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Weekly Reversal Report For 6/15/2015: One Potentially High Risk Swing Trade Is Something You Should $PAY Attention To.

Apple Pay Cartoon from News Cloud Productions for Amazon News

 FULL DISCLOSURE: I am NOT currently a shareholder of PAY, but I do have a private investment that relates to patentable aspects of Apple Pay that is NOT a public company, and which could ultimately NOT benefit from that patentable aspect. PAY’s earnings will not benefit me directly one way or the other. I do want to make sure I point that out. The selections made here are based on computer models and not my personal whims. I just call them as my computers and I see them.

There was a cartoon showing a member of ISIS accepting Apple Pay, but I REALLY didn’t want to go there. At least I got a late jab at Halloween 2014 (or early jab, if an uninitiated reader is early for Halloween 2015). I would do my own cartoons, but then you would have to use Apple Pay before READING this blog. After all, we bloggers are all starving artists, you know.

As I am in the midst of a couple of projects (including one home improvement project), I will make this post short and sweet. I will summarize what has gone on in this blog since the end of March, good bad or indifferent, later in the week, including the stop out on JBLU, which did bounce back, but, if one is rules based, one was nonetheless stopped out. Wishful thinking only leads to larger losses, which is why stops should ALWAYS be used in swing trading.

Here is a list of Friday’s survivors:

L G Display,         LPL,   xN, Electronic (Misc Products)
Micron Tech,       MU,    xO, Electronic (Semicndtr Mfg)
Arris Grp,            ARRS, xO, Telecomm (Equipment)
New Residential, NRZ    xN, REIT (Mortgage)
Delta Air Lines,   DAL,   xN,  Transportation (Airlines)

Amer Axle,           AXL,   xN,  Auto & Truck (OEM)
Verifone Hldgs,    PAY,   xN,  Business Svc (Misc)
NXP Semi,            NXPI, xO,  Electronic (Semicndtr Mfg)
Chicago B&I,CBI,xN,Building (Heavy Constr)
Ross Stores,ROST,xO,Retail (Apparel)
Vodafone GpADR,VOD,xO,Telecomm (Cellular)
Coach Inc,COH,xN,Retail (Apparel)
Luby’s Inc,LUB,xN,Food (Restaurant)
JP MoganAlerian,AMJ,xN,ETFs (Sector\Energy)
Alerian MLP,AMLP,xN,ETFs (Sector\Energy)
Ares Capital,ARCC,xO,Market (ClsdEndFndsDom)
Spdr BarCap,SCPB,xN,ETFs (FixedInc\Treasury)
iShr Silver,SLV,xA,ETFs (Commdty)\Futures)
Boardwalk Pipe,BWP,xN,Petroleum (Prod\Pipeline)
Mead Johnson,MJN,xN,Food (Prepared)
GoPro Inc,GPRO,xO,Electronic (Misc Products)
Plains AllAmer,PAA,xN,Petroleum (Prod\Pipeline)
Duke Energy,DUK,xN,Utility (Electric)
Senior Housing,SNH,xN,REIT (Equity)
GrubHub Inc,GRUB,xN,Internet (Svc Provider)
Momo Inc,MOMO,xO,Business Svc (Misc)
Gen’l GrthPpty,GGP,xN,REIT (Equity)
On Deck Captl,ONDK,xN,Financial (Savings&Loan)
Pandora,P,xN,Internet (Software),Internet
Kinder Morgan,KMI,xN,Petroleum (Prod\Pipeline)
Range Res,RRC,xN,Petroleum (U S Explr\Prod)
Yelp Inc,YELP,xN,Business Svc (Printing)

CBI almost made it, but was lacking volume. After value, momentum, volume, and price pattern screens were finished, the neural nets only liked one name, and it is somewhat of a wounded duck with a lot of future potential. Verifone Holding, Inc. made the final cut.  The profit factor was 3.83/1 for swing longs, with 83.3% of the trades being winners. The one slightly lacking factor was that average wins were 0.63 the size of average losses. The Beta (as compared to the $SPX) is 1.82 (meaning it is 82% MORE volatile that the S&P 500 index), so the ride could be a bronco ride.

The negatives ( basically 5+ months of money losing quarters) are summarized in a Wall Street Journal article. The good to positive news was that Verifone Holdings Inc. (PAY) made a little money and beat street estimates in Q2 2015. Verifone Holdings is indeed a play on the retail expansion of Apple Pay, a collaboration with Visa Holdings to expand Apply Pay and Android Pay into China and other overseas markets, as well as to expand store rewards via the Apple Pay app. There are a lot of moving parts to this story, but the stock reacted by swinging higher on a truly rotten trading day for bulls on Friday, June 12, 2015 on volume that exceeded 150% of its 50 -day simple moving average of shares traded. That tends to ring a bell with the neural net models, and in this case, it seems to like the set up. For a summary of potential growth (and yes, I know it comes from Seeking Alpha, but at least the data is summarized nicely), read this article. There is considerable controversy over what gets published there ( as many contributors are paid), but if I can find relatively generic content that does not amount to total fan-boy (or fan-girl) bloviation, I will reference it.

If (and I think, despite performance and prospects), $PAY can hit the numbers in that most recent article above, there is considerable chance that it could tag out somewhere between $39/share and $43/share. If $PAY screws up, it could get nasty, but with all the balls in the air seeming to bounce its way for the moment, (and price patterns tending to agree with that bounce). It does seem feasible. Lets look at this chart to see if we can get a bead on an immediate price target in that 5 to 15 trading day trading window.

To summarize the targets (and I can elaborate later in another post)

Target 1: 38.08 roughly, but I would accept a penny below the round $38.00 level at $37.99 to get a fill.

Target 2: $39.25

Target 3: $40.15

Can PAY go higher? It could, but remember everything has to work perfectly for that to happen. In the current world trade environment (and market environment), anything can happen. If you look at this IBD chart, you can see that the volume did pick up on June 12.2015, and that the price is attempting to hit support on a rising set of price moving averages.

With the general U.S. market in a bit of a sloppy mode between banging against old highs and then slumping listlessly into the summer season, we might see more volatility that could shake long positions like the one we recently saw with JBLU. That is one reason why so few positions pass the screens, and why I personally will remain cautious until liquidity and volume return to U.S. equities. A purchase at or below 36.64 is likely the best entry point, with a stop a penny below the low at 35.20 (35.19, which is not a round figure, probably works best). That makes this trade a slightly riskier than normal entry, but it is consistent with price structure.There are no guarantees of a winner, but the conditions seem right on any general market uptick.

That is all for this week’s reversal report. As I see things, I will make some brief postings. We are still running sideways in a rather confused but slightly bullish-biased market. This is NOT the time to be going to Vegas. It is time to look for the best set ups you can find and to manage the risks of any position, whether it is a swing trade or a long-term position trade. Make sure that if you have long-term profits, that you either find a way to protect them, or to take those profits in as tax-efficient manner as possible. U. S. equities in general are not cheap by longer-term historical methods, but there are places where those equities are cheaper or more expensive by sector than other stocks. Be mindful of that as you progress into the fall. In cases of extreme valuation, it is never a bad idea to sell too soon. You can always wait for the next bargain to come along, if you do your homework.

Thank you one and all for continuing to support this blog!

 

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