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Neural Net Swing Long Selection Of The Week….With A Word Of Warning 4/27/2015

John Belushi as Bluto in “National Lampoon’s Animal House”

 

 

My partner and I are still struggling in certain aspects of our automated trading models (something that is, sadly, out of our control at the moment). I am reorganizing the marketing effort, and I will find a way to get targeted traffic back.

  I think I heard someone out there say “Whud’the hell we sp’osed to do y’moron?” I decided to watch a favorite motivational speech.  Did you think that would stop ME from continuing?

The one favorite that the neural nets liked today was Hartford Financial Services (HIG). The way I have the net cash flow from operations estimated for the company, it’s value 2 years from now should (NOT WILL) be about 47% higher than it is now (1.47/1). The trail of long signals created by this model has an aggregate profit factors of $2.86/$1 ($2.86 made for every dollar lost in a trade, and the average win/average loss in this same signal progression is $1.72/$1 (the average winning trade wins $1.72 for every dollar lost in a losing trade).

Here is the problem, and why there is a WARNING with this particular stock. 1) Earnings will be announced after the close tomorrow. Estimated earnings per share is supposed to be $0.97/share. Whispers SEEM to indicate that it could beat those estimates by 2 cents/share, and there are analysts out there like Goldman Sachs recommending purchase. The company is trying to shore up its operations by offering specialized insurance products, but it is moving into areas of catastrophic protection that can be quite risky. Some of those risks may be discussed by management tomorrow and might have some impact on earnings tomorrow as well.

Let’s take a brief look at a daily and monthly chart of HIG.

HIG Monthly with Fibonacci ConfluenceHIG Daily with Gartley Pattern

On the bottom chart, you can see the almost perfectly symmetrical bullish Gartley pattern on the HIG daily chart, with the proper volume, price reversal and reversal of momentum. If you look at the top (monthly) chart, you can see that the stock has had one heck of a nice rally since March 2009, and is running into a little bit of bearish confluence with the 0.681 retracement levels of the large bear downswing from 2008 to 2009. Though Goldman Sachs forecast a price target of $49 in the stock, it is nearing once major confluence level this very week, and would meet another significant one at the $53 area (roughly. I could calculate it exactly, but I think there is enough concern about the earnings that the additional pattern evidence builds another case against being long for now).

If it were me, I would place HIG on a watch list and stand down until earnings hit. I can discuss this later in the week. What is interesting is that since that bottom in 2009, about 3/4 of the dips on the daily charts that meet Fibonacci criteria and the neural net pattern identification criteria were winners for HIG, but we could be nearing headwinds. I remember commenting on IBB late in the fall on StockTwits that it might also hit some headwinds, and it did for awhile, and then suddenly broke through. With all the new product developments and merger talk, these stocks hit rarefied air. 

There are still rumblings in the natural gas drilling sectors, but none that look that fantastic yet. CFG continues to remain firm despite the crazy volatility we have had recently. If you have a breakeven stop and are riding it, I would continue to hold it until it tags the 25.84, and then decide to take additional partial profits or leave the position altogether, depending upon the size of your position. I will find other swing candidates as time goes on.

Remember three things:

1) If you want the newsletter that will be coming in the future and you want to see the posts as they are published. Go to the top right of the blog page and add your email address.

2) If you need help with a TradeStation EasyLanguage trading model, you can get programming help from Bruce Linker at www.linkertrader.com. Bruce appreciates your business!

3) I am in the midst of getting training on how to market this blog and any redesign of it. I will very shortly post a video and a survey to get your ideas as to what YOU want to see. If you have ideas, send them along to buffalotrader100@gmail.com .

4) Thanks to everyone for supporting this blog! I especially want to thank the 12 of you still receiving my posts via feedly.com. I used to have a flood of RSS users back in the day. Its good to know that the hardcore never leave their stations!

More is coming, thanks again for your patience.

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