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Most of my watchlist is either extended or still basing.
Now I want to follow that notion of buying at least a small position in a nascent rally just to get something on the board. So here we go...
Two interesting stocks came to my screens: EQM and WETF.
EQM
Looking right at the charts EQM looks so tempting due to the multiple up weeks, very tight action throughout (since IPO!), nice RS line, good YTD gain (60ish), but it is quite illiquid at 107kshares.
Fundamentally, you can't really go wrong, growth is continuing and well above levels, including sales. They own stakes in transmission, storage and gathering of natural gas.
As well even though RS is 94 and rising, A/D is D+ indicating short term selling, and U/D (more long-term) is mediocre at 1.1. Group RS is < 80 meaning it's not in top 40 performing groups. I'm trying to focus on high ranking groups to minimize risk.
EQM is rebounding off the 10 week and in buying range with very nice volume on the daily!
WETF
Wisdomtree is another fundamentally strong stock that runs a catalog of ETFs. Sales and earnings seem even higher. I calculated ROE to be 20% in 2012, as it is not indicated in Marketsmith, but it shows 18% for 2011. It's up about 100% this year.
The number of funds owning the stock is increasing substantially, A/D is B- and U/D is 1.3. These numbers are way better than EQM so far. RS line is similar to EQM and group RS is stronger, too.
The chart looks not as civil as EQM but the liquidity makes me more comfortable. It never broke the 10 week on the ascent to the pull back which starts with a crazy flash crash type event before pulling back in a more orderly fashion. It continues to find support, although the weeks are always ending red.
WETF is in buying range, or basing at this point (4th down week), it's a coin toss right now. But it is showing 10 week support.
Conclusion
WETF wins this battle of the pullbacks for me, although I'm concerned of the lack of choice right now, but it could just be a quiet Friday. Or is this another June of gloom?
What screen do you use?
You could reverse engineer one based on these two stocks as long as both stocks show up your A ok.
These stocks didn't come from one screen.
My basic method is this:
Create a bare minimum stock list using a screen looking for good liquidity as the basis for my fundamental screens. This keeps me from having to recreate this parameters in every subsequent screen.
Then I run about 10 fundamental screens, each very simple and focusing on a particular CAN SLIM trait. I create a new list from the results of all these screens (basically ORing them all together), which serves as my growth universe.
I then run a bunch of stock guide technical screens and some I made myself on my universe to find stuff that's buyable and this becomes my watchlist. I flag anything I might buy for the day.
I then run themed screens or look over industry groups I like, to find any oddballs worth considering that was filtered out by the above process.
I'm new to Marketsmith, so my process is still maturing significantly and loosely based off the webinars and my desire to create a Poor Mans's 250 as my pool.
Happened to play WETF flawlessly myself on its B/O and locked in gains > 20%.
Got long again at 12.05 on 6/3.
Distribution volume has been rising recently. Keep an eye on that. That being said the ETF business is ripe for future gains. But if WETF's "DXJ" continues its free fall it will keep the stock under pressure.
Yeah yesterday lowered it from B- to C+ but it was showing support at 50 day. Let's see how the bounce completes itself now.
In at 11.99, not taking more than a 5% hit on this, less if the market turns ugly.
Guess I was wrong! WETF sold off today but EQM holds steady. I'm stopped out of WETF at a small loss. I tightened the stop ahead of Bernanke's press conference for this purpose. whew.
Funny thing is my gut instinct liked EQM better because of the chart action but I got spooked by the apparent illiquidity (which doesn't seem apparent in the price action...). EQM is actually still buyable but I will make sure there are no better opportunities out there that represent more of a primary position entry.
Lastly, I need to make sure I understand this industry a little better, I had no idea how strong the correlation is between their stock value and the DXJ. Japan's recent volatility would've led me elsewhere had I known.
Thanks tnewbergusl for the heads up. Lesson learned.
Not a problem my friend. Bailed out myself at 12.18 on 6/18. Was hoping it would dump into the 9's but it reversed. Love the LT story with this company, chart needs time and up volume here.
Although now its hindsight and each investor is different when it comes to stock selection criterias, I would stay away from both EQM and WETF
EQM: EQM is too thinly traded. 150k avg daily shares is just too small.
WETF: On 5/23/2013, WETF had a very wide swing, highest range in its 1 year history. After a stock goes through that kind of turmoil , usually good to stay away until it stablizes at a higher range.