I have been engaged in discussion with SA readers on several sites discussing how one recognizes a TRADING BOTTOM. The assumption seems to have been that it is IMPOSSIBLE to recognize a trading bottom. My view is that it is NOT IMPOSSIBLE, if you have the right tool.
I am watching several stocks for signs of a TRADING BOTTOM: FSLR and NVDA to be exact. Neither has given a trading bottom. We are SHORT both stocks. But one stock did give a recent TRADING BOTTOM, so I will use it as an example.
I'm sure this pleases my friend Cristiano at Integer Investments, who has been LONG the stock in question, against my recommendations.
Let's look at a picture of the stock in question, GNC HOLDINGS.
I think the picture says it all. When PROP1 flips from the SELLZONE to the BUYZONE, generally this is a trading bottom. Generally I write, because this is not absolutely true -- FALSE BOTTOMS have been known. But a PROP1 conversion is certainly preferable to a GUY FEELING or a simple surmise (hopium?) based on valuation models.
In contrast, FSLR IS NOT BOTTOMING.
PROP1 (bottom pane) shows very clearly that FSLR is still BEARISH, is still in the PROP1 SELLZONE. In addition, our COUNT indicator (third from bottom) is just now turning down -- in this weekly chart. This means FSLR is going lower. Note the second pane from the top, what I call TREND SHAPE: FSLR is making lower lows and lower highs. When a stock bottoms, the trend will break resistance and make a new high. That is the first sign of a trading bottom. In the subsequent pullback, the stock must make a bottom higher than the last bottom -- a Higher Low. This is the second sign of a trading bottom. When PROP1 breaks up into the BUYZONE (-7 or above) it will be time to close our SHORT position at the very least. That has not happened yet.
The market bounced back somewhat from Wednesday's mini-panic. We are still LONG UDOW -- and 75% long the market.
Gold, oil, and commodity stocks got crushed on Wednesday. Today, we got this signal:
We missed giving a BUY SIGNAL CHART from yesterday. When our COUNT gives a TRADING SELL SIGNAL, declines, and then flatlines without falling, generally, this is a statutory BUY SIGNAL. Note how Nestles has done this. And is now back up again.
We love NESTLES here. Perhaps not as much as Micron Technology -- but almost as much.
Here is our report:
|COUNT SIMPLE PORTFOLIO REPORT|
|COUNT||New Pos||New Pos|
|SWN||7.46||8||-2||-25||Short||Southwestern Energy Corp|
|CAAS||4.93||-12||-2||-23||Short||Chinese Auto Daily|
|SPU||3.56||4||0||-23||Short||Skypeople Fruitjuice China|
|DSLV||21.55||-16||-2||-19||Short||Enter Short||* Silver Stocks Bearish ETF 3x (NO)|
|BRZU||37.09||2||2||-7||Long||* Brazil Stocks Bullish ETF 3x (NYSE:O)|
|KTOS||7.57||22||2||-7||Long||Kratos Defense & Security|
|ABX||19.2||28||2||-5||Long||American Barricks Gold|
|GDXJ||34.54||26||2||-5||Long||Gold Junior Minors ETF Daily|
|LBJ||105.99||22||2||-5||Long||* Latin America Stocks Bullish ETF 3x|
|PBR||9||6||2||-5||Long||Petrobas Petroleum Brasil|
|SSRI||10.58||28||2||-5||Long||Silver Standard Resources|
|USLV||15.68||16||2||-5||Long||Enter Long||* Silver Stocks Bullish ETF 3x (NO)|
|FSM||5.02||30||2||-3||Long||Fortuna Silver Mines|
|^VIX||14.15||22||0||-1||Long||CRB Volatility Index Daily|
|^XAU||86.774||28||2||-1||Long||Phila Gold/Silver Ind $|
|AG||8.79||22||2||-1||Long||First Majestic Silver|
|COP||47.95||6||2||-1||Long||Conoco Philips Daily|
|IAG||4.35||22||2||-1||Long||I Am Gold|
|RGLD||72.68||28||2||-1||Long||Royal Gold Inc|
|UGLD||11.25||22||2||-1||Long||<---||* GOLD ETN BULLISH 3X (NO)|
|ACH||13.26||4||2||5||Long||Aluminum Corp of China|
|AHGP||27.59||2||2||5||Long||Alliance Holdings Mining|
|DRN||23.76||20||2||5||Long||* Real Estate Stocks Bullish ETF 3x|
|EGO||3.6||24||2||5||Long||El Dorado Gold Mines|
|LOCO||12.35||18||2||5||Long||El Pollo Loco|
|OTIV||1.65||8||2||5||Long||On Track Innovations|
|TOO||5.68||4||2||5||Long||Teekay Offsore Partners|
|UHN||14.993||16||2||5||Long||Heating Oil ETF|
|YGE||2.73||14||2||5||Long||Yingli Green Energy China|
|TSLA||302.51||24||2||17||Long||Tesla Motors Daily|
We are LONG OMER. We've made a good profit on the first leg of this BULL MOVE. Now we are getting a secondary buy signal -- which means we think it is going higher.
Disclosure: I am/we are long OMER, UDOW.