MLR - PMP 8/1/13

Published : August 1 2013 at 9:30 ET

Fed chief Ben Bernanke said the economy is growing modestly and that the Fed will keep buying $40 billion a month in bonds.This dovish tone did not help the markets which gave back their gains with the NASDAQ Composite adding an additional distribution day in the form of a stalling day which occurs when there is little price progress on high volume. The S&P 500 closed near its low to finish the day just in the red, also on higher volume. In classic QE fashion, however, futures are up this morning on improved manufacturing news out of China and a drop in U.S. jobless claims.

Yesterday's economic news was mixed as GDP growth of 1.7% in the second quarter topped views for 1.1%, and the ADP's private payrolls report was better than expected, but the Chicago PMI number was below expectations. As we know, if the economy shows recovery, the Fed will slow quantitative easing sooner than later which could upset the markets. In some sense, the markets are treading a fine line.

Vipshops (VIPS) has been one of our best performing stocks since we reported on its pocket pivot of July 15th. The company is a Chinese online retailer offering branded apparel at low prices offers nearly 2000 well known and popular brands at 50-70% off the retail price. Industry group rank is 8, earnings and sales have skyrocketed with earnings up 168% and sales up 207% in the most recent quarter. Institutional sponsorship has grown over the last 5 quarters since the company went public. This stock, a few months after it went public, soared from 6 to 38 a share. It then consolidated its massive gains then issued a pocket pivot buy point on which we reported to our members on July 15 when it was trading around 32. It has appreciated about 33% since, currently trading around 42. It’s a fast mover indeed. That said, one must be careful about Chinese stocks since a number of these are failure prone despite stellar looking fundamentals which calls into question corporate accounting standards in China. Nevertheless, when VIPS more than proved itself by rocketing from 6 to 38, the pocket pivot buy point at 32 was warranted. If you bought a position on the pocket pivot we sent out, and if this stock is a true leader, it may issue another buy point after the current consolidation.

Invensense (INVN) had another pocket pivot on a strong earnings report. It has an excellent story as we've reported on this stock in prior reports. Given how much it was up on the day, it is extended so if you missed the buy, any constructive pullback on low volume could be bought.

We reported on Lumber Liquidators (LL) on July 19 when it had its pocket pivot. Since then, it had a buyable gap up on strong earnings on July 24, then undercut the low by 1.34% which was not enough to warrant a sell as it is generally good to allow most BGU stocks to undercut their lows by 1-2%, and maybe even as much as 3% if the stock is particularly volatile or if the stock gapped up after coming straight up from its bottom. It was up again yesterday on increasing volume, always a good sign.

Canadian Solar (CSIQ) had a pocket pivot yesterday coming out of a short flag. CSIQ has rocketed and earnings are expected to turn positive in two quarters. Such earnings action usually bodes very well for stocks in hot industry groups that carry high relative strength in their price action. Sunpower (SPWR) announced earnings yesterday after the close and is currently roughly unchanged from yesterday's close.

This morning we see gap-ups in Trulia (TRLA) and Yelp (YELP). YELP appears to be in an extended position while TRLA is emerging from a short flag formation after breaking out of a cup formation about three weeks ago. If we believe any of these become actionable during the day we will issue reports as appropriate.

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