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I have been investing in stocks since 2003. Much of my trading career has been focused on automated trading strategies. My latest strategy is swing trading using signals generated automatically on S&P 500 stocks.
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  • 3 Shorts To Watch On Thursday

    I scan for stocks based on hundreds of patterns discovered through years of data mining. These patterns are then grouped together to rank and score all 500 S&P stocks. Depending on which patterns are matched, I then produce a 5 day expectancy of where the stock is headed based on historical results. For more information on my methods as well as an expanded list of signals visit my blog at:

    Today's scan has produced 3 interesting shorting opportunities for tomorrow:

    1. XL Group plc (XL):

    The 5 day expectancy for XL is -1.8% from tomorrow's closing price. The chart shows resistance around the $22 area. I will be watching throughout the day looking for signs of weakness that may help verify the signal. Earnings are not due out until May 8th, which provides plenty of time considering only a 5 day holding period.

    (click to enlarge)

    2. Masco Corporation (MAS):

    The 5 day expectancy for MAS is -1.7% from tomorrow's closing price. Earnings are only 12 calendar days away, which means I will need to be extra diligent in sticking with a 5 day hold. I like the $14 area for a stop, however this does not produce a good risk/reward considering only a -1.7% expectancy. I will be looking for a tighter stop location.

    (click to enlarge)

    3. Air Products & Chemicals Inc. (APD):

    The 5 day expectancy for APD is -1.7% from tomorrow's closing price. One attractive aspect of this trade is the ability to place a very tight stop just above the high from yesterday. Unfortunately, APD is set to release earnings on April 24th. This does not leave enough room for my typical 5 day hold. However, a shorter term trade with a tight stop is doable.

    Current Holdings:

    Long: (HPQ),(EIX),(HRS),(FAST),(NTAP),(APOL)

    Short: (MU),(MDT)

    Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in APD, MAS, XL over the next 72 hours.

    Tags: APD, MAS, XL, short-ideas
    Apr 19 8:19 AM | Link | Comment!
  • Planning For Uncertainty

    If there is one thing certain in this market, it would be expect uncertainty. The broad market is currently facing a major inflection point. What happens over the next 5 to 10 trading days has the potential to shape the overall market sentiment through elections later this year. The DOW Jones has bounced off of support around 12,700 and once again is above the 13,000 level. Today was a consolidation day as the market attempted to catch its breath before pushing towards 13,300. If the DOW Jones once again fails to break this level, we will likely begin a down trend lasting through elections.

    (click to enlarge)

    So how am I trading the uncertainty? Easy, I do not try to "guess" where the markets will go. Instead, I rely on emotionless statistical analysis of S&P 500 stocks. I match stocks against statistical models which generates a quantifiable expectancy over the next 5 trading sessions. Using this data I try to enter a balance of long and short positions to reduce my dependency on the broad market.

    Recently on my blog I posted 3 long signals and 10 short signals. Although I try to enter the same number of long and short positions, on any given day there is a slight bias one way or the other. Among the long signals that were generated were (FAST) and (NTAP). Both of these stocks have a positive expectancy over +3% within the next 5 trading sessions. On the short side I like (MDT) and (MU). MDT has a -3.3% expectancy while MU has a -1.3%. I took positions in all 4 of these stocks over the past 2 days.

    Of the stocks listed has the highest 5 day expectancy checking in at +5.5%. A quick glance at the chart shows that the stock been in a very powerful up trend until recently. The biggest concern is whether or not this is a pull back, or the start of a new trend. In these situations I allow the historical results to dictate rolling the dice. By removing the human element, I know the analysis will be wrong sometimes, but right more often than not.

    (click to enlarge)

    While statistical analysis of a stock may indicate a positive expectancy, I must also look at the companies upcoming events. A earnings release for example can render my statistical models useless. Of the 4 stocks mentioned, none are expected to release earnings during my 5 day holding period.

    By only entering stocks that have a statistical advantage and aiming to keep my overall portfolio balanced between long and short positions, I do not need to guess where the market is headed next. However, likely wherever the market goes from here will have far reaching consequences for the remainder of the year.

    Disclosure: I am long NTAP, FAST.

    Additional disclosure: I am also short MU, MDT

    Apr 19 8:18 AM | Link | Comment!
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