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DigitalDisco (< 20)

Weekly Watchlist

Recs

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August 17, 2013 – Comments (3) | RELATED TICKERS: CBI , OUTR , GMCR

The construction and engineering sector is still showing increasing lows but stagnant highs.  I'm not a full-fledged technician so while I'm sure the pattern has a name I have no idea what it actually is.  What I do know is that it signifies an increasing likelihood of a move.  There's always the potential for a downward move, but the strategy I use is intended to cut losses short and let winners run.  Oil and gas production and exploration companies continue to show a very nice bounce from a 6 month downtrend.  The same goes for specialized consumer services.  After its monumental cratering just shy of 3 months ago it has held a nice floor and has started a very slow climb upwards.  Still, upwards is upwards.

Two picks this week along with a few interesting ones to keep an eye on.

Chicago Bridge and Iron (CBI) - This stock fought for it for nearly 2 weeks and finally made it above its 30 day SMA on Thursday.  This was the final signal on top of an already positive MACD Histogram and uptrending stochastic.  It's even stronger since it had proper volume support and the stochastic is the result of a crossover as well.  The PEG ratio of .79 indicates that there should be plenty of upward momentum for this run, and this is just the beginning of it.  I started a CAPS pick on this one today.

Outerwall Inc (OUTR) - This one is still a buy from last week.  The nice part of the sour market the past couple days is that it kept OUTR from overheating on its SMA breakout.  And with the MACDH and stochastic still in positive territory, this one should have a good week.  There is still plenty of room in the PEG ratio with an increase in their expected earnings shrinking the number to .73.

Aside from these 2 picks there is another stock to keep on your radar this week as it could move into buy territory. 

Green Mountain Coffee Roasters (GMCR) - It just crossed over its 30 day SMA Friday but still has a MACD Histogram in the sell realm, however, it appears to be bottoming out.  Even though the stochastic is also downtrending one solid day in the early part of next week could turn this to a solid buy.  As I've mentioned before, GMCR likes to run on momentum as well, so the PEG ratio is less relevant as long as volume supports the 3 buy signals.

3 Comments – Post Your Own

#1) On August 18, 2013 at 1:47 AM, OklaBoston (67.12) wrote:

The fundmentals for CBI do not justify the technical up-trend.

 

I used to be much more into charting than I am now. I still do check http://www.stockcharts.com frequently but now that I am insisting on seeing some fundamental justification for trends my score here has been going up steadily afterhaving been a horrendous NEGATIVE 3000 months ago. 

 

http://www.finviz.com is the site I most often use to check fundamentals because it presents the info much more clearly than other sites I'mfamiliar with. 

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#2) On August 19, 2013 at 12:02 AM, DigitalDisco (< 20) wrote:

The first step in my process of stock selection is to run a scan of all stocks that meet certain fundamental criteria and then further limit those stocks by technical analysis on their sector and then on the individual stock.  With CBI, I do see a few fundamental metrics which cause me some concern.  Their revenue and earnings have grown nicely over the last 3 years, and they're writing off less and less for depreciation, which I like to see.  While the decrease in writedowns makes me happy and makes me want to believe that more of their earnings are real and not just accounting games, I can't ignore the growing amount of deferred tax obligation that they're carrying on their balance sheet.  An additional negative is that while they still have a nice cash pile, cash flow has turned negative of late.  Other than that, I don't see much else outside of the ordinary to cause me concern.

Further, my timeline for my trades is typically less than 3 months.  I enter into positions with a stop market at 3% below their 30 day SMA at the time that I buy in, and I adjust the stop price to the same 3% below SMA on each additional buy or sell signal that the stock shows me.  On average, I need about 20-21 trading days of generally positive price movement to get my stop to my breakeven.   While I'm fairly new to this strategy, I'm seeing that I'm less susceptible to fundamental corrections to stocks than I am to individual events, like earnings.  Granted, this is just an investing theory that I've developed so I'm glad to have people poke holes in it at every turn so I can refine it and improve it.

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#3) On January 21, 2014 at 3:28 PM, DigitalDisco (< 20) wrote:

Revisiting some older picks, here's an update on then vs now.

Chicago Bridge and Iron (CBI)

Close on 8/16 - $61.27

Close on 1/17 - $82.86

Gain/Loss - 35.24%

Outerwall, Inc (OUTR)

Close on 8/16 - $62.51

Close on 1/17 - $66.57

Gain/Loss - 6.49%

Green Mountain Coffee Roasters (GMCR)

Close on 8/16 - $76.38

Close on 1/17 - $78.96

Gain/Loss - 3.38%

S&P 500 Index

Close on 8/16 - 1655.83

Close on 1/17 - 1838.70

Gain/Loss - 11.04%

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