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Friday, March 29, 2024

Sabrient Select Opportunity Virtual Portfolio

Sabrient Select Opportunity Virtual Portfolio

September 27, 2010 –  The Week Ahead

After showing signs of being ready to make a significant correction, the market instead defied the charts (which were screaming "rollover") and spiked up on Friday to finish the week on a high note.

For the SPY, 112 seems to be an important inflection point. It was the high of the left shoulder of a possible head-&-shoulders formation, then served as a support level for the head of the formation, and more recently has served as strong support for the past 10 sessions. The chart shows that the MACD was aiming to roll over in a cyclical pattern on Thursday, but instead it abruptly turned upwards.

After the head-&-shoulders was seemingly confirmed with a breach of the downtrending neckline, it turned out to be only a head-fake, and the market has decided to defy historical trends by remaining strong throughout the historically weak month of September. Nevertheless, I am still skeptical that this trend can continue without higher volumes and more testing of bullish conviction and levels of support — perhaps even back down to the 50 and 100-day moving averages.

As you know, technical patterns are only backward looking and can turn on a dime. Patterns tend to repeat themselves, and the more traders follow them, the more self-fulfilling the patterns can become. Nevertheless, the market also likes to fool the greatest number of people possible, which is why it often reverses just when a trend (whether shorter term or longer term) appears to be firmly established.

If you follow my weekly Sector Detector column, which relies upon Sabrient’s forward-looking and fundamentals-based SectorCast quantitative model, you know that the more defensive sectors have been scoring higher than the economically-sensitive sectors, giving the latest rankings a bearish bent.

Last week saw a number of virtual portfolio moves. On Tuesday, I stopped out of short position BKS. On Wednesday, I harvested profits at the 20% level in another 1/3 of long position FCX and then added two new short positions in CIEN and ATPG.

Open Positions

Going into the new week, we have two long positions and four short positions. 

LONGS:

We are still long 1/3 of the original position in Freeport McMoRan (FCX) from $70.20. The stock closed Friday at $86.61. It is rated BUY in the Sabrient Ratings Algorithm, and carries a rising Outlook score of 79 and is still displaying strong momentum. We booked the first round of profits at the 10% profit level after it hit $77, and a second round at $84.90. I am going to move my mental stop up to Tuesday’s intraday lows around the $81 level. 

We are long a full position in Endo Pharmaceuticals (ENDP) from $28.62.  The stock closed Friday at $30.53.  It is rated STRONGBUY in the Sabrient Ratings Algorithm, and carries a strong Outlook Score of 99. I am going to move my mental stop loss up to a closing price below the breakeven entry price of $28.62.

SHORTS:

We are short 2/3 of a full position in First Horizon National (FHN) from $11.23 after harvesting the first round of profits on 1/3 of the original position at the 10% profit mark when it hit $10.10 on August 20. The stock closed Friday at $10.90. FHN is rated STRONGSELL by the Sabrient Ratings Algorithm and carries a woeful Company Outlook Score of less than 1. I have a mental stop at a close above the entry price of $11.23.

We are short 1/3 of a full position in Texas Industries (TXI) from $32.04 after harvesting the first round of profits on 1/3 of the original position at the 12% profit mark on August 24 when it hit $28.20 and then stopping out of another 1/3 position on September 2 when the stock closed above the entry price. The stock closed Friday at $31.42, and I am holding on to the final 1/3 position in expectation of continued weakness after a weak earnings report and outlook.  It carries a STRONGSELL rating in the Sabrient Ratings Algorithm and a low Company Outlook Score of 1.2. I will keep a mental stop at a close above the entry price of $32.04.  

We are short a full position in Ciena (CIEN) from $15.05. The stock closed Friday at $15.60, which is above my tight mental stop of $15.37. However, I don’t necessarily trust Friday’s strength, so I decided to give it a bit more time to see where it goes from here. CIEN is rated STRONGSELL by the Sabrient Ratings Algorithm and carries a Company Outlook Score of 4. 

We are short a full position in ATP Oil & Gas (ATPG) from $12.20. The stock closed Friday at $12.51. ATPG is rated STRONGSELL by the Sabrient Ratings Algorithm and carries a dismal Company Outlook Score of less than 1. My mental stop is set at a closing price above $15.71, which is last Monday’s closing high. 

Watch List
 
LONGS: 

Some stocks that I have on my Buy watch list include the following:

  • AXS
  • VECO
  • XRTX
  • STX
  • SCVL
  • HUM
  • TEO
  • ATK
  • FRX
  • OSK
  • ARLP
  • WDC
  • LXK
  • LRCX
  • SAFM
  • GCI
  • HWK
  • LEA
  • CLF
  • ACGL
  • NANO
  • LMAT
  • LZ
  • RELL
  • IPXL
  • TEN
  • AXTI
  • IDSA
  • TRW
  • PCLN
  • CVU
  • AZO 

SHORTS:

Some stocks that I have as Short candidates are the following:

  • USG
  • MGM
  • JOE
  • RAIL
  • CLDA
  • VTAL
  • VSAT
  • VRTX
  • ZOLT
  • GDP
  • VMC
  • SCOR
  • CCI
  • AMT
  • STI
  • SGMS
  • CNQR
  • TSLA
  • GHL
  • VSAT
  • MWW
  • ID
  • AMAG
  • RYL
  • CRK
  • BKS
  • HOG

I will be watching the markets for buy and sell opportunities.
 
Regards,  

Scott Martindale

Disclosure:  The author holds no actual positions in the stocks selected for this virtual portfolio. 

Disclaimer:  This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their own unique and specific circumstances in acting on any stock selection made by Sabrient. Sabrient makes no representations that the techniques used in these reports will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.

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