StockTwits 50, August 6
- Posted by Ivanhoff
- on August 4th, 2012
The S & P 500 and the Nasdaq Composite finished the week in a slightly positive territory. If you look only at the indexes, you might remain under impression that this was another boring summer week, but below the obvious surface there were quite a few crazy moves in individual stocks. 79 liquid stocks went up 10% or more for the week as opposed to 109 that went down 10% or more.
Issues with the market structure, caused by a bug in Knight Capital’s market making algorithm, certainly contributed to the volatility. For example, just look at the price action in NetSuite ($N) – it dove to $47 in early Wednesday morning, quickly recovered in the afternoon and finished the week above $57, near all-time highs. Such unusual price action has definitely brought back to light the question about a proper use of stops in trend following. Some form of a stop (limit, market or mental) that invalidates your thesis is absolutely needed. Using closing prices for exit signals will help to decrease the likelihood of unnecessary intraday shakeouts.
For the week, the St50 momentum index lost 0.18%. It continues to be a challenging environment with a lot of noise for momentum stocks. The whole summer has been a typical mean-reversion market, where buying breakouts and shorting breakdowns hasn’t been the most profitable approach. Just this past week, some of the biggest moves on long side came from total market laggards ($FSLR, $GMCR, $OPEN, $MELI), where analysts estimates and market expectations were extremely low.
Biotech was the hardest hit sector after reaching all-time highs the previous week, which only comes to remind that this is a typical “reversion to the mean” environment, where breakouts have hard time finding follow-through. $SGEN was hit pretty hard. The other two biotechs on the list – $ALXN and $PCYC performed much better. They continue to show impressive relative strength and consolidate near all-time highs.
No matter how crappy the market environment is, there are always under the radar stocks that are in a period of a monstrous growth. No one had heard of $ELLI at the beginning of the year. It was a $5 stocks that was trading under 100k shares a day. Seven months and three spectacular earnings reports later, it is a $25 stock that averages about half a million shares a day. Liquidity often follows price momentum.
$TFM was among the few stocks that reached new all-time highs on Tuesday, when most momentum stocks were under pressure. It has revealed clear signs of accumulation, which makes it one to pay close attention to.
Refiners stocks have been among the best performers this summer and frequent visitors of the 52-week high list. Given that the crack spread (which defines their margin) is up 20% since mid June, this should not be a surprise. A refiner in the face of $HFC is a new member of the St50 list. The crack spread is also mean reverting, so make sure you don’t overstay your welcome in these stocks.
$LNKD finished the week on a strong note after beating sales growth estimates and proving that not all social media companies are managed equally.
Specialty nutrition retailers $GNC and $VSI continue to hover near multi-year highs. Being a specialty retailer is a double edged sword. Some of the best performing stocks have the same background, but also some of the biggest losers. It is an industry with binary outcomes, where you either make it big and ride a multi-year secular trend or you vanish unnoticed.
You can easily follow any or all of the stocks in the ST50 on StockTwits by clicking here.
Have A Great Weekend!
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.blog comments powered by Disqus