A Few Penny Stock Setups

For you gamblers out there that are looking for a thrill, here's a few penny stocks that are setting up in nice patterns.

Should you decide to play these, prepare to lose everything as they are penny stocks for a reason.

The first one is Amedica (AMDA).  It's been forming a series of wedges which have a pattern so far of lasting 4 days.  The idea is to buy near the bottom of the consolidation pattern in the .385 to .40 range over the next few days.


Click on charts to enlarge view:

The next one is DirectView Holdings (DIRV).  They are allegedly collaborating with XG Technology (XGTI) on a body camera of sorts.

DIRV has been trading in a tight range over the last 2+ weeks and showing signs of volume accumulation, while the Bollinger Bands are starting to pinch.  Here's the setup.

Lastly here is the chart of XGTI that I posted a couple days ago on Twitter.  It has since broken out but looks like it still has room to run.

Updated XGTI chart.

10 Setups Under $10 for Next Few Days

After a big bounce back rally yesterday from oversold conditions, I'm not looking to press it too hard.  We could see the market try a continuation move today and then roll back over to test the bottom of the recent range, so we have to stay nimble.

The beaten down energy sector yielded a lot of bottoming type formations, and they're heavily shorted.  But keep in mind they're beaten down for a reason.

Here are a few setups from last night's scan.  As always, use stop losses or go broke.

Click on charts to enlarge view.

The Grind of 2015

The broad averages have been trading in a series of ranges through the first 5 months of 2015 with many traders referring to the action as a "meat grinder".

Grinding markets that make little upside progress frustrate short term traders as increased trading fees and stop losses can chew up your account.  There tend to be fewer really good setups that were present in prior periods, and the ones that do show up don't work as well.

So while longer term traders absolutely need to stick with the longer term trend, swing traders and shorter term traders need to do less trading and/or significantly reduce position sizes.

The markets are looking for clarity on a lot of issues, and until the outlook becomes more clear, less is more.

Here's a chart markup of the QQQ that shows the trading ranges.  There's a fairly distinct pattern of 4 down swings and 3 up swings inside these boxes, followed by a larger move out of the box.

Take note that the latest move in early May out of the box was smaller than the previous one in February.

Click on charts to enlarge.

Shippers on the Radar

Scanning through some different sectors the shippers caught my eye with some increasing volume popping up here and there.

Some of these stocks formed inverse head and shoulder bottoms and are now trading sideways, while others are still trying to move off their bottoms.

Click on charts to enlarge view.

(NOTE:  I added the chart of  TNK to this list on Friday morning.)

Not Out of the Woods Yet

After the jobs report last Friday when the labor department announced that 223,000 jobs had been created in April, price action in the U.S. indices was encouraging.  The DJIA rose 267 points (+1.5%) while the S&P 500 added 1.35% and the Nasdaq Composite 1.2%.

All of the major averages are hovering just below their recent all time highs, with the Nasdaq off the most at just 2.27%.  Yet one important average has been languishing off it's highs for many months, the Dow Jones transportation average.

The transports stand 5.8% from their highs,  That high was set way back on the day after Thanksgiving, November 28 of last year.  Since then we've seen a compressing, wedge-like (or extended bull flag?) pattern take form.  Yet Friday's close in the transports was off the daily highs.

(Note:  You can click on the charts to enlarge the view.)

History has shown that non-confirmation from the transports can take place for periods of time, but it also can portend weakness in the broader averages.

Looking back at the intermediate market top in 1998, all of the broad averages were at all time highs with no discernible topping pattern in place, before they suddenly reversed on July 20-21 and began a steep descent.

Here's how the DJIA, S&P 500, and Nasdaq Comp looked on the weekly charts back on July 17, 1998.  They were all in strong uptrends.

Here's how the Dow Transportation average looked from mid 1995 to July of 1998 on that same time frame.  It was not at all time highs, but was actually rolling over in a distribution week.

Now let's look at the current charts of the U.S. indices and compare them to the transports.  Do we see any similarities?

Here's a look at the current DJIA transportation average.  Why are they lagging so much?  Bad weather in the 1st quarter - sure.  Weakened oil price damaging rail /truck transport in that increasingly important industry?  Sure.  But it's been lagging for a good long while now so we have to take note.

So here's what happened in the Fall of 1998.  A significant hedge fund , Long Term Capital went bust and nearly brought the global financial markets to a freeze, and a famous hedge fund manager by the name of Victor Niederhoffer who studied under billionaire George Soros and had an outstanding long term record lost tens of millions for his investors in the decline.

Here's what happened to the Nasdaq Comp from July 17, 1998 over the next 3 months.  Down 33% !

Why should we care about the transports lagging right now?  Because any index can go anywhere at anytime without notice.  The weekly charts on the major U.S. indices were all in strong bullish uptrends back in '98, yet the transports lagged.

In the Fall of 1998 without warning, the major U.S. indices declined between 21-33%.  Market leading stocks corrected even more.

You have to stay on guard and always limit your losses.  Market trends can turn on a dime without reason or significant warning.  That's why we always cut losses quickly.

We rarely know or understand when or why the next big move is coming.  But you can escape devastating damage to your account by cutting losses when prices move against you.

What If Scenario (just for fun)

Three months into the new year and the broad U.S. equity indices have made limited progress to the upside.  The Nasdaq composite lead by the healthcare/biotech and select semiconductor sectors has risen 3.28%, while the S&P 500 is essentially flat and the DJIA has actually declined six tenths of 1 percent.

If you've been nimble and picked the right stocks in the right sectors your performance could be quite good relative to the indices.  But if you're an index investor in your 401K or retirement IRAs it's been a flat start to the year.

And looking back to the swift pullback that occurred back in October of last year it has made me look at the index charts from a little longer perspective.  The S&P 500 is in a long term uptrend of 72 months now, dating back to the March '09 lows.

We've seen mostly 8-10% corrections along the way, aside from the QE induced market hiccups back in mid 2010 and in mid to late 2011.  The "V bottom" has been the rule to follow where traders have been trained like lab monkeys to "buy every dip" lest you miss the next upturn.

I've looked back at prior market tops to see what signs to look for, and while there some similar patterns that take place, there's really no key moving average that signals the trigger for a decline.

So with that said, here's a current daily chart of the SPX showing what some technicians could interpret as the start of a topping pattern.  To me, the bias still lies strongly to the bullish side, but one must always be on guard after such a prolonged move up.

Obviously the lows from March 11 at 2039-40 are important near term.  Then the next level to me would be the 200 DMA currently around 2010.  After that the December lows of 1972-73 come into play.

The 350 EMA is mentioned on the chart as it has been an area that has shown support during the current 72 month move.  The only serious breach of that line was during the 2011 correction.

If the highs from February 25 are taken out with strength across multiple sectors, then this scenario is no longer valid, of course.