Market Lab Report - Premarket Pulse 12/8/15
Major averages fell yesterday on mixed volume. The price of oil continued to plunge, sending stocks lower at home and abroad. The Commodity Research Bureau Index (CRB) is now a hair away from lows not seen since the early 1970s. This confirms the ongoing global economic malais.
Airline Jet Blue Airways (JBLU) had a pocket pivot on a base breakout as airlines are perceived to benefit from lower oil prices. Earnings are soaring, group rank 37. The price of oil continues to trend lower which is bullish for the airlines.
Heating and A/C service company Select Comfort (FIX) had a pocket pivot. It gapped higher on its prior earnings report, earnings are strongly accelerating, group rank 78.
The success of recent pocket pivots and buyable gap-ups has been dicey at best, with most names going nowhere while some have moved slightly higher and others have moved lower. In an environment where making big money is difficult to pull off, investors have to adapt by taking smaller positions and keeping tighter stops. We tend to think that the standard O'Neil dogma of a 7-8% downside stop is too large in this environment. Investors who wait this long to sell stocks are probably down for the year in 2015 as losses can build up rapidly if one is sitting around waiting to get hit 7-8% before dumping a position. Therefore, it is far more prudent to use nearby moving averages, generally the moving average or moving averages from which the pocket pivot originated, as tighter selling guides.
Both Apple (AAPL) and Tesla Motors (TSLA) remain short-sale targets, with AAPL showing resistance at the 120 price level while TSLA's resistance lies at the 200-day moving average, currently at 234.10. Shorting as close to these levels of resistance as possible is optimal, while they also serve as guides for tight upside stops.
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