Thursday, May 26, 2016

Stocks Are About To Take Over

The market added to its gains yesterday with another decent move higher; we are now up 2.5%  since Thursday's close.  Short-term traders are probably looking for some consolidation here, and that is to be expected if it were to happen.  However, now is when we generally see more individual names start to move on their on merit, sort of a passing of the baton until we get short term overheated. In other words; stocks over indices over the next few days.

Some of the standouts from yesterday's LIST were; LGCY +11%, AREX +11%, DNR +7%, WLB +7%.

Today we have DNR, RYAM, DGI, VMW, PAA, AVH, JONE, TCK, POT, TRCO, OLLI, BTE, on the list.

The rules are simple;

  • Only get involved if they go through yesterday's high plus a few pennies.
  • Based on the chart patterns, the stops are close and clear.
  • Either the market will get you in or keep you out.
  • I only play this list one way, LONG.
  • Stocks move in momentum burst of 3-5 days (stockbee), you want to buy on the first day and start unloading on the way up and on days 3,4,5.
  • You are going to be wrong half the time.
  • Position size makes all the difference in the world.
  • I work with a price stop and a time stop.
  • Stocks in the short term move from 52-week lows, 52-week highs, all time highs, etc.
  • Contraction leads to expansion; this happens at lows, highs, middle, etc.
  • I tend to stay away from buying stocks in the first 15-minutes.




My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


              

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Wednesday, May 25, 2016

New Highs Are Inevitable, Am I right

The advance-decline line for both the NYSE and the SP500 was a big topic today on Twitter finance; one hit a high, and the other is pretty much at a high.  The discussion started when a comment was made on why so many feel miserable about the market when these two lines are making highs.  The assumption is that investors should be more optimistic or excited than they are now.  I believe that part of the disconnect is that these new highs on these advance decline lines are not translating to investors bottom line, which is returns.  Most investors don't have their entire portfolio fully invested in just the SP500; they own individual common stocks, emerging markets, different sectors, etc. A day doesn't go by that we don't hear how bad hedge funds have and are doing, they certainly are not benefiting from this.

The SP500 has been able to stay flat over the last 18 months while many sectors and stocks have tumbled. The Russell 2000 suffered a -28% drawdown, emerging markets a -36% drawdown, Energy -35%, Miners -36%, Biotechs -50%.


Behavior plays a huge role in the market; many don't sell until they can't take the pain anymore which is usually a day or two away from a major bottom.  Then they usually don't get back in until the underlying has had a huge move, by the time they get back in the move is over for the interim and the cycle begins again.


Flat, choppy markets wear people out; it makes them make more mistakes than they normally would, by trying to make something happen when there is nothing to make.  The market might be open 252 days a year, but it is not open for you to make money 252 days a year.

The last time financial Twitter made a big deal about the advance-decline line being at highs and everyone being bearish was back in August 2015, we wrote about it HERE. The gist of it was the same thing, the SP500 A/D line at highs, sentiment was bearish, the Twitter stream was whining, and the positiveness of the A/D line was not trickling down to people's portfolios. Here is the chart from August 2015.


Notice the date 8/18/15, and notice where the SP500 closed that day (2,096.92), where did it close today--2,090.  All this hurrah with nothing to show for it.

Here's what happen the days after 8/18/2015. One can argue that the majority was correct.



A few points

  • I am not discounting the validity of the A/D line, all I'm trying to do is solve part of the mystery on why so many can't relate to this "positive A/D action."
  • Part of the reason is; just like last year, the A/D effect is not trickling down to portfolios.
  • Some immediately think that if you are arguing against something that you have a bias, market breadth is all about bias they say.  As you can see from the picture below, there is no bias here; I'm not short, long and strong until further notice.
  • Don't assume what people are doing on Twitter; you have no idea, some manage their twitter account very well, they make you feel like they've caught every single move, and that every high also means a high for them as well.



My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


              

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Chasing

The market had a very nice day yesterday with the SP500 gaining +1.37% and the Russell 2000 +2.15%.  This morning the SPY is building on that gain with a 1 point gap up.  It's a little hard to get excited after huge up days because the market has had a hard time following through to the upside when most see it has a good "technical set-up".  We've enjoyed the best follow through from oversold levels, by the time most consider the market in "good shape" it has run out of juice.


This time like always could be different.

With that being said, AREX, DNR, RYAM, YELP, BTE, VMW, OLLI, AGN, WLB, LGCY, GNW, are the stocks on my swing trading watchlist for today.  GOOGL +$15, LNKD +$3, were the big standouts yesterday.

The rules are simple;

  • Only get involved if they go through yesterday's high plus a few pennies.
  • Based on the chart patterns, the stops are close and clear.
  • Either the market will get you in or keep you out.
  • I only play this list one way, LONG.
  • Stocks move in momentum burst of 3-5 days (stockbee), you want to buy on the first day and start unloading on the way up and on days 3,4,5.
  • You are going to be wrong half the time.
  • Position size makes all the difference in the world.
  • I work with a price stop and a time stop.
  • Stocks in the short term move from 52-week lows, 52-week highs, all time highs, etc.
  • Contraction leads to expansion; this happens at lows, highs, middle, etc.
  • I tend to stay away from buying stocks in the first 15-minutes.

My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


             

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tuesday, May 24, 2016

Stocks To Buy Today

The market has been very quiet. The SP500 has been alternating days for the last two weeks, the bulls and the bears have shown no interest thus far to make something happen.

In my eyes, the energy names continue to have the best swing set-ups in the short term  Contraction leads to expansion, so a move here is in the cards, the million dollar question is whether it will be to the upside or downside.  If it's to the upside, the stocks below are the ones on my watchlist for today.

GNW, DNV, AREX, DNR, PES, YELP, ERX, GTLS, AMED, EXPE, MBLY, GOOGL, LNKD, BTE.

The rules are simple;

  • Only get involved if they go through yesterday's high plus a few pennies.
  • Based on the chart patterns, the stops are close and clear.
  • Either the market will get you in or keep you out.
  • I only play this list one way, LONG.
  • Stocks move in momentum burst of 3-5 days (stockbee), you want to buy on the first day and start unloading on the way up and on days 3,4,5.
  • You are going to be wrong half the time.
  • Position size makes all the difference in the world.
  • I work with a price stop and a time stop.
  • Stocks in the short term move from 52-week lows, 52-week highs, all time highs, etc.
  • Contraction leads to expansion; this happens at lows, highs, middle, etc.
  • I tend to stay away from buying stocks in the first 15-minutes.


My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


            

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.


Saturday, May 21, 2016

The Scariest Chart That Is Not Scary At All

The chart below is making the rounds in the twitter finance world, and it's freaking out the uninformed.


The chart shows two instances when one moving average crossed another moving average (50-week and 100-week) to the downside and coincidently the market went down big. The underlying assumption is that the death cross we are experiencing now will have the same effect.  This is a great chart to get a lot of page views and to meet the daily blog quotas, but it means nothing at all.  Two sample sizes are not enough to conclude anything.  Secondly, you would have to believe that the 2001 and 2008 plunge was because of a cross of two moving averages and not because of the Internet craze and the housing bubble. Thirdly, if you went back to 1950 and calculated what happen every time this "death cross" has happened you will quickly see that there is no statistical edge to the downside at all.

Source; Chad Gassaway

The fact that the "death cross" is just nonsense to put it in a nice way, it doesn't mean that the market can't collapse, or crash, or go down, etc.  The point is that you the reader now more than ever has to cut out a lot of noise that now fills blogs, business websites, etc.,  posts are now being written to fill pages and meet quotas.

My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


             

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Thursday, May 12, 2016

Amazon's Next Retail Targets

Retail stocks were down huge yesterday, it all started when Macy's reported their earnings number and the stock took a nose dive dragging the whole retail sector with it; $M -15%, $KORS -11%, $VFC -6.5%.  Amazon, however, was printing a new all-time high, immediately mostly everyone on my twitter finance stream concluded that Amazon is the one killing these retailers.  As a big time Amazon shopper I have never purchased any clothing from Amazon, so obviously I don't buy into this argument.

With that being said, Investors Business Daily today reported that Amazon is poised to become the number one U.S apparel retailer by 2017;  Amazon is growing in the clothing business, while traditional retailers such as Wal-Mart (WMT) and Target (TGT) are in decline, Blackledge said.  A bold call, and while my apparel buying habits might be different than most this is without a doubt a huge possibility.  This got me thinking about what apparel stocks have held up well against Amazon and are they likely the next one's to feel Amazon's wrath.  Children's Place and Carter's have held up relatively well against Amazon; as an online buyer,  I would feel much more comfortable buying baby clothes on Amazon than a pair of jeans for myself. Children's Place and Carter's might be the next in line to feel some Amazon pain.

5-year chart of Amazon versus Children's Place and Carter's.


Source; IBD

My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


            

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Churn and Burn

The market had a huge up day on Tuesday, the gains were entirely erased yesterday, and this morning so far we have recovered half of yesterday's losses.  Some people are calling yesterday's action a bull trap; I'm not a fan of making calls based on the action of one day.

The perma-bulls get excited every time the market is up multiple days in a row near highs and then quiet down when the market has a natural pullback.  The perma-bears take every piece of information, data, Candlestick, etc., and spin like if it's 2008 all over again.

The fact is, the SP500 has not been able to break these levels in 15 months, flat is the pain trade, a big churn and burn with most not having anything to show for it except losses.  The market has a tendency to move higher over time, so you always have to give the benefit of the doubt to the bulls.

BV, BLX, ACW, SSTK, BTE, CTRP, CP, LGF, are the stocks on my watch list today.




The rules are simple;

  • Only get involved if they go through yesterday's high plus a few pennies.
  • Based on the chart patterns, the stops are close and clear.
  • Either the market will get you in or keep you out.
  • I only play this list one way, LONG.
  • Stocks move in momentum burst of 3-5 days (stockbee), you want to buy on the first day and start unloading on the way up and on days 3,4,5.
  • You are going to be wrong half the time.
  • Position size makes all the difference in the world.
  • I work with a price stop and a time stop.
  • Stocks in the short term move from 52-week lows, 52-week highs, all time highs, etc.
  • Contraction leads to expansion, this happens at lows, highs, middle, etc.

My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


           

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Friday, May 6, 2016

Resumption Or Change Of Direction

The SP500 has been in pullback mode for the last two weeks; it now sits on top of its 50-day moving average.  Just as the Twitter folks started making fun of the bears and screaming that new highs were coming the market stalled. The Nasdaq composite has not faired as well as the SP500; it's down ten out the last 11 days with -4.4% return. The cheerleaders from the 2100 level are nowhere to be found now that the market has a more favorable risk-reward ratio.



The Non-Farm Payroll numbers are due out at today at 8:30 am, this could be a market moving event and or perhaps will serve as a catalyst to resume the recent trend or as a direction changer.  No one knows.

What I do know is that the selling has not been intense, and a lot of stocks are down multiple days in a row (3 or more) sitting on top of what can be possible support.  If the market can start moving higher many stocks will offer great risk reward trades for the short term.

TNA, TQQQ, HLX, FMSA, BTE, YRD, CENX, PAH, NOW, AVH, R, SUN, PCAR, JCI, MANH, PAY, MPC, PSTG.  Normally I only like to get involved in trades if they can get through their previous day high. However, most of these stocks are down multiple days in a row, what I'm looking for is a green candle, that would be the trigger and the previous day low will be the stop.


My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


          

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Wednesday, May 4, 2016

Sector Rotation

The buzz word this year has been "SECTOR ROTATION", the minute one sector takes off for a few days it settles down and then the weakest starts to move up. In other words, it has been a mean reverting market, last year's losers are this year's biggest winners; ENERGY, METALS.

With that being said, the XLE (energy ETF) is down five days in a row, and many energy stocks are as well.  AR, CENX, are two of interest at this very moment. They both are retesting multi-month breakouts which I expect that they will hold, and if mean reversion takes effect again then these are great entry points.

ETF'S are for the most part mean reverting vehicles; anytime they are down 5-6 days in a row it peaks my interest along with the stocks within the sector.



My opinion and outlook are subject to change as new information comes in. 

Frank Zorrilla, Registered Advisor In New York. If you need a second opinion, suggestions, and or feedback in regards to the market feel free to reach me at fzorrilla@zorcapital.com or 646-480-7463.


         

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.