Happy New Year everybody. The market had what IBD labeled a follow through day on Tuesday. On Monday, we had peak levels of put/call activity (significant negativity). On Wednesday and Thursday, the follow through day appeared to fail although the levels of distribution were mild.
I continue to believe we are in a mild, intermediate correction not a bear market. I'm not sure it's over. Billy O always said focus on stocks first, the market second. There continue to be good trades either to be in or to stalk. I do anticipate a time where the market starts to trend. We weren't there yet on New Year's Eve.
New Addition to Watchlist
Lightpath (ticker LPTH) - I missed the initial entry points and now will watch to see if sets up a secondary entry point. LPTH has had a nice breakout, incredible RS last week, and accelerating fundamentals (61% sales growth vs 45% in prior Q). It is in the same group as LITE, a good sign for the opticals. LPTH has an optical business but it also has an infrared component business too. They are seeing strength in industrial, telecom and China (just like LITE).
One of the risks is this is a $30 mm market cap and a below $5 stock. Ie, not institutional quality. But with newer product lines like specialty products growing 103% and infrared growing 146%, I am going to do more work on this and look for secondary entry points. There is an Internet of Things sensor part of this story I am trying to better understand.
Existing Watchlist Update
N - Took out 50 day and came back in. Didn't have the volume for a pocket pivot. Still RS starting to rise and I like the look of the MACDs on the daily and weekly. I show the daily here.
VIAV - Put in a tight consolidation week in its double bottom base. Nice tight handle so far with volume drying up as handle goes lower.
LITE - Continues to ride the 20 day and build RS. Still hasn't had a classic handle. It is trying to take out what some people would label the top of its cup ($22). One of my favorite 2016 stories. Its RS rating is now a 90, EPS rating continues to be an 89. If a trader bought the pocket pivots before ($16) and after earnings day ($18), you are safe.
LNKD - Not building RS. But that's ok. After getting rejected at the 50 day hard, this is looking to make a short term low. Gap fill is down at 218. This still is a very shallow, controlled, tight base in base or handle. We still had another tight weekly close. My bet is we make another hard low here, and then we start to climb the right side of this base on base and we will see if it fails or not. This is a $30 billion mkt cap that dominates its space with accelerating fundamentals. This is the type of market cap where you can have a multi bagger. Don't fall asleep; continue to look for a pocket pivot. We haven't had it yet.
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