Monthly Archives: September 2014

Weakest Stocks on Twitter

Below is a list of stocks that had the least support (or were most bearish) on Twitter over the past week. The list is made up mostly of stocks that have weak fundamentals and shouldn’t be too much of a surprise. In a healthy market this is what we want to see. Notice the lack of momentum stocks. This is a good sign for the general market and gives the bulls a chance to resume the rally.

One concern on the list is that the Consumer Discretionary ETF (XLY) is showing weakness. When this sector lags it often precedes weakness in the major indexes.

Subscribers should keep an eye on the 1 day through 1 month bearish lists for warning signs going forward. If momentum names start to overwhelm the fundamentally flawed stocks it will warn that the market is going to make another leg lower.

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Odds Favor Lower Prices

Social media momentum indicators for the S&P 500 Index (SPX) continue to suggest lower prices are ahead. Last week we noted that traders on Twitter were chasing price and that it should cause some instability. That turned out to be the case as market indexes had 1% moves in both directions. This is another indication of uncertainty by market participants that is generally resolved with a large momentum move once everyone piles on to the same side. 7 Day momentum is showing large negative divergences with SPX which often precedes declines. We don’t have a confirming uptrend line on momentum for SPX to act as a signal line so we’ll watch for a drop below zero instead.

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Small cap stocks (IWM) broke the uptrend line from social media momentum on Monday last week which gave us warning that the triangle being painted by price would likely break to the downside.

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The Nasdaq 100 (QQQ) also broke the confirming uptrend line from momentum. This puts QQQ in danger of showing the same type of weakness that we’ve seen in small cap stocks over the past several months.

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Breadth from social media continues its slow drift lower as more stocks are losing support on Twitter and fewer stocks have positive tweets.

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More support and resistance levels are starting to show up on Twitter as price gyrates. We now have 2000, 2020, and 2050 as resistance on SPX. The 2020 level is garnering the most tweets so it is the line in the sand for the bears. Below the market 1980, 1955, 1940, and 1905 are the largest areas of support. 1955 seems to be the critical level with traders so a break below 1955 would most like carry prices to 1905 before the market could sustain a rally to new highs.

Sector strength is showing a preference for defensive stocks with Consumer Staples and Health Care getting the most support. The weakest sectors are Technology and Consumer Discretionary. As I mentioned last week, there appears to be a rotation to Financial stocks. This week Financials are positive which needs to continue for the market to rally.

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Overall social media indicators are suggesting that lower prices are ahead. Momentum for small caps and the Nasdaq 100 are currently warning, traders are tweeting a wider range of support and resistance, and investors are showing a preference for defensive stocks. These conditions give the advantage to the bears.

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Twitter Top 10 Down Slightly

The Twitter Top 10 portfolio is slightly down this month and is performing similar to the S&P 500 Index (SPX). The only real leader this month is Bank of America (BAC) up over 5%. The drags on the portfolio are Achillion Pharmaceuticals (ACHN) down almost 10%, JC Penney (JCP) down 8%, and Netflix (NFLX) down 6%. One thing that is interesting is that the stocks aren’t getting crushed…yet. This portfolio tends to hold momentum names so they out perform in up trends and under perform ahead of and in down trends. So keep an eye on theses stocks as a guide to the market. Maybe most of the froth came out of the momentum names earlier during the January to April decline.

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

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Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
9/5/2014 $TWTR 279 50.70 14145.30 52.21 14566.59 2.98%
$FB 174 77.26 13443.24 78.25 13615.50 1.28%
$NFLX 24 475.68 11416.32 446.03 10704.72 -6.23%
$GILD 118 105.36 12432.48 107.52 12687.36 2.05%
$JCP 1027 11.08 11379.16 10.20 10470.27 -7.99%
$ACHN 935 12.17 11378.95 11.00 10285.00 -9.61%
$BAC 710 16.02 11374.20 16.91 12006.10 5.56%
$GOOG 19 586.08 11135.52 577.00 10963.00 -1.55%
$BIDU 51 226.07 11529.57 217.22 11078.22 -3.91%
$YHOO 287 39.59 11362.33 39.14 11233.18 -1.14%
Cash 2.53 2.53
Totals 119599.60 117612.47 -1.66%
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StockTwits Top 10 Continues to Track Market

The StockTwits Top 10 portfolio continues to track the S&P 500 Index (SPX). It is slightly under performing this month mainly due to Advanced Micro Devices (AMD) down 12.5% and First Solar (FSLR) down 5.5%. Lululemon Athletica (LULU) is the only stock that is significantly out performing SPX, up nearly 8%.

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

140925ST10

 

Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
9/5/2014 $TWTR 210 50.70 10647.00 52.12 10945.20 2.80%
$YHOO 268 39.59 10610.12 39.13 10486.84 -1.16%
$BIDU 55 226.70 12468.50 216.5 11907.50 -4.50%
$MU 355 32.94 11693.70 31.55 11200.25 -4.22%
$GOOGL 17 597.78 10162.26 587.57 9988.69 -1.71%
$GMCR 80 131.50 10520.00 128.44 10275.20 -2.33%
$AMD 2565 4.15 10644.75 3.625 9298.13 -12.65%
$FSLR 149 71.47 10649.03 67.5 10057.50 -5.55%
$DIS 117 90.94 10639.98 88.13 10311.21 -3.09%
$LULU 272 39.14 10646.08 42.21 11481.12 7.84%
Cash 629.03 629.03
Totals 109310.45 106580.67 -2.50%
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Identifying a Bottom

Are you’re looking for a stock that’s had a good sized correction that may be ready to rally again? Here’s how you use Trade Followers to identify them. First take a look at the most bullish stocks on Twitter over a longer time frame (6 months or more). In that list you want to look for gaps in the 1 month to 3 month range. Below is an example showing Kandi Technology (KNDI). KNDI has shown support from Traders on Twitter over the past month after a several months of weakness. This suggests that people are starting to accumulate the stock even though it is still falling. Notice Glu Mobile (GLUU) is showing the same signs.

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You can also see every list KNDI is on by looking at the chart and status page. This list shows the same gap in the intermediate term.

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Then take a look at the chart and you can see that bullish momentum is overwhelming bearish momentum for KNDI after a positive divergence. This is a strong sign that the stock is ready to bounce. Today KNDI is painting a hammer on a candle chart. It broke below its 200 day moving average, traded as low as $13, and has now recovered back above the 200 dma. This is good price confirmation that the sellers have been washed out and sets up a high probability trade.

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Better Action From Momentum Stocks

Last Monday the momentum stocks took a big hit on a mild down day in the market. Yesterday the market sold off harder, but momentum names didn’t get hit as hard as last week. This is an encouraging sign for the market as a whole because it indicates that profit taking in high fliers is slowing and that buyers are stepping when price falls. Subscribers should watch the daily, weekly, and 2 week most bearish lists on social media over the next few weeks. If they are filled with momentum names it will indicate caution. A lack of momentum names will indicate higher prices for the market.

Here’s an example of the weakest stocks on Twitter from yesterday. Notice that other than the obvious Alibaba (BABA) and Yahoo (YHOO) the list doesn’t contain a lot of momentum stocks. That’s what we want to see for the market to move higher.

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Chasing and Uncertainty

The Trade Followers momentum indicators for the S&P 500 Index (SPX) are showing uncertainty from market participants. The pattern currently being painted by 7 day momentum is usually indicative of traders chasing price. The consolidation and small dip in price over the past few weeks caused momentum to drop rapidly, then when the market recovered momentum shot upward. This behavior shows market participants are reacting rather than planning and executing. This puts some instability into the market as any change in news will cause swift changes in sentiment.

In mid August the indicators showed extreme overbought conditions for SPX. That has now been resolved, but no clear direction has been established yet. This is another sign of uncertainty by members of the Twitter and StockTwits communities.

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Small cap stocks continue to under perform the general market, but are providing more guidance than SPX. The Russell 2000 index ETF (IWM) is currently painting a triangle in price and momentum on Twitter. The next direction of the market will likely be shown by which side of the triangle is violated.

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Breadth continues to drift lower from high levels indicating that market participants are getting more selective in their purchases and also finding some short opportunities.

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Support and resistance levels captured from the Twitter stream are generally positive with traders tweeting 2020, 2040, and 2050 as likely targets for SPX. The 2020 resistance level that has been in place since late August was reached this week and the market immediately pulled back. Support comes in at 2000 and the recent lows near 1980.

Strength from the sector ETFs show a rotation to Financials and Health Care. This is consistent with what I’m seeing when I look at the aggregated relative strength scores from individual stocks. Keep an eye on those sectors as they’ll need to continue to rally for the market to move higher.

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Overall social media signals are showing hope for higher prices with some underlying nervousness from market participants. Small cap stocks, financials, and health care will most likely point the next direction so use them as your guide.

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Twitter Top 10 Portfolio Turns Down

The Twitter Top 10 Portfolio is taking a turn lower this month. The portfolio is being hurt by JC Penney (JCP) down 8%, Achillion Pharmaceuticals (ACHN) down 5%, and Netflix (NFLX) down 4%. The portfolio is also being impacted by the drop in many momentum stocks earlier in the week. This isn’t good news for the market as a whole. Keep an eye on these stocks over the next few weeks. If a lot of them continue to show weakness it will signal choppy markets are in our future.

The only stand out in the portfolio is Bank of America (BAC) up 5%. This aligns with what I’m seeing when I look at industry relative strength from the Twitter stream. It appears that some rotation to financial stocks is occurring.

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

140919Twitter10

Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
9/5/2014 $TWTR 279 50.70 14145.30 50.68 14139.72 -0.04%
$FB 174 77.26 13443.24 76.80 13363.20 -0.60%
$NFLX 24 475.68 11416.32 456.31 10951.44 -4.07%
$GILD 118 105.36 12432.48 106.17 12528.06 0.77%
$JCP 1027 11.08 11379.16 10.21 10485.67 -7.85%
$ACHN 935 12.17 11378.95 11.56 10808.60 -5.01%
$BAC 710 16.02 11374.20 16.91 12006.10 5.56%
$GOOG 19 586.08 11135.52 591.08 11230.52 0.85%
$BIDU 51 226.07 11529.57 224.06 11427.06 -0.89%
$YHOO 287 39.59 11362.33 40.29 11563.23 1.77%
Cash 2.53 2.53
Totals 119599.60 118506.13 -0.91%
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