Note: For full disclosure, I am an former Corning employee, but I am neither a hapless fan boy nor am I a current shareholder of Corning stock. My stock screens (fundamental, technical, and neural net) found this name and a few others that hit the top of my lists this past Friday evening. As you know, I am not a purveyor of crap (commonly repeated attributions of profit), most of which are not profitable because they are based on random tips. This research, good or bad, is based on a consistent application of screens that I have used for nearly 15 years now, combined with about 30 years of overall experience. There is NO guarantee of profitability implied, only a relentless effort to find good technical, fundamental, and momentum values for stocks to hold long for at least 5 to 15 trading days. Though these are bullish set-ups, I am neither bull nor bear, I am just a Buffalo.
Here is a list of this weeks screening survivors:
Raytheon RTN xN 2619318 Aerospace & Defense (Mfrs) Aerospace & Defense
Fidelity NatInf FIS xN 1599317 Business Svc (Misc) Business Svc
Paychex Inc PAYX xO 2454385 Business Svc (Misc) Business Svc
Biomarin Phr BMRN xO 1013159 Drug (Biomedical\Genetic) Drug
Catalent Inc CTLT xN 1443668 Drug (Biomedical\Genetic) Drug
Medivation MDVN xO 1305460 Drug (Biomedical\Genetic) Drug
Corning Inc GLW xN 8753586 Electronic (Misc Products) Electronic
Fairchild Semi FCS xO 1097018 Electronic (Semicndtr Mfg) Electronic
iShr GSInvst LQD xA 5547971 ETFs (FixedInc\Other) ETFs
JP MoganAler AMJ xN 1776758 ETFs (Sector\Energy) ETFs
Sony Corp. SNE xN 1389931 Home (Audio\Video Prods) Home
Bitauto Hldg BITA xN 2835045 Internet (E:Commerce) Internet
Joy Global Inc JOY xN 1469355 Machinery (Const\Mining) Machinery
Terex Corp TEX xN 1169341 Machinery (Const\Mining) Machinery
Pitney Bowes PBI xN 1347774 Office (Equip\Automation) Office
MeadWestvaco MWV xN 1246130 Paper Paper
Rock-Tenn ClA RKT xN 1538994 Paper Paper
Lorillard Inc LO xN 4730512 Personal (Tobacco) Personal
Chevron Corp CVX xN 6023877 Petroleum (Intl Integrted) Petroleum
Enterprise Ptr EPD xN 2858695 Petroleum (Prod\Pipeline) Petroleum
Kinder Morgan KMI xN 12092161 Petroleum (Prod\Pipeline) Petroleum
HollyFrontier HFC xN 2563829 Petroleum (Refining\Mktg) Petroleum
Marathon Oil MRO xN 5321674 Petroleum (Refining\Mktg) Petroleum
Tesoro Petrol TSO xN 1612504 Petroleum (Refining\Mktg) Petroleum
Valero Energy VLO xN 5262965 Petroleum (Refining\Mktg) Petroleum
Western Rfng WNR xN 1008221 Petroleum (Refining\Mktg) Petroleum
Devon Energy DVN xN 2740467 Petroleum (U S Explr\Prod) Petroleum
Cheniere Engy LNG xA 3974166 Petroleum (U S Explr\Prod) Petroleum
Computer Assoc CA xO 2739483 Software (Business) Software
O G E Energy OGE xN 1152285 Utility (Electric) Utility
ONEOK Inc OKE xN 4608627 Utility (Gas) Utility
Volume is recorded in shares traded on Friday June 5, 2015
x means the stock is optionable
Trading in U.S. equities and stock index futures has been as treacherous as trying to row a kayak in the vortex implied by that Steuben glass piece shown at the top of this post in the last month. As you can see, we still have a lot of petroleum exploration and production names appearing on the list. This week however, biotech drugs and electronic components have made a rumbling. When value and fundamental screens were applied to the technical screens, we had three final qualifiers, WNR, GLW, and CTLT.
The value play among these three happens to be CTLT. Because the stock has such a short trading history, there are not enough trades to apply against the trading statistics, and for the purposes of swing trading this model, CTLT has to be put aside. I WOULD keep this one on a watch list. Catalent is a developer and marketer of drug delivery systems. The stock has a projected earnings/share growth over the next year that should approach 40%. No guarantees that this could happen, but the company finishes a secondary offering on June 8, 2015 priced at $29, and that has not harmed the current stock price, which closed at $29.61 on Friday, June 5, 2015.
WNR does not quite possess the statistics required by the neural net based Fibonacci pattern model to be traded either. As oil prices continue to struggle with the $60/barrel level, I think there will be time for this name to provide additional swing trade opportunities as time goes on. Many of the names in that list above will also, which is why the screens will continue to look for them over time.
So what about GLW (Corning Glass Works)? Statistics fall just below the acceptable level, (1.62/1 Profit Factor, 58% winners, versus the minimum standard 1.60/1 60% winners standard, though average win/average loss ratio is 1.42, which is strong). Corning appears poised to see improved earnings from their involvement in 4K high definition TV screens and optical fiber to the home sales. With 2 billion in net cash, GLW could buy back shares. When one considers that near term (next 12 -18 month) earnings growth could approach 16% per annum, given its current price to earnings ratio of approximately 12.11 and a share price at 20.71, its not impossible to see a price on GLW approach 27.30 to perhaps 30.oo a share. That is not too shabby a return. Read this week’s Barron’s article for data on the prospects for GLW.
Why does the model not like the swing trade? Look at the daily chart and the corresponding weekly chart. Typically, you would like to see a bullish engulfing candle for a price bar on the momentum reversal somwhere around the 61.8% retracement of that last up-move (it stalled around the 50% retracement, and did not show a large price reversal). In my experience, it is best to wait for that to show up before initiating a trade.
Also, you would typically see a reversal very near that blue trend line you see on the weekly chart at a key retracement line that intersects the blue trend line. That would happen somewhere between 18.48 and 19.80 per share. Yes, that is a WIDE range, but it is important to understand that the statistics on the model will likely improve dramatically when support is tested, and that if a volume reversal hits with a bullish engulfing candle AND at an important retracement level, the criteria for a trade with 70%+ likelihood of success will have been met. I am willing to WAIT for that to happen.
Once again this week, we have stocks that are close but not yet ready. I will continue to monitor them and keep looking for better entries. At least the companies pass the test on a multitude of fronts for a long trade, and those that do generally work. That reminds me!
Progress of CFG:
The neural net swing model fired a sell signal after Friday’s trade. It closed at 28.32. When that stock was recommended on March 30, 2015 at or below 24.50. If you still hold it, not adjusted for commission, you have about a 15.5% gain over that time. Now, it look a LOT LONGER than 5 to 15 trading days to get through the targets, but in this market, it is taking longer to get to target levels. The US equity markets seem to be pretty much in stall mode, even though in aggregate they continue to press to slightly higher highs on relatively light volume. Because screening out the nasty names in the list helps to reduce (though not TOTALLY ELIMINATE) risk, these kind of shorter term returns are possible.
Progress on JBLU:
20.49 was the close on Friday, only slightly higher than the 20.44 entry. The model still likes the position, but for now, momentum is a bit slack and little progress has been made since May 26 when this position was mentioned. I will continue to follow it and comment.
For the kind of method I use, the trades are a bit slow in coming at the moment. I am fine with that, as I will protect capital while waiting for the positions to arrive. I am eager to trade when conditions are right, but I am not eager to lose money otherwise :).
More is coming. Thank you for supporting this blog!