MLR - PMP 5/20/14

Published : May 20 2014 at 8:42 ET

Major averages rose yesterday on lower volume. The NASDAQ Composite is inching towards its 50-day moving average while the S&P 500 and some European bourses are less than 1% off their respective all time highs. The markets remain choppy as major indices attempt recovery, spurred by quantitative easing.

Gentherm (THRM) had a pocket pivot coming out of the sideways pattern it formed after it gapped up on strong earnings. Institutional sponsorship has increased 5 quarters in a row, sales are accelerating, earnings are robust, group rank 6.

Biotech Intermune (ITMN) had a pocket pivot which also coincided with a base breakout and buyable gap up. Sales have been accereatling stratospherically, group rank 43.

Illumina (ILMN) had another pocket pivot yesterday as it tries to round out the lows of a new base. The stock had a pocket pivot seven trading days ago that came up and off of its 10-day moving average, and yesterday's pocket pivot occurred as the stock came up above its 50-day moving average.

Stocks that are exhibiting buy signals are the first names to consider on the long side should the market shift into a rally phase. In particular, "roundabout" formations where leading stocks are rounding out the lows of a prior base. In some cases, stocks that appeared to be forming right shoulders within a possible head and shoulders formation can begin to show more constructive action that is consistent with a "roundabout" formation. In this manner a bearish chart formation can morph into a constructive one, and investors need to keep an open mind with respect to properly interpreting the action without being locked into a solely bearish frame of reference.

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