MLR - PMP 11/6/13
Major averages closed mixed, near breakeven, on higher volume. Action among individual stocks was also mixed as decliners led advancers on the NYSE by over 2 to 1, while NASDAQ decliners led advancers yesterday, 1475 to 1076. Futures are up this morning after Fed head and President of the Federal Reserve Bank of San Francisco John Williams stated that stocks are not overvalued. Williams has been a long-standing cheerleader for the Fed's aggressive money-printing policies.
Tesla Motors (TSLA) had a pocket pivot coming up through its 50-day moving average yesterday before it reported earnings. If one was intent on playing "earnings roulette" appropriate position sizing was advised. Earnings and sales came in ahead of expectations, but the company fell short on whisper numbers on the 5,500 Model S sedans it delivered in the quarter. Given how far TSLA has risen, the market is not forgiving as it expects TSLA to beat all estimates and whisper numbers. TSLA is currently trading down about 10% in the premarket. While TSLA may base, recover, then set new highs, it is impossible to know if TSLA heads lower after this morning's gap down today or in ensuing days. That is to say, given its huge run up, the depth of the base it forms from peak to trough is impossible to predict. Thus, when a stock gaps down, it is usually best to sell at the open, then wait for the base to form, and buy points to emerge.
Jazz Pharmaceutical (JAZZ) had a pocket pivot yesterday after announcing earnings. Pretax margins come in at a strong 52.3%, ROE is a very healthy 44.2%, and group rank is #28. Keep in mind the market makers in this stock sometimes let it trade sloppily where the slippage can be well beyond the norm, so position size accordingly.
Luxury retailer Michael Kors (KORS) had a buyable gap up after a strong earnings report. KORS continues to maintain an outstanding ROE of 52.9%. This is another stock that tends to trade in a sloppy manner so position size accordingly.
Regeneron Pharmaceuticals (REGN) had a pocket pivot yesterday after a strong earnings report. REGN has strong profitability with an ROE of 61.3% and pretax margins of 38.5%, while the bio-tech group still ranks a strong #4 among all industry groups. It tends to violate its 50-dma so position size accordingly. We have reported on REGN in prior reports.
Facebook (FB) came back to its 50-dma after having a pocket pivot as a result of its earnings report. One sell stop could be just under the low of its pocket pivot day. A more relaxed sell stop could be a violation of the 50-dma. A violation occurs when the stock closes below the moving average, then trades below the low of that day in subsequent days.
This morning Zillow (Z) is set to gap-up after reporting earnings yesterday after the close. We will report on this later once we can determine the actionability of the move as a buyable gap-up, but so far it looks to be shaping up as one once it is possible to determine the intra-day low for the stock.
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