$TLRY – When the dummy becomes the genius

Can a dummy become a genius?

With the right setup and a dose of luck, in stock trading, of course. Maybe not to the level I am about to chart (see below), but it happens more often one might think.

It’s the setup that creates the luck. And it takes persistence and experience to recognize the opportunity, and discipline to play it out.

In this link in early August – Buying IPOs For Dummies— I suggested the setup:

In the tradition of the “For Dummies” books, I give you the short and sweet on trading and/or investing in IPOs:

Buying into an IPOs is actually one of the easiest decisions in stock investing but never let a broker con you into doing it the day of the offering.

Instead, note the high price and the low price on the first IPO is traded. Those are the lines in the sand or the Darvas box around the first day of trading (see the charts below). The time to buy, invest, is on a close above the high of the first day with a stop loss below the high of the first day.

That is usually a low-risk trade since the real good news comes when the stock proves it can move up from all the hype surrounding the offering itself and if it falls back the stop to exit can close by and obvious – either below the high of the opening day or below the low of the opening day depending one’s own time parameters and risk tolerance.

Whatever the latest stock IPO, there is nothing more to say except maybe “Keep it simple, dummy!”

That having been said, let’s take TLRY (Tilray, Inc.), a timely recent IPO launched in the wake of the Canadian legalization of all marijuana products.

Talking about smokin’ hot! According to the setup (see the chart below), that was a buy at the $29.77 close the day after its IPO day, July 20th. If one happened to gamble on it as it gaped above its IPO high that day at $24.25 or so, all the better. At $29.77 it is now up 400% in two months.

This is a stock!

Granted this doesn’t happen this big this often — this took a MASSIVE DOSE OF LUCK — but it does happen regularly to a lesser degree (maybe I’ll bring up MESA next time).

By the way, if TLRY breaks that fast average on the chart be ready to get out of Dodge. That’s a parabolic and it’s likely to be a violent break. In fact today (at the moment) looks like a blow off. Might want to leave town any minute…

(click on the chart for a larger view)

UPDATE – $SPY #Options trade on a “Turnaround Tuesday”

Pretty great day in the gone-long options world.

Bought the Wednesday 287 call based on the immediate post below speculating that today would be a turnaround day suggested by history and by David Bergstom’s analysis at the “See It Market” site.

Several notable stocks were also up more than 3% from the open: NFLX, AMZN, BABA, and AAPL almost at up 2.95%. TQQQ, the Nasdaq 3xLeveraged ETF, was up 3.8% from the open.

#MarketTiming – Time for a “Turnaround Tuesday”?

There’s an old cliche in the stock market that says after a down Monday, the market turns back up Tuesday.

Everything was up a bit today except the Dow but…

David Bergstrom writing at the excellent “See It Market” website back in June, 2017, (see this link: TUESDAYS MARKET CLICHE OR TRADING EDGE?) added a wriggle to the criteria for a Tuesday Turnaround.

The idea is that the market tends to reverse a Monday selloff or down day with a strong rally on Tuesday hence the name “Turnaround Tuesday”. If this is the case then we can test this idea and add a simple edge to our arsenal.

First, let’s define our “Turnaround”. If Monday’s Close is below Monday’s open then Tuesday should – based on our theory – show positive performance across the stock indexes. On the other hand, Tuesdays following a neutral or positive Monday (close > open) should fare only about randomly or without a strong trading edge.

In the charts below, you can see equity curves for Tuesday trading across the major stock indexes. The first chart follows an up Monday, while the second chart follows a down Monday – or our “Turnaround Tuesday” performance. The blue line represents the S&P 500 futures since 2002.


The charts he presented are these:

Quite impressive Tuesday performance as per his setup.

So what about now?

If one hasn’t guessed, Bergstrom’s set-up for tomorrow is in play. Today’s major indexes, represented by SPY, QQQ, and IWM all closed below their respective opening prices. So if he is right, tomorrow should be up, and possibly it could be the beginning the next market upswing to new highs.

In that latter regard, I will add my own indicators. While the all-important long-term breadth is down, short-term breadth (measured by the McClellan Oscillator), after a series of highs below highs, plunged into oversold Friday (see chart below) and turned up today.

In addition, my nifty-50 stock list saw 40 or more stocks on sell signals two and three days ago, which is usually the bottom of a swing or in this case the beginning of the bottom. There are now 28 on buy signals with 15 triggering buys signals today — the stocks are turning, which often happens before the indexes.

Also, the Nasdaq composite declined coming into today’s little bounce four days in a row. In bull markets that’s about all the steady decline one can expect. This is only the third time it has happened in this very bullish year in the Nasdaq and each time has marked the bottom of the downswing.

Reiterating: tomorrow, Turnaround Tuesday, the market will likely bounce and it could be the beginning of a rally back to new highs.

(Click on the chart for a larger view)

UPDATING getting high in the weed stock patch 9/6

UPDATE 9/6: as suggested in this post yesterday the marijuana stocks were looking vulnerable to a correction. Today they took the projected tumble: TLRY down 15.4%, CGC down 4.5%, CRON down 7.55, the sector ETF, MJ, down 2.1%, and INSY down 7.6%. See updated chart below. There are still substantial profits on the table. Might think about lightening up, if not exiting completely (it’s been a great fast run). There is likely more downside to come since the market, even if it bounces tomorrow, is now in a down thrust and these stocks which have gone straight up and can also go straight down).

This is an update to this post two weeks ago:

A Serious Swing Through The Weed Patch

Marijuana stocks have gone crazy in the last 10 trading days, putting on the kind of gains that last marked the dot-com bubble in 1999 and 2000, which of course lead to the end of the nineties bull market.

TLRY up 189%, CGC up 52%, CRON up 87%, the sector ETF, MJ, up nearly 28%.

See the chart panel below. Gains per $100k traded are in the white flags on the lower right of each chart.

If I owned these, I would exit on any down bar to preserve profits. Note IIPR and INSY while still profitable have followed through currently on down candles. CGC turned in a red candle today which makes it worth watching on the open tomorrow. In fact, CRON and MJ also look vulnerable.

Congratulations to anyone hold these, but, me thinks, one should not fall in love with them.

(click on the updated chart for a larger view)

#MarketTiming – Pot stocks partying like it’s 1999

Canada legalizes marijuana and the stocks get high.

In the past ten trading days, with confirmation from long-term breadth as a market-timing signal, sector newcomer TLRY is up 200%, CRON up 97%, all up, CGC 50%, the sector ETF MJ (this might be the more reasonable way to play the sector), even long-term steady, GWPH, which actually makes money in medical marijuana is up nicely. The cash/percentage gains per $100K invested are the white flags on the lower right of the charts below.

In 1999, it was the dot-coms gone crazy with no more than hopes and dreams of massive monies to be made. With, most notably AMZN, the hopes and dreams have come more than true. So it’s likely to be with cannabis too in the fullness of time, but like in 1999 with the dot-comes, it is now no more than party time.

If anyone rolled these up ten days ago, congratulations! If not, they will correct, probably any moment now with the market but, no matter, these stocks will be obvious prospects for the next market upswing.

(click on the chart for a larger view)

#MarketTiming – Summing up profits on a 10-day upswing

How important is long-term breadth to the swing trader?

It is a trigger to get into the trade and an answer to one of the most difficult questions in market timing and stock trading — When to get out?

Measured here by the McClellan Summation Index ($NYSI), this latest upswing began on the open of of 8/20 and closed on the open today, a 10-trading-day swing. See the indicator in the center band of the charts below).

On the swing, the 3xleveraged ETFs made solid gains for the 10 trading days: TQQQ up 8.6%, TNA up 5.7%, UPRO up 3.7%, FNGU 11.5%, SOXL 19.7%, FAS 2.8%, LABU 18.8%, ERX 4.6%. There were no losses in the group.

On the swing, among my “bellwether stocks” AAPL racked up a 4.9% gain, AMZN gained 7.3%, NVDA 15.9%, NFLX 14.3%, TWTR 5.6%. But there were also losers – TSLA down 2.1% , GOOGL down .9%, BABA 4.4%. BIDU 2.4% and FB down 2.5%. The entire basket was up 1.98%.

The top-ten stocks in my nifty-fifty list coming into the swing outperformed both of the above stock baskets with CRC up 38.4%, TNDM up 36%, PVAC up 4.8%, RGNX up 13.2%, WTI 15.1%, ARWR 4.6%, I up 2.9%, HLG 4.6%, TLRD 7.7% and the only loser in the group was MDGL down 3%. The nifty-fifty stock basket for the swing gained 12.48%.

How important is long-term breadth for the swing trader?

The “When to get out?” was today’s open for everything (market timing). As of the moment of this writing all of the symbols mentioned above are down with the exception of MDGL, the only loser in the nifty-fifty basket (that, I believe, is the market giving a wink to traders just for the fun of it).

Except for the fact we are still in a bull market, today’s breadth sell could have been a short. For aggressive traders, it was.

A main path to the “persistence, experience and discipline” it takes to be a successful trader is the trigger-in one is comfortable with and the trigger-out one is willing to accept without question.

(click on the chart for a larger view)

$SPY – Can Orange Become The New Black Swan?

Four days up in a row for SPY and TNA while the Nasdaq, long the leader, now lags…

At the close of the day forty-one of the stocks on my nifty-50 stock list ended in the buy column with fourteen overbought.

Short-term breadth was up again but is now in overbought territory. Usually it takes time to unwind that even when it turns down.

Long-term breadth has been rising now for just three days, giving worthwhile advances in most everything — 40 out of the 50 stock on my list advanced today, and 41 or the 50 are positive on this three-day upswing. It should be noted if long-term breadth turns down now it will put in a fairly serious divergence with the SPY new high (see chart below).

Which bring us to the news?

I don’t ever trade the news but just taking in some market perspective one wonders if something is going to come along and blindside the complacency of this bull advance? Like the odd VIX spike today. Like AAPL gone crazy and possibly running out of buyers besides AAPL itself. Like some sector gone so frothy so fast it signals irrational exuberance has crossed over into insane exuberance (see the pot stocks in the post below).

Or like two of those closest to the jabbering President of the United States suddenly going down coincidentally on the same day, one with a guilty plea and flip, and the other found guilty on 80 criminal counts that could get him 80 years in prison. Trump claims always to be the best, be the greatest, know more than anyone else, likes setting records…how boastful can he be when his administration racks up more convictions than any other, including the Nixon administration?

What’s it mean to the market? As I write this, I see futures are down, with the Dow futures reversing the day. This bull market has been able over and over again to erase the overnight falls in futures. What if this time it doesn’t?

I guess then we might be able one day to look back and say: “Whattaya know…Orange
was the new black…SWAN!”

(click on the chart for a larger view)

#SwingTrading – a serious swing through the weed patch

Marijuana stocks are the ruling weeds in the market garden on this upswing.


SWING TRADING TRIGGER – AUGUST 16TH

That was the technical trigger for the open three days ago.

The fundamental trigger came on the news Constellation Brands (STZ), U.S. distributor of Corona and Modelo beers, was investing $4 billion for 38% of CGC. All of a sudden, the Wall Street mob discovered it might be acceptable to pour money on the weed patch, particularly those springing up in Canadian gardens where marijuana has recently been made legal throughout the country.

As a result, of those traded in the U.S., CGC is up 26; a new IPO, TLRY, up33%; CRON, 27%. Even the most legitimate of the medical marijuana companies, the stalwart GWPH is up 3.6%. See the white flags on the lower right of each chart below which correspond to the cash and percent gained for each $100K invested.

Of particular note is MJ, up 10.7 percent, the sector ETF for the weed patch. MJ tracks the Prime Alternative Harvest Index, generally by holding many of these stocks and others traded on the Toronto Exchange.

(click on the chart panel for a larger view)

It’s been a great run for Ferrari but its $RACE is run

Nothing like stair-steps in an uptrend.

See the chart below.

If this race was hill climb, RACE obviously finished in the money.

But, a couple of observations: 1) the stock has not had a breakdown from a boxed consolidation until recently; 2) there’s also a small head-and-shoulder top formation inside the box; 3) when leader flag it’s a warning for the general market too.

So what now? It’s a short the bounces until it makes a new high, and as long as it continues breaking to the downside.

And keep in mind this could be a warning in a possible transition from bull market to bear market.

(click on the chart for a larger view)

$AAPL – still rising in an ever thinning market

AAPL continues to rise among my bellwether stocks.

The others to some degree or another have sold off in recent weeks (see chart panel below). That would indicate the market is being led higher by fewer and fewer leading stocks. Maybe just one since AAPL is in all three major indexes except the Russell.

However, the general market managed to follow through Friday on the short-term breadth signal and turned long-term breadth up. If all goes well for the bulls we should have a rally for a couple of weeks at least that moves more of the bellwether stocks to the upside.

(click on the charts for a larger view)