays - May 18 - One has to go with what seems to be working currently (retail, software, healthcare, and oil exploration) when they show up.

These articles describe the statistical probabilities of long positions on these equities, based on neural net projections, for the next 5-15 trading days. These are not holy grail methodologies, the road to easy street, or anything else. These projections are the result of screening for technically significant retracement and momentum patterns that have been further screened for value and bullish sector performance. In other words, the projections are for long positions.

For 05/09/2007:

                                        $INDU            $SPX                $COMPQ
Monthly Momentum    Positive         Positive           Positive
Weekly Momentum     Positive (OB)Positive (OB) Negative
Daily Momentum          Positive         Positive           Negative

Note: (OS) means oversold and (OB) means overbought. The value to price estimate (it is not a guarantee, only a cash flow based estimate) can be defined loosely as a multiplier of price. A number higher than one means the stock is undervalued using this model and a number less than one means the stock is overvalued.

Stocks fought off early selling and attempted a late day rally in the U.S. equity markets yesterday, but did not quite make it back to breakeven on the day. Patterns were once again quite scarce.

Retail sellers of all stripes, from food to computers (WFMI, DKS, SHRP, and SCSC) made the top of the list, and one computer systems maker (DBD) also hit the list. Homebuilders continue this complicated bottoming process (HOV). Healthcare REITs (HCP) also made the list. Oil ETFs (USO), internet business (TSCM), insurers (FNF), drug makers (NOVN), and business services (FCN, MCO) also hit the screens. The lone food related stock was JSDA, which reversed to the upside after several days of selling pressure.

In the end, only one stock made the list, and though the statistics are not the highest, the pattern does look good, and the fundamentals are in good shape.

Here is what the nets saw today:

Light trading volume, higher oil prices, and Fed Chairman Bernanke’s comments on home sales probably kept bullish action in check in the U.S. equity markets on Thursday. Prices universally seem extended in most sectors, and patterns continue to be scarce. Retail stocks (BONT, ANS, and CHS) and building construction (MHO, LII) continue to hit the bullish reversal list, along with software (this time, gaming-related, like ATVI and THQI). Petroleum drilling (UDRL), mining (AUY), insurance (ACGL), home furnishings (LCUT), healthcare (DVA), credit services (CYBS), business services (PRAA) rounded out the list.

The statistics are better than average today.

Here is what the nets saw today:

                           Value/Price est.   7 day ATR   %( 7 day ATR)/Close

UDRL 4.41.1 62.5%                1.88            0.59      3.95

BONT 3.29/1 43.8%               1.89            2.01      4.04

DVA 2.79/1 69.0%                 1.65            1.05      1.97

That’s it for now. One has to go with what seems to be working currently (retail, software, healthcare, and oil exploration) when they show up. These stocks are extended somewhat too, so caution is advised. The homebuilders are in a very complicated (not incomplete) bottoming process currently. We will have to wait for some better patterns (and perhaps fundamentals also) before endeavoring into that sector.

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