One thing is for sure, the only thing that can seem to wake people up in this market is "earnings"! The past week was filled with some dramatic volatility. In the early part of the week it seems that market was ready to give up. We had back to back days of strong opening and a very weak close. Both indices were flirting around 50 ema and it just looked that shaky. Come into rescue toward the end of the week is of course the prospect of the earning season. The fed decision is once again a none factor in this market this time of the year. We feel many people are sitting on the sideline waiting for some good earning opportunities to get into. From the big cap earnng front, RIMM definitely sets the tone as well as the benchmark for others to follow. 20% gain in one day given RIMM's market cap is still a very big deal, regardless of its momentum status. To put this into perspective, GOOG has to gain over 100 bucks in one day just to gain 20% and that'd be just something unthinkable at this point of GOOG's growth cycle.
So what are we really looking forward to at this point? Earnings, of course! The earning season usually starts with Alcoa kicking off and that comes around second week of July. Our game plan is the same as before, go after the winners early and aggressively. If the apparent "winner" does not get the kind of attention we wanted, we simply move on for our next kill. With earning season, we'd usually be busy enough to trade multiple earnings winners at same time. So rest assured, if one doesn't work out, there'd always be the other one or two that will work out. Now the key in trading that kind of strategy, is to stay with the winner, at all time. We had a little taste of the earnings drive last few weeks from the likes of LPHI KMGB TNH FSLR RCCC TBSI... etc. All of them have returned substantial gain given our usual time frame. So be prepared and be ready, both financially and mentally, because the next 3 to 5 weeks of trading is probably the only trading matters in the summer.
Here are some stocks that are worth reviewing over the past week....
PENX, one thing about this earning winner is that it never had this kind of volume in its past quarters. Perhaps, this quarter's number is just that good, or it is the fact that it's in a sector people really go gun ho about. In any case, we the momentum traders may also have something to do with its latest volume surge. Well folks, this baby is in play and that's all you need to know. Remember our favourite strategy, if you missed the first runup lets say from $24 to whatever price it stalls, the first pullback should always be bought, aggressively! We are fortunate that we caught majority of the move so far but the rest of our game plan is still the same. Just because we did well the first run up doesn't mean that we can slack off on the second time around. So keep a close eye on this one and trade on the long side aggressively. Always put the 9 ema up and imprint it in your mind to know where it is at all time. Nobody wants to miss another RCCC or LPHI type of move again. The funny thing is, at this point, we don't think people even care about their actual eps number anymore. There's really no need to extrapolate their number to calculate a "proper" valuation price or assign P/E or whatever. Know this, this one is in play and professional traders like us and others are trading sizable shares to drive this one higher.
KMGB, almost a month ago, this one came out with a strong report. One month later, this one is roughly 30% higher, and it closed with a NCH on Friday. Ok, we didn't stay in this one the whole one month. As far as we did, we basically traded two runup. The first runup was from the initial earning/IBD and second runup, which we are still in it, started couple of days ago as per our alert. The coming week should be interesting since this one did not make it to IBD100 again but we think this shouldn't be an issue any more. Float is pretty tiny for this one so as long as the chemical sector is in play, we'd like this one's odds to go much higher.
TNH, speaking of chemical sector, this one is probably the epitome of chemical stocks during the last three months or so. The recent 10 point drop in one day may set a warning sign of its extended runup but we are still keeping this one as one of our favourite trading stock. If you look at its chart, it hasn't closed "below" 9 ema ever since the breakout area of $90 and we think as long as this is the case, this one is still relatively safe to play. The only thing of concern lately is that the volatility is getting to the extreme side of things and it may eventually crack its uptrend completely.
TBSI/DRYS, when shippers move, they move together and we like these two the best. They both notched a new closing high on Friday and we'd see if this generates a new round of enthusiasm in the coming days.
FSLR/JASO/LDK, so once again solar plays have been hot lately. Out of all of the solar plays we have touch based before, these three are the closest to their respective all time high. If anything, we'd be trading among these three when the sector is having a good day.