Swing Trading Strategies & Stock Picks Since 2003

These articles describe the statistical probabilities of long positions on these equities, based on neural net projections, for the next 5-15 trading days. These are not holy grail methodologies, the road to easy street, or anything else. These projections are the result of screening for technically significant retracement and momentum patterns that have been further screened for value and bullish sector performance. In other words, the projections are for long positions.

For 07/29/2010:

                                     $INDU      $SPX         $COMPQ    $RUT

Monthly Momentum   Neg            Neg              Neg             Neg

Weekly Momentum     Pos            Pos              Pos              Pos

Daily Momentum        Neg            Neg            Neg               Neg

N means neutral, Neg means negative, Pos means positive (OS) means oversold and (OB) means overbought. The value to price estimate (it is not a guarantee, only a cash flow based estimate) can be defined loosely as a multiplier of price. A number higher than one means the stock is undervalued using this model and a number less than one means the stock is overvalued.

Index and ETF I-shares Bullish Reversals (Note: to look up quotes for the Dow Indexes (starting with DJ or DW, add a dollar sign. No dollar sign is required for the ETFs beginning with other letters.) Today’s list includes only those ETFs with a 50-day moving average of daily volume greater than 100,000 shares:

The stocks listed below are ranked by pattern bullish reversals based on a momentum indicator. Each stock by sector is listed with the cheapest stocks on a near-free-cash-flow value/price basis at the top, and more expensive stocks on that basis farther down each sector list (they are listed alphabetically):

None

Stocks that almost passed the neural net screens but just missed: None

With yesterday’s trading, the daily momentum model turned negative, and despite the weekly positive positioning of momentum, monthly and daily momentums are aligned with the bears. Volume again was very light, and buyers were absent. As stated previously (and which I discussed on Vince Rowe’s show yesterday), this is not the kind of environment for which pattern trades show up with my methods. When traders come back in September, we should resume finding patterns that will work from a swing perspective, but for now, the indexes are wedged between narrow ranges as are most stocks in this environment. We have to be patient with capital as only acceptable set ups should be taken to stick with the trade plan.

Note that most of the bullish reversals were in fixed income and bearish index funds related to general stock market indices, retail, and the Russian stock market. We still need more data to model these emerging market ETFs, but that will happen over time.

Here is what passed the neural net screens:

                                        Value/Price EST.       7 day ATR   %( 7 day ATR)/Close

Nothing today.

Note (O): optionable*

Beta greater than 1.5, Volume greater than 1 million shares on a 50-day simple moving average.

I hate to be so repetitive, but I cannot express any better what I continue to see in this market, discussed below:

The dynamics of longer term momentum are rather bearish, with monthly momentum still negative. Daily momentum is now bearish, but we need to watch weekly data. A permanent shift in weekly momentum to the downside with volume could force continuance of a longer-term selloff. This has not yet been confirmed but could happen when traders return en masse during September. Monthly momentum remains negative as key resistance levels in the indexes are yet to be fully tested.

Any positions, short or long, should be limited in size to what your risk tolerance and trading capital limits allow.  Use proper money management skills to scale into and out of positions as profits occur. Low overall volume could also still be an issue as the summer ends. These are tough market conditions in which to trade. Journal mistakes you make and the conditions in which you make them and learn from them. These are times that will hone you as a better trader and investor if you do so.

One needs to stick with one’s trading strategies and not roll the dice. Manage your stops and targets well. It will help make AND save you money. We still do not know from day to day what will push this market.

Take care,

DBB