Professor’s Comments February 25, 2015
Posted by OMS at February 25th, 2015
The Dow rose 92 points, closing at 18,209. Volume was moderate, coming in at 94 percent of its 10 day average. There were 198 new highs and only 14 new lows.
The rally toward 18,300+ continues. Ride the Tide!
Ordinarily the last few trading days of the month usually have a positive bias. However with the market nearing completion of what appears to be an impulsive wave 3, I believe that the market will have a tough time staging additional gains for the remainder of the month. Yesterday’s rally appeared to be part of or all of minor wave 5 up within wave 3 up. And if this is the case, the market will likely need a rest.
Gold tested key support at the 1200 level and held. It ended the day by rallying into the close. Keep your eye on gold during the next few days to see if gold stocks start to appear on the Dean’s List. Also, keep your eye on the U.S Dollar ETF, UUP, to see if drops off the List.
IF gold can hold the 1200 level, it could be ready to start a very strong rally leg. You might want to take a close look at a gold ETF like GDX, which is coming off a TLB Pattern, had a ‘Rope Jump’ in early January, and has been forming a nice ‘Blade’. If it re-appears on the Dean’s List with other gold stocks and ETFs now, and the PT indicators turn positive, I’m a buyer.
There are a lot of Big IFs in the paragraph above, but I’m mentioning gold today because of its potential. The set-up is classic. All we need now is a breakout to turn the indicators positive. Keep watching gold.
I received an interesting email from Gene S last night on Tesla (TSLA). Gene noticed that TSLA was being highlighted by Emeritus as a SHORT candidate for the Honor Roll, while at the same time also being listed on the Member’s Watch List. This is a very unusual event that we don’t often see. But it can happen because of the differences between the two algorithms. Remember, the Dean’s List measures Relative Strength and where Emeritus highlights short-term trends. This is one of the reasons that we always use the Dean’s List together with the two other elements of The SIGN; namely pattern and indicators. Gene, who always uses ALL of the elements of The SIGN, provided the following analysis: “From the Members Watch perspective, TSLA looks to be coming off a TLB pattern, but it’s in a downtrend with negative indicators, so it’s not a buy at this time. From the Honor Roll perspective, however, TSLA is in a downtrend with negative indicators, so it IS a good short candidate. But, I would not short at this time with a positive Tide.”
Gene also said that seeing TSLA on both Lists was a great exercise in analysis.
The only thing I would add to what Gene said is that even though the Tide is positive, a lot of stocks are starting to form topping patterns. And the weaker ones, like TSLA, have already started to roll over and enter downtrends. In broader terms, what Emeritus is telling me is that if I owned a stock like TSLA with negative earnings, no P/E, and a negative ROE of -37%, it might be time to take some action.
Last night at the request of Tom M, I added Cerner Corp (CERN) to the data-base for the Members’ Watch List. In my comments to Tom, I noted that the stock supports a relatively high P/E of 49, which is a bit pricey for my taste. Also, I was not too impressed with a management team that can only produce a ROE of 15.6% and a ROA of 11%. The high Price/Sales ratio of 7.45 is another concern. Cerner is one of those companies that needs to keep running. If its growth starts to falter, it could come back to earth very quickly.
Yesterday’s rally in the Dow didn’t do much for my energy stocks. They still appear to be forming ‘Blades’. As long as the PT indicators remain positive, I will continue to hold them, especially as the bullish March-April time period for energy approaches.
Watching gold.
That’s what I’m doing,
h
Market Signals for 02-25-2015 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | POS |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | POS |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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Category: Professor's Comments