Well well well, last week bullish harami on the weekly chart provided further proof that well-known candlestick patterns do provide good probability in term of identifying future movements. While assessment of movement is not guaranteed, it does provide enough information for traders/investors to anticipate price action and act accordingly to adjust risk.
Looking ahead, I see a potential double-top from the daily SP500 chart.
This week rally propelled the SP500 into the major resistance at the prior historical high established on March 1st (see left red arrow). Price action was meandering below this high for the latter half of the week. And when you factor the popular saying, “Sell in May and go away” into the equation, there is a slight odd in favor of another correction coming soon. Self-fulfilling prophecy can sometimes magnify itself or it can vanish without a trace due to external events that support the bullish momentum.
Despite the potential double-top scenario from the daily chart, the weekly chart reflected bullish sentiment from the momentum indicators.
As you can see on the weekly chart above, both momentum indicators are turning up (see blue arrows at the bottom). We will have to see how next week unfolds. Since my cash position is less than last week, I’m a little bias to the bull side.
This week, two of my positions were doing the exact opposite of what one would expect from a logical movement.
What do you mean?
Here is an example:
Giving the bullish SP500 sentiment, no one was surprised that $IBB (Biotech ETF) went up for the week as well. However, no one expected $CARA to go down but it did.
I was quite baffled as well. But below are some possibilities:
- Investors/traders were concern about the repeat of downdraft after earnings update and thus chose to sell now and buy back after earnings.
- Short sellers forcing a walk-down to take advantage of the absence of the “to be” buyers waiting to buy after earnings coming out next week on May 4th.
- A whale (large investor) trying to unload shares for whatever reasons
- A whale forcing the price down looking to start buying at a lower price point.
- Lack of confidence on the coming results of the two trials due by end of 2nd Qtr:
- A phase 3 trial of 450 patients for IV CR845 for post-operative pain
- A phase 2 trial of an oral formulation for arthritic pain
BUT no one really know the true answer… meanwhile, there are sign of a possible bounce as well:
- Price is completing an ABC correction where wave A = wave C
- Price is near the 79 & 89 MA supports
- Last two trading days (see highlighted yellow circle) reflected a spinning top candlestick bar bouncing off the 79 & 89 MA supports and a follow-up bar of higher high and a higher low. Per my book, a spinning top bar near the 79 & 89 MA supports has better than 50/50 of reversing a downward trend.
- The weekly chart is still reflecting price action inside an uptrend channels (see chart below) and there is a possibility of a bounce off the lower band of the channels and the 15 MA support (brown line)
Looking at the weekly chart of $CARA above, did you notice the wave like movement of the price action inside the channels? Price action seems like it is finishing the down wave this week and is getting ready for the up wave to kick off similar to the recent up wave that began in January of this year.
While I had loaded up the boat (added more trading shares on top of my core position) on Friday morning looking for a bounce, I decided to sell the trading shares a few minutes before the closing bell after I saw the potential double-top formation on the SP500 daily chart. Because I bought more of other stocks, I felt the need to reduce the $CARA exposure to bring cash back up a bit to alleviate portfolio risk.
What other stocks did you buy?
I started a new position on $DSPG after their earnings result. I like their fundamental story of providing technologies to enhance voice activation/command on any electronic devices that can be voice activated. I’m going to cut and paste an excerpt from the earnings conference call that highlighted what I think is an important growth factor for DSP Group in the coming years:
We are excited to share with you that during the quarter, QIVICON, Deutsche Telekom’s smartphone platform launched its home-based 2 gateways. It’s an IoT hub that incorporates our DECT ULE technology. In connection with the product launch, the new QIVICON gateways are offered with bundled ULE-based sensors, and based on our check, these new products are well-received in the German market. Moreover, propelled by the recent ULE-based smarthome launches by leading service providers, we are experiencing increased interest and strong momentum for ULE technology and consequently a continued expansion in our IoT consistent. As an example, LEEDARSON, the world leader in IoT product manufacturing has announced that it decided to integrate ULE into its lighting solutions, security and intelligent lighting controls, all using our ULE model, enabling fast time-to-market and easy integration. Moreover, we are seeing growing interest in adding voices or interface to IoT sensors. The voice is viewed as the prevailing user interface for the smart home environment. This represents another meaningful growth opportunity as our offering includes all the necessary building blocks for voice user interface and wireless connectivity.
ULE technology is designed to support high-quality two way voice and video and best-in-class range and propagation interference-free.
Looking at the second quarter, we expect IoT revenues to grow on a sequential basis, and to be in the range of $1.5 million to $2 million. In summary, we began the year with a record number of IoT programs, concentrated on leading service providers and OEMs. We anticipate the strong momentum to continue during the remainder of 2017 and to generate solid revenue growth.
The blue highlights are my own emphasis.
From the weekly chart, this week doji bar could be a “pausing” bar before continuation of a bullish trend since the price is no where near support or resistance. I only bought a standard size and may add more later depending on price action.
Next, I added to $AMRN despite an uneventful week.
A closer look at the chart and you could see this week is a bar with a higher high and a higher low.
Why do you add when price wasn’t that exciting this week?
You would laugh if I told you. I felt a tug in my heart telling me to buy more. Call it intuition or gut feeling, I decided to pay heed to the calling and added. Who know, perhaps they have new information on the morning of May 3rd earnings conference call that may propel the stock upward. Sooner or later, price may start to trend up to prepare for interim data review coming out in the 3rd Qtr. Meanwhile, weekly script numbers are increasing steadily over 20.000+ per week. We will see next week if my intuition is spot-on or not.
As we approach May, I also added to $SEED to prepare for the announcement of the receipt of the $60 millions the company expects to receive from the sale of commercial corn seed production and distribution business.
There are several factors supporting a bounce here:
- Possible double-bottom (see blue arrows)
- Price bouncing off $1.76 support which also happened to be near the Fib 61.8% retracement level.
- This week doji bar at Fib 61.8% support provide a slightly favorable odd of bouncing even though price is below the 79 & 89 MA. Per my book, simple penetration of the MA supports is not enough, price needs to go further below the MA supports for a few more bars to be bearish. Right now, there are still potential for price to bounce back above the 79 & 89 MA lines due to proximity.
$KGJI is the hero of the week.
Price bounced strongly this week despite falling gold price! This is the 2nd position I referred to above regarding price going the opposite direction against logical movement.-> where this gold stock ($KGJI) went up while all other gold mining stocks went down due to falling gold price.
The reason could be as simple as what I explained in my last week post that Kingold total gold asset is not being valued fairly by market price giving the 11% increase in gold price for 2017. Seeing such strong upward momentum, I forced myself to take profit by selling down my position just in case a continuing falling gold price would take this one back down; however, I will be looking for opportunity to buy back shares before the 1st Qtr earnings result is released.
Finally, $IBIO bounced slightly for the week with a green bar to stop the red bars trend.
Nothing change here. I’m patiently waiting for Dr. Carol A. Feghali-Bostwick’s discovery on fibrosis treatment to kick off their trial soon. How soon? As soon as they are ready. I’m counting on that once all the ‘i’s are dotted and the ‘t’s are crossed, I will hear something. Meanwhile, I’m here to wait. Watch the video below. Also jump to 35:32 minutes on the video and you will hear Dr. Carol A. Feghali-Bostwick talked about partnering with a company that used plant to generate the peptides she needed to perform the fibrosis study for a very economical price comparing to conventional method of peptide production. Basically, IMHO, Dr. Carol A. Feghali-Bostwick and iBIO are joined at the hip on this fibrosis treatment program.
Thanks to $KGJI strong gain for the week, my port was able to gain back some despite falling $CARA price action.
Main port (no margin): IBIO AMRN CARA SEED DSPG KGJI and 38% cash. (up 5.2% YTD)
Trading port (with margin): MENXF IBIO CARA
My 2 cents
From my camera: