🟨 2023 WATCHLIST: $MBLY2023 WATCHLIST
A series of stocks that i will be monitoring at the beginning of 2023
Here is a new issue from the Semiconductor Industry.
Relative Strength (IBD): 96
IPO: 2022
Sales acceleration:
Jun-22: 41%
Sep-22: 38%
Tintintrading
🟨 January effect - SPX vs RUTWHAT IT IS
Since 1988 the Russell 2000 has outperfomed the SPX 73.5% of the time during the end of December into 1st of January.
Classical David vs Goliath. Read more below👇
THE DETAILS
Testing from 1988 to 2021 the period of 15th Dec through to 1st Jan, we see that Russell 2000 has outperformed the SPX 25 out of all 34 years.
This is a win rate of 73.5% . Moreover, the times the Russel outperforms the SPX were greatly oversized when the Russell underperforms. Gains in the years of outperfmrance are 5 times bigger. Totals outperformance vs Total underperformance is (42.80% vs -7.81%).
And there was only 1 year (1988) when there was a loss larger than 1%. The last few years we have not been so consistent but it is worth the consideration.
🟨 SP500 Around Post-War RecessionsTodays study follows analysis on the Post-War Recession Start Dates.
We evaluate the price action the 12 months before Start of Recession and 12 months after Start of the Recession.
What we can easily evaluate that once and IF a Recession is confirmed we have about 5.8% more (ON AVERAGE) to the downside and the next 2 months are most volatile.
From then on we can see that within 10months (the Median length of a Recession) the Market comes close to full recovery.
DATA FROM FOLLOWING START OF RECESSION PERIODS
11/30/1948
07/31/1953
09/03/1957
05/02/1960
12/31/1969
11/30/1973
01/31/1980
07/31/1981
07/31/1990
04/02/2001
12/31/2007
03/02/2020
🟨 Months to Bottom after FED ✂️Today we have FOMC FED announcement! This is likely going to create volatility in the market.
If we measure the how long it takes for a market to reach bottom we can see that the average time after the first FED cut is 9 months.
From previous post we saw that the first RAISE was in 11 May 2022. Now if the FED pauses or cuts rates will start our timing of the average of 9 months
🟨 SP500 Declines - BEFORE Recession[bBACKGROUND
In previous idea I showed that it is very significant if we are going to get recession or not.
Link here:
WHAT WE ARE LOOKING AT
Here we look at what % decline did the SP500 experience BEFORE the start of a recession*.
HOW TO USE IT
We see that the average decline is -6%, HOWEVER we are currently already at -25%.
This indicates that the current market environment has already discounted quite a lot, even if there is a recession. Remember market is forward looking mechanism. Meaning things might not get VERY ugly even if there is a recession.
However, in the previous idea we saw that the average decline of a Bear market that coincides with a recession is -34.6%, meaning that ON AVERAGE, EVEN IF we get a Recession we can expect about a 10% decline from the current levels, but a lot has been discounted before the decline.
LEGEND
*Percent decline from SP500 monthly closing cycle high to the month "before" a recession begins.
🟥 Red lines indicate the start of a recession.
🟨 Bear Markets - History & AnalysisThe calculations use the S&P Dow Jones Indicies.
"The past doesn't repeat itself but it rhymes"
WHAT IS THIS IDEA
It plots all Bear Markets from 1900 to present day and separating them with those who have coincided with Recessions and those who are independent of recessions
Analyse the current Bear compared to previous precedents to determine the probability of the move of the general market
HOW TO USE IT
We can see that there is a clear correlations between the depth+length of the Bear market and the times we are in recession;
We can see that IF there is no recession on the market than the current Bear is becoming quite mature (299 days vs 212 days average) and we can expect that we will not violate the current lows;
If the economy is announced to have a technical recession, we will be likely go deeper and violate the lows (-31% vs 34.6%).
LEGEND
🟢 Bear Markets without Recessions (avg. -25% Loss, 212 Days)
🔴 Bear Markets with Recessions (avg. -34.6% Loss, 353 Days)
⚫️ Current 2022 Bear Market (avg. -31.0% Loss, 299 Days)
🟦 William O'Neil Rule – WALL OF BLUE**Publishing again because it got taken down by Mods**
While this has pulled back recently - it reminds me of a lesson from the great trader William O'Neil and his lesson for the "WALL OF BLUE" 🟦
Not many know this rule, so hope you like it!
Wall of blue rule states that when you have 4+ weeks of blue volume bars (blue volume bars = volume when the week close up, hence up weeks), then this is a buy signal of itself.
In the case of $SMCI we also have above average volume - which is additional strength and confirmation.
This is a signal that the stock is under heavy accumulation from institutions and hence why it made +83% advancement.
Now it is pulling back and it is extended from any base - so I would not touch it here, but it is a good example to illustrate the rule
🟩 $REGN - Buying againI am buying $REGN again here.
I like the base, the volume signatures are great and it is showing great strength.
The industry is Biotech (and it is in top 30 industries currently in the stock market)
The IBD RS rating is 95
Fund ownership is increasing:
- notable funds owning it are: American Century Focused Dynam, JP Morgan, FIdelity Contrafun, MFS Frowth, Franklin Growth
🟨 TV Crypto Market Caps - TICKERSThese are quite useful to follow.
We have 4 major ways to track Crypto Market Caps
$TOTAL = Crypto Market Cap
$TOTAL2 = Crypto Market Cap - BTC
$TOTLA3 = Crypto Market Cap - BTC - ETH
$TOTALDEFI = Crypto Market Cap for DeFi
Clearly all are below the purple line (200D SMA) and clearly in Stage 4 downtrend (as per Stage Analysis criteria).
This mean "no-touch" for me. Actually the clear sign to get out for INVESTORS (not traders) should have been all the way back in January!
🟨 Pausing rates - Bullish tendancy?The market is a forward looking mechanism. I have discussed before that the current correction can play out like 1994 bear market. For this reason I look at this as a historical precedent.
When the market sees pause it anticipates a decline, this pushes stock prices up, at least in practice :)
🟨 HOW TO trade stocks in DEEP BASESA DEEP CORRECTION = a correction more than 25-30% within the consolidation period.
Sometimes a stock might correct more especially in a volatile bear market. Deeper correction are more risky as they are more failure prone - use these ideas to put probabilities on your side.
The checklist
1. You want as much time away from that correction as possible (at least 1 year)
2. Many bases (iterations) on the right side (currently 3)
3. Explosive moves over the bottom💥 (currently +100%)
General Rules
The bigger the base the more time you want. Always look to the left to see:
- Where is the supply?
- How much is the supply? (could use Volume Profile free tools on Trading View)
- How is the stock acting as it reaches this supply? (Sharp pullbacks or controlled pullbacks)
🟩 Anticipating FED pause - BullishThe market is a forward discounting mechanism and looking back my stance is that the stock market are anticipating a pause in the FED stance. Hinted on Wednesday by FED Chairman Powell who said "smaller rates increases are likely ahead" as soon as December.
If the market is anticipating a pause, THE GENERAL MARKET INDECIES are likely to push forward. This of course is different to the actual stocks pushing up. So my stance is Discipline until I get good enough traction.
The real question is HOW MUCH HAS BEEN DISCOUNTED already?
🟩 Breadth showing Bullish signAs we are making lower lows in the Nasdaq Composite, the % of stocks participating in the rallies increases.
This is exactly the opposite to what we were seeing in the November highs when we said that the market is topping.
This is great bullish sign.
🟨 VIX Study 3/3 - Volatility analysisIDEA 3 OF 3
As the market transitioned from high volatility bear market to a low volatility bull market we saw that the VIX was transitioning and once it pushed BELOW the 20 level it stayed long term there giving ability for the market to rally up.
We want to use this precedent to study the current market and determine probable direction.
🟨 VIX Study 2/3 - Volatility analysisIDEA 2 OF 3
A level under 20 is generally where we see the market rallying. Currently we are above 20 but this is still elevated compared to the times we are trending up.
🟨 VIX Study 1/3 - Volatility analysisIDEA 1 OF 3
The bear market has been characterised by a moves of the VIX between 20 and 32.
We will see if the current market has legs by the way it acts from here.
Idea 2 will show how the VIX acts when we are easily moving up
🟨Successful FollowThroughD - BlueprintSince 1971 we have had 6 "major" Bear Markets.
Average Characteristics of Bear Market
👉 Avg Length: 536d
👉 Avg Depth: -39%
Current Characteristics of Bear Market
👉 Length: 282d
👉 Avg Depth: -28%
But as I have shared before around the web - the Length and Depth depend wether we have a recession or not.
FULL ANALYSIS HERE (this part starts +17:00 in):
www.tradingview.com
How do Successful FTDs look like:
👉 Avg Gain in first 4 weeks: +6.46%
👉 Avg Gain in first 13 weeks: +12.07%
👉 Max Drawdown in first 13 weeks: -4.65%
Last FTD statistics:
🟥 Gain in first 4 weeks: +5.4%
🟨 Gain in first 13 weeks: +9.3% (so far we have more time to achieve average threshold)
🟥 Max Drawdown in first 13 weeks: -5.4%
🟨 Cup and Handle Pattern - cheat sheetWhat is the Cup and Handle Pattern?
One of the most important chart patterns in the stock market is the Cup and Handle Pattern, invented by William O’Neill. Sometimes you might see it abbreviated as CWH. It also holds the crowd proclaimed title as one of the most profitable and reliable breakout patterns. The Cup and Handle Pattern forms as a bullish continuation pattern that can be found during strong trend.
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Is Cup and Handle Pattern Bullish?
William O'Neil cup and handle patterns represent bullish continuation patterns that mark consolidation periods which are followed by breakouts. This pattern includes two components: cup and handle . After advancing, this cup is formed in a bowl shape or with a rounded bottom. Handle forms in the upper third of the cup.
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Stages of a Cup and Handle Pattern Formation
Stage 1 Setup:
The pattern starts when a price raises from a former base, making the prior trend a bullish trend. At some the profit taking starts taking place and the stock begins the decline, forming the high of the cup. The high of the cup is also called the ‘Left Cup’
Stage 2: Decline:
The stock starts to form a new base. It is normal to see above average volume at the beginning of the decline. The volume element is important since it ensures that later buyers to the party are out of the stock and do not provide an overhead supply. By the end of Stage 2 the volume would have fallen below average. This low trading volume is combined with price consolidation around the low of the cup.
Stage 3 Recovery:
The stock starts to recover and the volume on up days starts to pick up. This indicates that institutions are taking interest in the stock. Pro tip: look for low volume on down days. Now we still have a few more types of players into the stock: the bottom fishers who bought in at the low of the cup and the bag holders who have bought at the high of the cup and have been sitting on a loss. As the stock price moves up, these would partially close their positions making the recovery process a stair stepping process rather than a V shaped recovery. As the price reaches close to the High of the cup, the last bag-holders will cut their losses and will create a large volume sell-off. At this point the “Pivot” is formed or the “High of the Handle”.
Stage 4 Consolidation:
After the High of the handle, the price is likely to continue its handle formation. The handle pattern occurs as there are still weak hands in the ticker. A shakeout preferably on higher volume is considered a bullish continuation in the cup and handle pattern formation . This indicates that all overhead supply is depleted. The point when the price starts to climb again and reaches the high of the handle is the breakout point. We will look for a to price breaks on higher volume to indicate that institutions have taken control of the stock and that the sky is clear to move upwards. A rule of thumb is to look for a price target with the same value as the prior advance from previous base as the one subsequent to Stage 1.
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Hope this helps!
Example of Cup and Handle on AAPL from 2003
🟨 FundStrat - Top 10 Worst CPI ReactionsIn 2022 we got 2 of the top 10 Worst CPI Market Reactions
The forward looking returns are quite bullish given the other dates.
🟩 $EE - Buying nowI like the primary base here.
Buying a pilot position into this.
RS rating is low = 83
No of funds accumulating is increasing nearly 200 funds as of Sep 22
EPS '23 is breakout @ 1.06 (+212%)
Fundamentals are great
🟨 Ned Davis - 3 Day Price Thrust The market triggered last week the Ned Davis 3 Day Price Thrust Trigger Indicator - indicator available in my profile.
The Thrusts occur when the S&P 500 rises at least 1.5% for one day, at least 1.15% for a second day, and at least 1.5% on the third day. The record since 1970 is perfect one year later. However, the prior18 cases, ending in 1938, only show 11 out of 18 profitable one year later.
We have backtested this for you and show you the result.
Bare in mind that the FED is speaking this week, which always brings extra volatility.
🟩 $ADM - Buying todayI like $ADM
It is in Stage 2 Uptrend.
A low cheat setup.
It has great fundamentals.
Volume is very quiet/
