Market Lab Report - Weekend Review of Pocket Pivots Reports for the Week of July 18-22, 2016
Trading journal notes from Gil and Dr. K regarding this past week's pocket pivot reports. Note that several of these cover stocks that have been our our VoSI Focus List of prior pocket pivots and buyable gap-ups for some time now.
GM - FB is expected to announce earnings after the close on Wednesday, so it is questionable as to whether one would want to take a position here and then seek to play "earnings roulette" on Wednesday. Overall, however, the action ahead of earnings is constructive as FB not only flashed a pocket pivot this past Monday which we reported on, it also flashed a pocket pivot on Friday as it found support on a pullback to the 10-day line.
Dr. K - FB has gapped higher over its last three earnings reports. It is due to report again this Wednesday. Recent price/volume action has been supportive as it has had two pocket pivots. Earnings and sales have accelerated nicely, and institutional sponsorship has grown in every quarter since the company went public.
Ollie's Bargain Outlets (OLLI)
GM - OLLI has pulled into its 10-day moving average on volume that was -68.9% below average on Friday. This brings it into a lower-risk buy area at the 10-day line.
Dr. K - Even during normal markets, retail stocks are often better bought on pullbacks. OLLI is in a lower risk position near its 10-day line.
GM - TRU is holding tight along its 10-day moving average. Earnings are expected to be announced this Tuesday, so one might wait to see what develops after earnings are out, but so far the action is constructive.
Dr. K - TRU had two recent pocket pivots and has gapped higher after the last three earnings reports. While odds favor a positive response after it reports earnings this Tuesday, always remember to position size for the worst case scenario which would be a surprise gap down.
New Oriental Education and Technology Group (EDU)
GM - EDU is something of the "comeback kid" as it has recovered both from a severe, high-volume breakdown in early June as well as an initial downside breach of the 50-day moving average early on Friday. However, that morning move lower reversed back up through the 10-day, 20-day and 50-day moving averages in a strong reversal back to the upside. This resulted in a nice pocket pivot breakout, and the stock has held up very tightly along the left-side highs of the prior base as volume dries up. This looks buyable here with the idea that it should hold above the highs of the prior base.
Dr. K - We sent a report out on how to handle this stock had one bought it on its pocket pivot prior to its earnings report. It has since had two constructive pullbacks on lower volume back to the top of its prior base. It is therefore not necessary to wait for it to pull back all the way to a moving average before buying.
Eagle Materials (EXP)
GM - EXP broke out on Wednesday on a pocket pivot move. This stock tends to have flashes of strength followed by pullbacks so I'd look to enter here on a pullback to the 10-day line at 81.29.
Dr. K - This stock is extended relative to its normal price action, so one should wait for it to trade closer to its 10-day moving average before taking a position.
Ubiquiti Networks (UBNT)
GM - Last weekend we discussed the constructive action in UBNT, and after briefly testing its 10-day moving average on Tuesday the stock broke out on Wednesday. It is holding tight along the highs of the base and is in a buyable position. More opportunistic buyers might wait to see if a pullback to the 10-day line at 40.37 ensues, but the stock is technically in a buyable position right here.
Dr. K - UBNT has a strong pattern including three gaps higher on its prior three earnings reports. Buying on pullbacks over the last two trading days were reasonable buys as it pulled back to the top of its base. Thus it was not necessary to wait for it to trade down to its 10-day line.
Vuzix Corp. (VUZI)
GM - Feeding off the virtual reality frenzy being created by the Pokemon Go phenomenon (see our Pocket Pivot Report from Friday), VUZI has tried to get going three times by posting three pocket pivots off the 10-day line over the past eight trading days. Each one has occurred on successively higher volume, but the first two were immediately followed by above-average selling with the day after the second pocket pivot trading heavier selling volume. Notice, however, that the day before Friday's pocket pivot, VUZI traded very light, below-average volume. I mentioned this stock at that point in our Thursday live webinar. I would look to buy any little pullback in this thing this week should that occur. It will be interesting to see whether VUZI can catch a tail-wind here and breakout through the low 8 price area.
Dr. K - This stock reminds me of the tech stocks of the late 1990s - a great story with solid technical action and a big move higher on Friday with the highest volume in its trading history. While such stocks in this QE environment are rare, this stock is a leader in its space and augmented reality's potential is massive as it has proven itself with Pokemon Go. I've tested it out myself here in Ireland, and the psychology that drives the game is impressive. It's not hard to see why it's sweeping the world. It also brings people together as it's very obvious when someone is using their smart phone to play this game. Already, many meet ups are forming globally. And the game requires one burn a lot of calories covering good distances, so it should help contribute to overall fitness among the tens of millions that are playing it, with nearly ten million of that total coming from the US.
This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.