Professor’s Comments June 3, 2021
Posted by OMS at June 3rd, 2021
Just a quick update today….I mostly wanted to comment on the performance of some of the Top Stocks on the MWL. Even though I watch them shooting higher, I think the time has come where students need to understand the danger of these trading shaky vehicles. Most of you understand what’s been happening with in-play stocks like GameStop (GME) and Dillard’s (DDS). But now its spreading to junk like Bed Bath and Beyond (BBY) which jumped almost 17 points yesterday to 44.19 after the company announced it was adding three new brands. Imagine! I’m sure you’re going out today to buy several new sets of towels and wash cloths just because of yesterday’s announcement. Yeah, right! Because of this, BBBY moved to the top of last night’s MWL. Oh boy!
When stocks like BBBY, GME, DDS, and DDD are dominating the news, it usually spells trouble. A quick glance at Yahoo Finance shows BBBY has no earnings, less assets and over twice the debt it had two years ago. If they couldn’t make money last quarter, after people who have been cooped up for over a year are finally going shopping again, one must wonder how they’re going to do it in the future? I don’t think it’s going to happen. I believe stocks like BBBY and others like GME and DDS will be trading at half their current price a few months from now. There are many others like AMC, BB, WKHS, NKLA, and PLUG in the same boat. Many of these will likely be trading at 60-70 percent of their current value in the next year. Thus, my current warning. Yeah, you might see something like BBBY at the top of the MWL, but please be careful. These are NOT the kind of stocks that drive markets higher. They are trading vehicles only! And the MWL is full of them now. Concept stocks like these are usually the last stocks to come to the party. When you see them exploding higher, it usually means the party is just about over. Again, please be careful.
The major indexes were mostly unchanged yesterday on strong volume. After watching yesterday’s session, I’m becoming more convinced that the price action we’ve seen for the past two weeks has been corrective, either the completion of a 3-3-5 flat or an a-b-c move for wave 2 up. This means that the next major move should be down.
There were no changes to my Market Timing Indicators. The Dow remains Positive while the same indicator on the S&P and NASDAQ remain Neutral. The Scalp Trading Indicators or the Dow (DIA) and NASDAQ-100 (QQQ) remain Positive. The ST Indicators on the S&P (SPY) turned Positive after yesterday’s session.
The Dean’s List is Neutral. The Tide remains Positive.
The Sector Ratio stayed at 22-2 Positive after Wednesday’s session. The top 5 strong sectors were Service, Real Estate, Autos, Leisure, and Energy. The Service Sectors had the highest RS ratings at 8. Real Estate was #2 with a rating of 7. The remaining top five sectors have ratings of 6. All other sectors have RS ratings between 1 and 4. So, the top sectors remain strong, but the rest of the sectors continue to show some weakness. The two weak sectors were Media and Telecoms with RS rating of -1. Continue to watch for increasing weakness in the Sector Ratio as the week progresses.
Model Update: There were NO Changes to the Model. It remains 100 percent in cash.
Top Stocks: GME, the top stock from Tuesday’s MWL, was up another 33 points yesterday. It got as high as 294 before pulling back to close at 282.24. If you used my Scalp Trading indicators on the 10 min bars, you entered the stock near the 250 level, took some profit near 270, then exited near 285 when the ST Momentum indicator told you the party was over. Believe me when I tell you I’m not proud of my system that identifies GME as a top stock, I wish it would only identify good quality, strong stocks. But it is what it is. And GME has been a great trading vehicle for the past few days. BTW, students should look at the ST indicators during Tuesday’s session. Same results. The indicators gave say so just after the open, then stayed positive for the rest of the session. In at 232, out near 250. What more can you ask of Lists and indicators that produce consistent winners? Just be careful. You’re trading junk!
The #2 stock from Tuesday’s MWL, DDD, also had a big day yesterday gaining 3.29 points to 32.34. The ST Indicators gave say so right from the get-go and didn’t turn negative until late in the day. Once again, the indicators and Lists worked, but I’m not happy that the List is highlighting DDD. Oh well!
That’s what I’m doing,
h
Model Portfolio is being shown for educational purposed only. The Buy/Sell actions in the Model Portfolio are made based on technical indicators that can and do change frequently and should NOT be considered as recommendations for trading an actual portfolio. Any gain or loss in the Model Portfolio should not be used to predict future performance of the Model.
Market Signals for
06-03-2021
DMI (DIA) | POS |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEU |
THE TIDE | POS |
Index | Signal | Signal Date |
---|---|---|
DOW | POS | 27 May 2021 |
NASDAQ | NEU | 27 May 2021 |
GOLD | POS | 06 May 2021 |
U.S. DOLLAR | NEG | 12 Apr 2021 |
BONDS | NEG | 11 May 2021 |
CRUDE OIL | POS | 27 May 2021 |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
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.
Category: Professor's Comments