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Weekly Reversal Report For 6/8/2015 CTLT , WNR, And GLW. CTLT Has Statistics But Not Enough Trades, GLW Just Short Of Perfect, But Still Slick As Glass

A piece of sculpted Steuben glass from Post Online Media

 

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!

 

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