Monthly Archives: August 2014

Short Term Caution Signs

Our Twitter and StockTwits momentum indicators for the S&P 500 Index (SPX) are mostly positive, but showing some short term caution signs. Seven day momentum reached extremely overbought territory last week and has now turned over. Previous peaks of high magnitude have led short term tops in the market by roughly a week or two. The peaks are often associated with sideways or slightly upward action in SPX that ultimately ends with a short term drop in price. This is the first indication of caution, however, it doesn’t imply a large consolidation in price…yet.

140830spx

Breadth calculated between the strongest and most bullish stocks on social media compared to the weakest and most bearish continue to paint high readings and have mostly cleared their negative divergences. This indicator is a longer term measure of market health and suggests that the market will continue to move higher over the intermediate term due to the large number of stocks traders find attractive.

140830breadth

Support and resistance levels for SPX gleaned from traders tweets continue to target 2000, 2030, and 2050 as resistance. Traders are mostly tweeting higher prices which suggests they believe the market will move higher. Support is at 1955 and 1905. However, the 1955 level is not as active as the 1905 area. As a result, there is a lot of white space for the market to fall into if a decline starts from here. This adds some instability to the market.

Another sign of instability creeping into the market comes from social media momentum for volatility (VIX). After painting a series of lower highs, momentum from both StockTwits and Twitter are breaking above very long term down trend lines. This suggests traders are getting somewhat skittish and might be dancing close to the door.

140830vix

Sector strength is showing support for every sector. In the past, this condition has almost always marked short term tops. It shows market participants rotating to safety which often causes choppiness in the market.

140830sectors

Overall momentum is still indicating higher prices in the intermediate term, but showing some caution signs near term. Rotation to safety and a fall from over bought readings on 7 day momentum suggest the market needs more time to digest recent gains. The action of these indicators is what I’ll be watching most closely over the next few weeks.

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Twitter Top 10 Portfolio Update

The Twitter Top 10 portfolio has risen 2.2% this month in spite of El Pollo Loco (LOCO) that has lost over 22% from the first Friday of August. Twitter (TWTR) up 12% and Gilead Sciences (GILD) up 17% are the two standouts.

Below is a performance chart and details of the current holdings.

140828TW10

 

Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
8/1/2014 $FB 174 72.36 12590.64 74.07 12888.18 2.36%
$TWTR 279 44.13 12312.27 49.51 13813.29 12.19%
$PLUG 2551 5.38 13724.38 5.63 14372.33 4.72%
$GILD 118 91.50 10797.00 107.29 12660.22 17.26%
$GOOG 19 566.07 10755.33 571.85 10865.15 1.02%
$BIDU 51 212.38 10831.38 213.80 10903.80 0.67%
$INTC 320 33.75 10798.40 34.66 11091.20 2.71%
$CMG 16 675.14 10802.24 678.98 10863.68 0.57%
$AA 657 16.44 10801.08 16.63 10925.91 1.16%
$LOCO 262 41.20 10794.40 31.95 8370.90 -22.45%
Cash 166.52 166.52
Totals 114373.64 116921.18 2.23%
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StockTwits Top 10 Tracking the Market

The StockTwits Top 10 portfolio is tracking the market this month. JC Penney (JCP) and Micron Tech (MU) are the only stocks that are up more than 5%. The rest of the portfolio is mostly moving sideways.

Below is a performance chart and details of the current holdings.

140828ST10

Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
8/1/2014 $BIDU 55 212.38 11680.90 212.96 11712.80 0.27%
$MU 355 31.09 11036.95 32.81 11647.55 5.53%
$INTC 303 33.75 10224.74 34.67 10505.01 2.74%
$CMG 15 675.14 10127.10 677.96 10169.40 0.42%
$AA 622 16.44 10225.68 16.645 10353.19 1.25%
$GS 60 170.25 10215.00 177.19 10631.40 4.08%
$JCP 1061 9.63 10217.43 10.94 11607.34 13.60%
$GRPN 1582 6.46 10219.72 6.615 10464.93 2.40%
$SINA 219 46.53 10190.07 45.91 10054.29 -1.33%
$BIIB 31 329.83 10224.73 340.95 10569.45 3.37%
Cash 147.66 147.66
Totals 104509.98 107863.02 3.21%
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Strongest Stocks on StockTwits Last 3 Months

Here’s a list of the stocks that have had the most support on StockTwits over the past three months (ending 8/25/14). Notice that the top contenders are dramatically different from the most bullish stocks on Twitter over the same time period. Solar and semiconductor stocks are the most popular on StockTwits while Facebook, Google, Apple, Twitter, and BlackBerry dominate the Twitter list.

This is something I don’t see to often so it’ll be interesting to see which list of stocks performs best over the next several months. Generally the stocks that have held up well over three months become good candidates for buying dips.

Another thing to watch from this list is breakouts from Micron (MU) and First Solar (FSLR). They’ve consolidated, then had a short term rally with support from traders on StockTwits so a breakout should be good for a trade.

140826STStrong3m

 

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Strongest Stocks on Twitter Last 3 Months

Here’s a chart that shows the stocks that have the most support on the Twitter stream over the past three months (through 8/25/14). Apple (AAPL) continues to lead the list after a long time in the wilderness. For those of you who are interested here’s some information on how our computer system calculates the most bullish stocks list by quantifying tweets.

140826TwitterStrong3m

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The Difference Between Traders and Investors

Traders on Twitter and StockTwits tend to use the symbol $IWM (Russell 2000 ETF) when referencing small cap stocks. While investors and market pundits are more likely to use the symbol $RUT. As a result, your trading or investing style should guide which symbol you follow on Twitter and StockTwits. Take a look at the action of the RUT since the first of the year and then we’ll compare it to the bullish and bearish actions and opinions by traders vs. investors.

140825rut

The market dipped in late January, rallied to new highs, dipped again from March till May, rallied back to highs again, then sold off during July. Currently, a new rally is underway. If you look at the chart below of social media strength scores for RUT (which has a larger following from investors) you’ll see that the March/May dip did some damage to the confidence of longer term investors. They are still negative on the prospects for small cap stocks and are likely selling into rallies.

Meanwhile, traders (using IWM as a proxy) got positive after the March/May dip and again as IWM was making a low at the first of this month. The lesson to be learned from this example is that it’s important to follow the symbols that fit your own style. Investors should mostly ignore the IWM stream and focus on RUT instead. While traders should be watching what other traders are doing via  the IWM stream and not place a lot of emphasis on RUT.

140825index

For individual stocks you should be looking carefully at its stream on StockTwits and Twitter to see if it is dominated by investors or traders. This will allow you to take action with others who have a similar style rather than fighting the majority of participants for a stock.

 

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End of Buy Signal for Gold ETF

On 8/4/14 we posted a trade setup for aggressive traders in the Gold Miner’s ETF (GDX). That signal ended at the close on 8/22/14. Neither price nor social media momentum was able to move substantially higher. Sometimes you just have to close a trade when it doesn’t move like it should…then wait for the next opportunity.

140825gdx

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Optimism Abounds

Our Twitter momentum indicator for the S&P 500 Index (SPX) continues to confirm the uptrend after clearing its consolidation warning two weeks ago. Although the uptrend is intact, momentum from both Twitter and StockTwits is getting a bit frothy. Both are at the highest levels they’ve reached since December of 2013. In the past, peaks in the +12 to +15 range have marked short term tops. Both indicators are now showing readings above +20. This is a very overbought condition which should signal a short term top when momentum turns back down.

140823spx

Support and resistance levels generated from Twitter are also starting to confirm the uptrend with new calls for 2000, 2030, and 2050 on the S&P 500 index. These tweets indicate that traders believe the current rally can reach those levels. The number of tweets near the 2000 area makes it a place where traders will likely take profit so the market should at least pause there before moving higher. Below the market the most tweeted levels are 1955 and 1905, making them support.

Breadth calculated by comparing the number of stock with strong support on Twitter and StockTwits against those with weak support has turned back up, but continues to paint a negative divergence from price. I’d like to see this indicator continue its high readings on any further rally.

140823breadth

Sector sentiment is showing a bit of rotation to safety again with almost all sectors garnering strength from the Twitter stream. A short term top has almost always been put in place in the past when all sectors were positive. This is another indication that the market may need to pause.

140824sectors

Overall momentum is suggesting the market should move higher, but may need to clear over bought readings before it can do so. The large number of tweets near the 2000 level on SPX makes it a likely level to consolidate recent gains before a push to 2030.

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El Pollo Loco Holds Twitter Top 10 Down

The majority of stocks in the Twitter Top 10 portfolio are performing well this month, however El Pollo Loco (LOCO) is getting crushed. It is down more than 25% and serves as warning about buying IPOs before they have a chance to shake out…regardless of the excitement from people on Twitter.

If you’re interested in seeing more stocks that have support from traders on Twitter we’re offering a 7 day trial. You’ll have to set up a subscription. Just cancel within a week and you won’t be billed.

Below is a performance chart and details of the current holdings.

140822Twitter10

 

Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
8/1/2014 $FB 174 72.36 12590.64 74.54 12969.96 3.01%
$TWTR 279 44.13 12312.27 45.16 12599.64 2.33%
$PLUG 2551 5.38 13724.38 5.85 14923.35 8.74%
$GILD 118 91.50 10797.00 104.56 12338.08 14.27%
$GOOG 19 566.07 10755.33 582.92 11075.48 2.98%
$BIDU 51 212.38 10831.38 214.61 10945.11 1.05%
$INTC 320 33.75 10798.40 35.05 11216.00 3.87%
$CMG 16 675.14 10802.24 675.30 10804.80 0.02%
$AA 657 16.44 10801.08 16.43 10791.23 -0.09%
$LOCO 262 41.20 10794.40 30.87 8087.94 -25.07%
Cash 166.52 166.52
Totals 114373.64 115918.11 1.35%
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