Swing
Plays - ISE MATW PNRA
Dec 18, 2006
- double bottom
patterns in context of a major retracement are liked by the nets...
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 12/18/2006
$INDU
$SPX
$COMPQ
Monthly Momentum Positive (OB)
Positive (OB) Positive
Weekly Momentum Neutral
Positive
Negative
Daily Momentum Positive
Positive
Positive
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.
Quadruple witching drove volume early in the day Friday, but the
U.S. equity markets basically scooted (how’s that for a technical analysis
term?) only slightly higher on all the increased volume. Only about 120
patterns made the initial screen, and most of these patterns (with the possible
exception of some of the healthcare names, were essentially bullish extensions
of previous support. Specialty chemicals showed up in large numbers (CBT,
OMG, SMMX, and SEH), as did drug and healthcare stocks (ASPV, MRK). The
exchanges (BOT, ISE) also made bullish reversals. Leisure stocks (ISCA) and
restaurant stocks (PNRA) also made the list. The lone transport issue was DSX,
and the lone gas utility was ATO. The lone internet service name was GMKT.
Though the pattern was interesting, the nets did not like the set-up. MATW was
definitely not dead, however, as it screened rather positively with the neural
nets.
Typically, double bottom patterns in context of a major
retracement are liked by the nets, but for some reason the nets just did warmed
up neither to ISCA nor CBT. Both also exhibited somewhat higher than normal
volume on the reversals. Regardless, to be consistent with the analysis, these
stocks were dropped from the final screen.
Here is what the nets saw today:
Value/Price estimate 7 day ATR %( 7 day ATR)/Close
ISE 4.56/1
83.3%
0.91
0.98
1.97
MATW 3.12/1
71.4%
1.62
0.81
2.08
On the bare fringes of acceptability:
PNRA 1.34/1
64.8%
1.24
1.20
2.15
That’s it for now. Our department of redundancy department has
advised us not to use the terms overbought or hyper-extended again to describe
these markets (though I just did). We perhaps may continue to see some of the
deflated IPOs (like EICU) turn up on new business contracts (some of which get
announced at this time of year), but sector leadership is still squirrelly. The
drop in natural gas prices apparently allowed specialty chemical stocks to
shoot up like bottle rockets in this last rally. To expect these stocks to
extend long rallies may be asking a bit too much. Still, stranger things have
happened, so we must continue to scope out the patterns.
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