Market Lab Report - Weekend Review of Pocket Pivot and BGU Reports for the Week of August 22-26, 2016

Published : August 28 2016 at 6:08 ET

Trading Journal notes from Gil and Dr. K regarding this past week's Pocket Pivot and Buyable Gap-Up reports:

Line Corp. (LN)

GM - LN had a pocket pivot on a trendline breakout three Fridays ago (11 days ago on the chart) as it emerged from an "IPO U-Turn" formation. The stock ran up sharply from there but was unable to hold the pullback to the 10-day moving average on Tuesday. This set up a retest of the prior pocket pivot/trendline breakout down in the 42 price area and presents a lower-risk entry point right here using the Thursday intraday low as a tight selling guide. 

Dr. K - LN's pocket pivot was extended but has since pulled back along with many other "frothy" stocks offering up a possible buying opportunity. Watch for tighter, low volume days to further confirm it has found a floor.

Talend S.A. (TLND)

GM - TLND is an interesting new cloud-related name that came public in late July, so it is quite "fresh." And with great freshness comes great volatility as TLND shows a tendency to move 20-30% in a matter of 1-3 days, up and down, prior to posting a pocket pivot along the 10-day line on Monday of this past week. TLND gapped down on Friday after reporting what was initially interpreted as a weak earnings number Thursday after the close. However, note how the stock undercut the prior low of the week before and then rallying to close near the peak of its daily price range on heavy volume. This is a classic "undercut & rally" move as I discuss in our live webinars, and represented a potential entry point for those who are both enterprising and risk-oriented. With the stock just below its 10-day moving average, I would watch for a retest of Friday's low on declining volume as a potential new entry point, perhaps down to the 20-day moving average at 27.10.

Dr. K - TLND is in a state of greater volatility but given its fundamental story, it holds good potential, so watch for a constructive pullback in the way of tighter trading ranges and lower volumes. 


Mobileye (MBLY)

GM - MBLY gapped up on Tuesday when it announced that it was teaming up with Delphi Automotive (DLPH) to develop a fully autonomous driving solution by 2019. The gap-up ran into resistance along the prior recent highs in the 50 price range, which seems somewhat normal. Thus while the BGU failed in short order, the ensuing pullback actually served to fill the gap and bring the stock right into its 20-day moving average as selling volume dissipated, a positive sign. The stock looks buyable here using the 20-day line as a nearby selling guide if it fails to hold up.

Dr. K - Convergence of the 10- and 20-day moving averages is strong support, also helped by the 50-day line which is fast catching up. Undercutting the 50-day line can serve as a stop. On Monday, the 50-day line should be around 46, a price level which serves as support. 


Square (SQ)

GM - SQ is an interesting new-merchandise play that came public last November. I first discussed this as an extreme "Ugly Duckling" bottom-fishing play around the 9 price level in our live webinar series back in late June/early July of this year. The stock tends to be a little volatile, and is best bought on pullbacks. Even though it failed to hold the 12.15 intraday low of Tuesday's buyable gap-up move, I like it here along the 10-day line on this pullback with the idea that it will continue to hold above the line from here.

Dr. K - SQ has held its 10-day moving average since July. An undercutting of Friday's low of 11.91 along with the 10-day line which is roughly at the same level can be used as a stop. 


Three D Systems (DDD)

GM - 3-D printing stocks have been down and out for a long time, and DDD is showing some signs of trying to come out of its long decline with a pair of pocket pivots along the 10-day line. DDD has been trending higher since posting its extreme lows at the 6 price level in January of this year. Earnings are starting to turn, with the company posting 300% earnings growth in its most recent earnings report. Next quarter the company is expected to post nine cents in earnings, representing 900% growth over the same quarter a year ago, so it does have some turnaround potential.

Dr. K - DDD is a potential turnaround play with its earnings have reached a nadir 4 quarters ago of 0.01 but since has jumped higher the last three quarters. With its price action earlier this month on a strong earnings report, it has since traded in a tight, sideways manner up until its two pocket pivots. Such BFPPs (bottom fishing pocket pivots) can sport significant gains over a short span of time. 


Eagle Pharmaceuticals (EGRX)

GM - An interesting little bio-tech, EGRX had a big-volume pocket pivot on a gap-up move on Tuesday but reversed back into its 200-day line on Wednesday. It held the line on Thursday on a stalling sort of pocket pivot. This is in a lower-risk buy position here using the 200-day line as a guide for a tight downside stop.

Dr. K - EGRX gapped higher on its prior earnings report and has consolidated over the last two weeks with lower volume on down days. It has been using its 200-day moving average as support, so a break below this support would constitute a good sell stop. 


Tesla Motors (TSLA)

GM - This was looking like a pocket pivot in the making on Tuesday, but the stock closed near the intraday lows and as far as I'm concerned is off the table as a buyable situation. In fact, with the stock drifting back below the 50-day line it is starting to look like a potential short-sale target more than a long-side candidate.

Dr. K - The weak close on its pocket pivot was a clue, thus it could have been sold the next day when it closed under both its 10- and 20-day lines. 


Drew Industries (DW)

GM - DW had a continuation pocket along the 10-day moving average on Thursday, which comes on the heels of its early August pocket pivot on a flag breakout. The small pullback on Friday into the 10-day line puts it in a lower-risk buyable position along the 10-day line. 

Dr. K - We first mentioned DW when it had a pocket pivot on Aug 4. Friday's pullback offers a lower risk entry point close to its 10-day line. 


Boston Scientific (BSX)

GM - This name lacks dynamism as far as I'm concerned and I wouldn't waste my time with it. I prefer more dynamic, newer-merchandise names that are less snail-like.

Dr. K - BSX is a slower mover but for those more prone to lower beta names, dont expect big gains, but your risk is also mitigated, using an undercutting of its 50-day line as a stop. 


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