Weekend Strategy Review 01-20-13

by Hank Swiencinski, AIQ
TradingExpert Pro client fro over 20 years, founder of ‘The Professor’s One
Minute Guide to Stock Management’. Later this month Hank will be presenting an
AIQ webinar covering some of the techniques he teaches, like cycles and stick patterns.
Hank will be presenting this free AIQ webinar entitled The Professor’s
One Minute Guide: The Basics,
January 24th, 2013, 4:30 – 5:15pm
Click on this link to register. Here’s a sample of his Weekend Strategy Review 01-20-13
The Dow rose 53 points on Friday, closing at 13,650. It was up 161 points for the week. The Nasdaq was down 1 point on Friday, but was up 9 points for the week. The Nasdaq is having a tough go of it lately, mostly because of Apple. The characteristics of the company have changed radically in the past month. Apple went into a sustained up trend almost four years ago, on 11 May 2009, at a price of 129.49. During that time, the 50 NEVER once fell below the 200. Pretty amazing! But that is no longer the case. On 2 October of last year, the PT indicators turned negative and then on 19 December, the 50 dropped below the 200. So now, any rally in Apple must be viewed with suspicion. That’s because any rally could be the development of the Blade of a negative Hockey Stick pattern, which could lead to significantly lower prices. And it’s not often that you see a stock that has a potential ‘Stick” of over 200 points, so we need to be careful. Remember, Apple represents a significant portion of the Nasdaq100. And IF Apple continues its downtrend; the Nasdaq will likely continue to experience problems. But let’s not focus on Apple for now. Let’s look at the Big Picture instead.
Big Picture Strategy: The Dean’s List remains strong and the cockpit indicators are positive. I will remain Bullish as long as my Lists and indicators stay positive. The strategy is very simple now. Once we get closer to the 14,000 level, I will re-evaluate the strategy. Not now.
OK, we’re at 13,650, just 450 points from our target of 14,000+. What now? Just a few weeks ago, we were trading under 12,900 and some of the folks on CNBC thought the world was coming to an end. We didn’t. We saw that the Dean’s List was much too strong for Armageddon. We also saw that the decline that occurred since the middle of December looked more like the Blade of a Hockey Stick Pattern than the beginning of any end of the world scenario. Pullbacks after rallies are normal. They are positive, not negative, no matter how the world looks to the folks on CNBC. We also saw that the 50 was still comfortably above the 200, and that the pullback only caused the price to drop back to the 200. The Dow was taking a break. It was resting.
So why am I writing about this today? Well, I want you to take a quick look at the Dow. I want you to once become familiar with the pattern. Get it burned into memory. Specifically, I want you to look at the stick that started on 15 November and completed on 18 December. Note that the November low was 12,472, and the high was 13,366. or a rally of 894 points. So if we add 894 to low of the Blade that completed on 31 December, 12,884, when Congress was trying to keep us from falling off the ‘fiscal cliff’, we get 13,778. Only 222 points from 14,000.
In the Classroom, we talk about how the market moves in waves. We also talk about Ending Diagonals and termination patterns. And the one thing we know about them is that the final waves of these larger patterns should consist of 5 waves. And because the most recent ‘Rope Jump’ that occurred in early December told us that the move was likely a wave 1, which was followed by a retracement, it’s even more likely that what we are seeing now is the impulse wave, or wave 3 of the 5 wave sequence that will eventually complete the Ending Diagonal Pattern.
So assuming that we are in the impulse wave, then we also know that it too should consist of 5 waves, So odds are that the move that started on 31 December still has a lot more to go. We know that the move probably won’t be straight up. That there will be pullbacks along the way, and each of these pullbacks should be viewed as a buying opportunity.
Buying opportunity as in Buy the Cake, Eat the Cake (BTC-ETC). That’s what we’re looking for now.
One of the stocks that I’m currently watching is Green Mountain Coffee Roasters, GMCR. Before you look at Green Mountain on a Daily Chart, I suggest that you take a look at it on a Weekly Chart. That way you’ll have a better feeling for the kind of stock we’re dealing with.
Green Mountain had an incredible ride once the market turned positive in March 09. It rose from relative obscurity to being a 115 stock in 2 ½ years. Then the coffee tree came crashing down and GMCR fell back to earth, once again trading in the teens. Hey…GMCR is a coffee grower not a purveyor of magic potions. Anyhow, for the past few months, GMCR has been appearing on the Member’s Watch List. We saw it jump the ropes in late November, an indication of a possible wave 1. Since then, it has spent the last 6 weeks forming what appears to be a wave 2. The stock is currently in a well defined up trend, and is on MWL with positive PT indicators. More importantly, the Bands are narrowing, which could be telling us that its K-cups could be ready for some serious brewing. If the stock starts to move above 43.79 and push its Bands, it could be headed significantly higher.
On the other hand, on Friday, Bank of America reported fourth-quarter earnings that were 63 percent lower than last year but slightly above expectations. A decrease in revenue and a few costly blunders from their 2008 acquisition of Countrywide and Merrill Lynch were the reasons cited for the decline.
Now, most of you know that I’m not a big fan of bank stocks. I’m not. But I also know that many of you are. But when it comes to stock ownership, the only thing I really care about is patterns, indicators, and Lists. Being a fan of something is for sports, not stocks. And right now, the events leading to BAC’s earnings announcement have created a very interesting situation on its Daily chart.
BAC is currently in a well defined up trend, and when the stock pulled back on Friday, it caused the 2-period RSI Wilder to become oversold. Now I know that a few of you might be looking at BAC and thinking about using the BTC-ETC strategy. But as we know, to use this strategy, the stock must be in an up trend, and have positive indicators. During Friday’s pullback, the DMI and P-vol on BAC turned negative. So right now, BAC is NOT a candidate for my BTC-ETC strategy. The stock was on the MWL recently, but dropped off during the pullback. That’s OK. But to use BTC-ETC Strategy, we still need to see an Up trend, an oversold 2-period RSI Wilder and POSITIVE indicators. So I still say…. NO Banks! Besides, take a look at BAC’s weekly Chart since 2009. It’s been almost 4 years since the stock bottomed, and the chart still looks horrible! Give me Free Willy stocks anytime! I can’t get interested in BAC until I see it ‘Jump the Ropes’ on the Weekly.
Another stock I’m watching is American Express. AXP. It’s on the MWL and has pulled back on the Daily’s. The stock is in a well-defined up trend with positive PT indicators and is a candidate for my BTC-ETC strategy
Also, on Friday, we saw Schlumberger, SLB, pop 3.13 points to 76.50, after being highlighted by Emeritus and placed on the Honor Roll at 73.22 two days before.
After jumping the ropes in mid-September for its wave 1, SLB formed a 2 wave pullback into mid-November. Since that time, it jumped the ropes again for wave 3.1, that was followed by another 2-wave pullback or wave 3.2. The PT indicators turned positive on 4 January at 72, and Friday’s jump appears to confirm that the impulse wave is underway. Take a look at the HS/w Blade Pattern on the Weekly’s.
While you’re at it, you might want to compare SLB to our energy rabbit, GPOR, which continues on its tear. Do you see the massive HSw/Blade pattern that formed on the Weekly chart of GPOR since 2009? That’s what is propelling the stock higher now. Now go back to SLB. See the similarities? For comparison purposes, you might want to look at the chart of Petrobras, PBR. GPOR is Green, having fun in an Up trend, and is now in the Free Willy Mode. PBR is in Jail, constrained by its moving averages, RED indicators, and fighting a downtrend. What’s more fun? Free Willy or Jail?
Remember, it’s mid-January, and March is right around the corner. I always want to look at energy going into March.
So reviewing my Big Picture Strategy, I’m positive and looking to buy stocks from my Lists that have patterns and are either starting an Up trend or are pulling back and resting from a recent move up. For stocks that appear to be completing a wave 2, I’m looking to buy them when the indicators turn positive, especially if they have tight Bands. On those stocks that are already in up trends, I’m looking to buy them if the 2-period RSI Wilder becomes oversold. We’re going higher.
Also, continue to pay attention to Emeritus and the Honor Roll. Remember how he signaled ‘RALLY’ on 2 January by placing a world record 38 new stocks on the Honor Roll? Then added RCL, GILD and CNI. He highlighted SLB on 8 January, then again on 16 January. And PEP on 10 January, just to name a few. Pay attention :>)
Continue to be patient with gold and silver. On Friday, the PT indicators turned positive on SLV after a nice 2-wave pullback since mid-September. The ETF is starting to ‘Jump the Ropes’again. Hmmm? Could Major Wave 3 Up be starting? We’ll see.
I’m also watching the Major Hockey Stick Pattern on physical gold shares, GLD. Gold is also playing with a ‘Rope Jump’on the Daily’s. The DMI and P-vol turned positive on Friday. Now all I need to see is a positive MACD and I’ll go looking for my pick and wheelbarrow.
That’s what I’m doing,
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.

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