Easier to join the reversal trend then to go against it - 6 long ideas for next week 05-01-2017 SIMO ESND ZEUS BBW COWN CHUY

Markets closed positive last week on the back of solid earnings results (AMZN, GOOGLE et al). Despite the uncertainty on Tax details markets continued it's positive run while skeptics continue to wonder if the corporate tax cuts would increase already higher federal deficit and cause interest rates to go even higher.

On a side note, to give you some context on how inefficient federal government is when it comes to managing it's budget here is a simplified version which converts budget into a household income by removing 8 zeros.

fed-gov-family-budget

Next week, we look forward to more earnings report as more than 1500 companies report earnings including AAPL. We will very likely see SPY test $240 area if earning results from key companies continue to be positive.

Trade Idea Recap

Let's look at few ideas from last week that I thought were good candidate to sell short.

  • CRR - Carbo Ceramics, Inc. : CRR was forming a descending triangle it seemed like $7.50 or $7 was very likely. Stock closed $6.87 on Friday dropping more than 20%.

  • NCR - NCR Corporation : NCR got in our radar as Elasticity turned negative along with a descending triangle formation. $40 crack on heavy volume was anticipated with targets of $38 and $34 in coming weeks. Price held $40 nicely. This would still be on watch next week for that $40 crack if Elasticity continues to stay below 0.

  • CPSI - Computer Programs and Systems, Inc. : We wanted to see $26 crack to join the short side trade on CPSI but buyers took control and pushed it higher but were unable to hold the near term resistance break of $27. Stock remains on watch for next week with an anticipation that supply would increase pushing the price lower.


Six long ideas (bullish reversal)

For next week we're going to source ideas from prospecting engine for stocks where Elasticity indicator reversed to positive for stocks priced between $8 and $50. The common theme among these stocks is that they all have positive catalyst which along with technical lining up nicely.

ProspectingScenario-04-29-2017

If you're reading this article for the first time and wondering what's Elasticity then please take a moment to checkout our howitworks page.

Now let's take a look a deeper look at these 6 ideas that we will be watching as potential long reversal plays for next week.


SIMO - Silicon Motion Technology Corporation

Earnings winner traded more than 3x its volume on Friday breaking above $48 which was a strong resistance. Elasticity turned positive in a big way with a Berserker score above 10. This is a powerful combination and combine this with flag pattern breakout on the daily, stock will very likely propel to $50 and $54 in the coming weeks. If I enter early next week I'll use $48 as my risk.

SIMO-04-29-2017

ESND - Essendant Inc.

Despite the earnings miss investors and traders alike like what they heard from the management regarding future growth.

"Our first quarter operating results reflect the impact of our transformation initiatives which enabled us to deliver sequential earnings growth"

Price action certainly reflects that sentiment. Elasticity getting drawn back to 0 all of last two month and finally flipped to positive on a high Berserker score after earnings. Price shows a saucer formation on daily and I wouldn't be surprised if we see a cup and handle formation next week. Gap fill is possible if mid $17 can sustain next week. Next targets are $20 and $22 in coming weeks.

ESND-04-29-2017


ZEUS - Olympic Steel, Inc.

Another earnings winner that reported 30% increase in sales causing the price to gap up and break the near term resistance of $20. Elasticity reversed positive by 17% day over day which is a strong bullish indicator. I'll be looking for $22 to hold next week for an entry. $26 in few weeks seem very likely as we all know price has a memory.

ZEUS-04-29-2017


BBW - Build-A-Bear Workshop, Inc.

BBW reported positive earnings and closed Friday session up 8%. Gap fill looks possible in coming weeks if demand continues. Short term targets are $12 and $13 if price continues to trend higher.

BBW-04-29-2017


COWN - Cowen Group, Inc.

Another earnings winner currently testing $16 resistance. I'll be watching COWN next week to see if $16 can break on heavy volume and if so looking to join the trend as a swing position to $19 or $20 in a month or so.

COWN-04-29-2017


CHUY - Chuy's Holdings, Inc.

Despite the lag on restaurant business at large, I like the chart and the positive movement prior to earnings. Although holding through earnings isn't a good idea unless you have a long term view on this stock so I'll be looking to join the trend after earnings assuming $30 breaks and holds.

CHUY-04-29-2017


That's it for now folks. Happy and Profitable trading for next week. One interesting thing you can try is use the same scenario I've setup above and go back couple of days and find ideas that have sustained the positive reversal trend to find additional opportunities.

Finally, If you're interested in finding highly actionable trading ideas everyday like the ones in this blog post, sign up for an account at http://buysellshortcover.com, our new idea generation platform. We're currently in open beta and there is no cost for using the platform during this time.

Feel free to contact us if you have question, comments, or feedback by visiting http://buysellshortcover.com/contact

Image credit - scottrade.com | disclaimer.

Saadey (साँढे)

compsci background, high perf software engineer by profession, fintech fanatic, entrepreneurial, food lover, soylent, traveler, NBA fan, geek, and avid learner.

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