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Michael Noonan Edge Trader Plus Michael Noonan is the driving force behind Edge Trader Plus. He has been in the futures business for 30 years, functioning primarily in an individual capacity. He was the research analyst for the largest investment banker in the South, at one time, and he... More
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  • TEVA - Finding Quality Trades With Institutional Backing 0 comments
    Feb 21, 2014 1:17 AM

    Friday 21 February 2014

    Three days ago, Tuesday, we posted a Market Commentary with a
    chart of TEVA, an Israeli pharmaceutical company. It was around 1
    a.m., several hours prior to the stock market open. This was the
    second paragraph:

    For disclosure, we do not trade stocks, so this is just an
    exercise. Were a position to be
    taken, there is merit in a buy-
    stop order at 44.68, with a protective sell stop at 42.25.

    ...We post this now, in case 44.68 does trigger, so the
    recommendation would not appear to have been in hindsight.

    More to come, soon.

    This is the chart, as posted. The recommended buy stop was just
    above the box area, at the end of the chart. TEVA had two noted
    positives going for it: 1) A strong rally on very strong volume in mid-
    January. Here is a clear example of institutional buying in a stock.
    2) TEVA was building another TR, [Trading Range], base, which if the breakout were to be to the upside, the base supported a move much
    higher, or at least somewhat higher.

    TEVA D 18 Feb 13

    An article was written, last November, Markets Talk Few Listen, in
    which we presented the very same concept as a valid approach for
    improving one's ability to make better trade selections. It explains
    why early January was the time and price to buy TEVA. The chart
    above shows a new trade that offers potential with a clearly defined
    risk.

    It turns out TEVA was one of the largest stock holdings in a Soros
    Fund, at least as of last Quarter. That may or may not still hold true,
    which is immaterial because the noted spike in volume was the
    market's way of letting us know that institutions were buyers. It
    does not matter which institution[s]. When they buy, they buy for
    the longer term.

    TEVA is measured against the pharmaceutical ETF, XPH, to
    determine its strength within that sector. TEVA was ready to have an upside breakout at the same time as the ETF.

    XPH D 21 Feb 14

    TEVA is slightly under the similar chart structure of XPH. This would
    prompt a closer look at other pharmaceutical stocks that may be
    relatively stronger than TEVA, maybe even the ETF itself. It just
    happens that TEVA was the hand we were dealt, at the time, and
    mention is made to show how there is flexibility in how one wants
    to determine the quality of potential stock selections.

    The increased volume, last bar on the chart, would raise some
    concern over the next day trade activity. The volume is similar to the January breakout volume, but the range of the bar is slightly smaller
    than the January range. Just something over which to be aware.

    Because the Fed-driven stock market is at an advanced stage, one
    has to be quicker to respond to price activity, as opposed to say
    were this kind of breakout occurring during the early stages of a
    bull market, and one could exercise more patience.

    Another way to be flexible is in the risk management of this trade.
    The stop can be raised up to the breakeven level, eliminating risk
    exposure entirely. On any further advance, profits can be taken on
    half the position to ensure a profitable trade. The point is, do not
    just buy and hold without taking an active role in managing each
    stock selection.

    TEVA D 21 Feb 14

    Here is an updated TEVA hourly chart. Price gapped higher on
    Tuesday morning, which would have triggered a 44.68 buy stop.
    The recommended buy could have been filled in the 45.40 area,
    with an initial stop-loss at 42.25, risking $3, initially.

    TEVA 60m 21 Feb 14

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