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PatternDNA: Long & Short Ideas for Dec 14th

Jim Cramer's Lightning round session is never short of possibilities. In his Friday, December 10th program he offered four bullish and five bearish candidates for review. We can use PatternDNA to narrow down the candidates.

PatternDNA looks at the past 5-days of trading action and based on historical testing, offers a projection forward over the next 5-days. PatternDNA also shows the cumulative (annualized for default) return for the pattern based on a defined Target&Stop strategy. The Target&Stop strategy uses an initial Target of 15% with an opening Stop of 10%. Once the initial Target is reached the Stop adjusts to 5% from that price and updates on every subsequent 10% gain until the overall Profit Target of 25% is reached.  A Neutral Match level is assumed to generate a representative sample of matches.

Bullish Stock No. of
Patterns
1-day
% Win
2-day
% Win
5-day
% Win
Return
Trail
CREE 124 59 51 56 7.4
CAT 239 40 44 51 6.4
BIDU 9 56 68 56 11.1
CLF 25 80 72 68 7.2

Bearish Stock No. of
Patterns
1-day
% Win
2-day
% Win
5-day
% Win
Return
Trail
NANO 260 51 49 58 11.7
LLEN 49 37 49 41 6.8
SGMS 60 45 51 65 11.8
TEVA 179 48 52 54 7.7
FFIV 21 56 37 53 16.3

There was quite the spread of Patterns, some more common than others. Of the four stocks showing common Patterns (over 100 matches), Nanometrics (NASDAQ:NANO) showed the strongest Return going forward with an annualized cumulative return of 11.7% from the current 5-day Pattern. There is a 58% probability the stock will close higher by the end of business next Tuesday. 

Of the rarer Patterns, Cliffs Natural Resources (NYSE:CLF) has a 68% probability of closing higher by next Tuesday's close (off Tuesday's open) with an 80% of closing higher by the close of business today. It's 7.2% annualized cumulative return is more modest than some of its peers, so any gains here may be relatively small.

The strongest Return came from F5 Networks (NASDAQ:FFIV). The low number of matches (21) make the current Pattern a rare one and the five day performance expectations are not spectacular. However, it's five-day trading Pattern supported the highest annualized cumulative return of 16.3%.

On the Jim Cramer scheme of things, two of his Bearish Calls are considered bullish as per the PatternDNA. With Cliffs Natural Resources (CLF) the pick where PatternDNA and Jim are in agreement.