Professor’s Comments February 25, 2014
Posted by OMS at February 25th, 2014
The Dow rallied for almost 200 points before giving back 100 of them to close at 16,209. The rally was likely the result of several days of ‘Small Change’ readings in the A-D oscillator. The readings for the past four days have been 127, 148, 138 and 143, with last night’s reading being another small change. In other words, we need to be on the lookout for yet another Big Move within the next 1-2 days.
Volume was moderate, coming in at 105 percent of its 10 day average. There were 254 new highs and only 26 new lows.
About two hours after the open, when I saw the DMI on the Dow turn positive, I started running The Professor thinking that the final wave ‘c’ rally had begun. But much to my surprise, The Professor was only highlighting 22 longs. Shortly after I saw this, I received an email from Gene S. asking if it was possible that a ‘rogue wave’ could be occurring that The Professor didn’t catch. I replied by telling him that almost anything is possible, but because the Bollinger Bands were wide, and The Professor wasn’t confirming the DMI change, it would be very unusual for a rally to start under these conditions.
If you recall, I have been talking about a trading range for the Dow between 16,100 to 16,300. Yesterday the Dow reached the very top of this trading range, pulling back after hitting 16,300 exactly. And now that the Dow is back in the middle of that trading range at 16,209, the possibility still exists that we could see a move down to the 15,900+ level before the next rally begins. I’m still not in any hurry to be buying a lot of stock.
Yesterday was a good day for two of the sectors that I have been talking about recently; Energy and Healthcare REITS. Halliburton continued its skyrocket like climb, gaining 1.07 points to close at 56.37. It turned Green on 7 February after developing a classic Hockey Stick pattern and hasn’t looked back since. If you’re new to The Professor’s Methodology, you might want to take a quick look at a chart of Halliburton (HAL) to see what a Hockey Stick Pattern is supposed to look like.
Note the long ‘Stick’ that started in the June time period that topped in November. Then note the two wave a-b-c pullback into the end of January. So now that you’ve looked at the Pattern, you might want to calculate the target for the stock, and where you should be taking some money off the table. Hmmm?
Another interesting stock is Omega Healthcare (OHI) which popped 0.51 cents yesterday to 31.93. If you look at a Daily Chart of OHI, it’s not that impressive. having been in a large consolidation triangle pattern since last May. However the chart becomes a thing of beauty when looked at on a monthly chart, where it becomes clear that the triangle is part of a massive Hockey Stick that began in October 2011.
When I talked about Healthcare REITS two weeks ago, I mentioned that they could attract a lot of interest as the Boomers start looking for other places to park their money. If OHI can get back to its May high of 38.4 which seems achievable given the massive Hockey Stick pattern, that would be a 20 percent return form current levels. Add in a 6 percent dividend while you wait, and you can see why the stock has this Boomer’s attention.
OHI does not appear on any of my Lists right now because no Member has added it. But because I wanted to talk about the REITS this morning, I added it and re-ran the List (not posted). It has a RS Ranking of 1. Technically, the stock has still not broken out of its triangle pattern, so I’m still mostly watching the stock. On the other hand, several other Healthcare REITS and stocks are on the Lists, (HCP, HCN, HTA and ACHC) and last night Emeritus highlighted two Healthcare REITS for the Honor Roll. So something could be happening in this group.
Also, don’t forget about TMF. It’s still on the Dean’ List near the bottom. Three weeks ago, when TMF ‘Jumped the Ropes’ I mentioned that I was taking profit because I felt the stock would need a wave 2 pullback before pushing higher. Well now that the pullback has occurred (6 points) and has formed a nice little Hockey Stick Pattern, it is starting to look very attractive again. The ETF is still in a downtrend on the Daily’s, so any shares I buy MUST be considered a trade at this point.
If I add the 10 points of the ‘Stick’ to the recent low, I get a target near 59. So with TMF trading under 50, I’m starting to really like the odds. Because it’s only a trade, I will be looking to buy a few shares when the PT indicators turn Green on the 60s. If the Daily’s turn Red, I’m out. I want to see another ‘Rope Jump’ and then a MA cross before I start to get serious about TMF.
The short I have been looking for in RGLD on the 60s has still not triggered. Gold, the metal, looks like it could still trade a few points higher before topping. If you look at GLD, you can see that the target for the current move (interim high between the first two lows) is near the 131 level. GLD is currently trading at 129. I’m in no hurry to get short.
That’s what I’m doing.
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