Thursday, March 31, 2011

Looking for breakouts? Try our new stock screener

The Alert HQ lists of alerts and reversals are a great source for finding stocks and ETFs that are breaking out from down-trends or breaking down from up-trends.

Finding stocks that are breaking out of a messy consolidation phase can be a bit harder to do. The good news is that the Premium Stock Screener at our new site TradingStockAlerts.com has a neat way of doing it.

Putting the Trend Performance Score to work --

Start at the very top of this new screener where the focus is on recent changes. Set the Trend Performance criteria to "Somewhat bullish (>3)" and the Change in Trend Performance to "Bullish to Very Bullish (>1)"

What this means is that we are looking for stocks that have been moving sideways or upwards and are suddenly showing a noticeable move upwards; ie: a breakout.

If you want to eliminate those stocks that are already in an up-trend, you can add a couple of more criteria. For example, looking for MACD flipping to bullish or recent bullish improvements in the 50-day Moving Average will tend to help identify those stocks that are just moving out of their consolidation patterns.

Add some fundamental criteria --

Now that the chart pattern you are looking for is set, you can add some fundamental criteria. I always like to pick stocks that exhibit some "reasonable value" characteristics. The screener offers the ability to look for low Price-to-Sales, moderate PE, low Debt-to-Equity and low to moderate Enterprise Value-to-EBITDA among other criteria.

Give it a try --

The Premium Screener does require that you become a member of the TradingStockAlerts.com site but you can just register with a free account and be able to use all the features described above.

Give it a try and let us know what you think. It's a new site and we look forward to your feedback!



Friday, March 25, 2011

Is Cramer right about tech?

I occasionally read the emails from TheStreet.com. One of Jim Cramer's themes recently is that tech is in the "house of pain" and should be sold into rallies or avoided altogether.

Having a particular interest in tech, I was wondering if I could prove or disprove his thesis. As it happens, the Durable Goods report for February was just released and we can see how tech in aggregate is performing.

Shipments --

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how February shipments looked for the overall tech sector:


It appears that shipments in the tech sector peaked back in September 2010. Furthermore, the six month moving average has turned down. If you're keeping score, you might say Cramer 1, tech 0.

New Orders --

This is the category that gets the most attention as it provides a glimpse of what might unfold in the future.


Here the situation is slightly better. We have the same peak in September of 2010 and, though the six month moving average is turning down slightly the most recent data point shows that there was a bit of an improvement in February. This suggests that shipments may at least hold steady in the short term. Let's call this one a draw.

Conclusion --

As far as the hardware segment of the tech industry goes, it is clear there has been a slowdown. Though certain individual companies are doing well, the aggregate performance is less than stellar. Investors in general seem to agree with Cramer as the following chart of the Technology Select Sector SPDR ETF (XLK) illustrates:


You can see that a significant pullback has been in progress. Despite the rebound underway, this ETF remains below its 50-day moving average.

Where investors seem to be more interested is in the software sector. Here's the chart:


Here we see the ETF, which did not suffer as sever a pullback, has now crossed above the 50-DMA and MACD is just turning bullish.

With the issues affecting the hardware sector due to the problems with factories in Japan and the slowing of new orders, it appears that Cramer may be right. For those interested in the tech sector, software seems to be the way to go. We just had great earnings from Red Hat, for example and pretty good earnings from Oracle while on the hardware side Cree and Research in Motion both suffered after offering disappointing guidance.

Cramer's caution on tech, especially the hardware sector, seems to be warranted.

Disclosure: I have no positions in any stocks or ETFS mentioned, and no plans to initiate any positions within the next 72 hours.





Disclaimer: This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.




 
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