Major market averages rose on mixed volume yesterday as they recovered from three prior down days. The market had two bullish events yesterday that favor continued quantitative easing. The producer price index rose 0.3% in October, the lowest reading in four years. Low inflation gives the Fed more room for prolonged easing. The Senate panel also approved Janet Yellen's nomination to head the Federal Reserve. Yellen is associated with easy-money policies so is expected to continue Bernanke's program of QE that began in 2009 at similarly aggressive and prolonged levels.
Illumina (ILMN) had a pocket pivot yesterday. This comes after a gap up on a strong earnings report last month. While sales have somewhat accelerated, earnings have been relatively tepid so this stock may continue its slower ascent. Position size accordingly.
Big semiconductor stock Micron Technology (MU) also had a pocket pivot yesterday. MU has had strongly accelerating sales and earnings. It has, however, violated its 50-dma once in recent history. As well, the stock tends to be a slow, big-cap name, so position size accordingly.
Splunk (SPLK) is set to gap up this morning after a strong earnings report after-hours yesterday. Earnings are just turning positive. SPLK is the 'Google' of the business world. It is a search engine and analytic software program for a company’s IT data. It tracks customer behavior, user transactions, security threats, and more, and uses a company's IT data to help the decision making process. It holds agreements with a number of major companies. We have reported on SPLK in past reports.
Pandora Media (P) announced earnings yesterday and is trading up about a point pre-open. The stock had a pocket pivot breakout four days ago and since has traded back down to its 10-day moving average. However, positive action today keeps the stock in play as a pocket pivot breakout with the idea that it will continue to hold above its 10-day line.
Pocket pivot and buyable gap-ups have had an uneven record of success over recent days, so investors should keep their stops in mind and act quickly if a particular pocket pivot or buyable gap-up fails.