Monthly Archives: March 2015

More Volatility Ahead

Last week we highlighted several signs coming from Twitter that a short term top was in the making. One of them was Twitter momentum for the S&P 500 Index (SPX) turning down from over bought levels and at the same time creating a negative divergence. This week momentum is warning that the selling we saw last week will most likely continue. After painting a negative divergence, 7 day momentum has broken its newly formed uptrend line. This suggests that investors and traders are not committed and were quick to exit positions established during the February rally.

150308spx

Breadth computed between the strongest and weakest stocks on Twitter is still printing healthy readings. However, the large positive prints are a result of a lack of bearish stocks rather than an increase in the number of stocks with bullish readings. The number of bullish stocks has fallen by 20% since mid February while the number of bearish stocks has been cut in half. This puts breadth in a position that it could fall rapidly if the number of weak stocks starts to increase.

150308breadth

Last week SPX paused at the first Twitter support level of 2100 then on Friday the market fell to the next Twitter support level at 2065. SPX is holding just above that point. If it breaks it puts 2040 in play. There are virtually no tweets for prices below 2040 on SPX. This indicates that traders aren’t showing any fear yet. It also puts the market in a precarious position where a break of 2040 will take market participants by surprise which often leads to a waterfall decline. Resistance gleaned from Twitter is at 2100, 2120, and 2140.

150308spxSR

Last week we mentioned that short term tops have occurred almost every time all sectors showed positive readings. After those positive readings we did in fact get a top. This week the positive readings are still in play, however the defensive sectors of consumer staples and utilities have weak positive readings. This suggests that investors aren’t rushing into them. This is most likely a result of the strength the defensive sectors showed during the first of the year. It adds a concern that if the market starts to decline there will be no where to hide because the rotation to safety has already occurred.

150308sectors

Overall social media indicators are suggesting that we’ll see more volatility ahead, but traders aren’t expecting a large decline. This is a positive for the market if support at 2040 on SPX holds. If it breaks, the market is at risk of a cascade lower due to lack of support below that level and what appears to be a lack of buying in the defensive sectors as the market falls.

facebooktwittergoogle_plusredditpinterestlinkedinmail

Weekly Chart Pack

Below are a  couple of charts I shared on Twitter and StockTwits this past week, but didn’t post to the site.

Tesla (TSLA) was trying to hold momentum trend as the stock consolidated in a sideways pattern.

150303tsla

At the close on Friday, TSLA broke trend in Twitter and StockTwits momentum. This increases the odds that the recent price lows will be broken and TSLA’s down trend will continue.

150306tsla

We got a weak signal at the close on Wednesday that volatility (VIX) might be coming back to the market.

150305vix

facebooktwittergoogle_plusredditpinterestlinkedinmail

Take More Profit or Close Apple Trade

On February 24th we suggested it was time to take some profit in the Apple (AAPL) trade from 1/23/15.

150224aapl

A few days ago 7 day momentum from StockTwits broke below its uptrend line. As we mentioned in the above post, it’s time to take more profit or close the trade with a nice profit.

Social media indicator for Apple (AAPL)

Please be aware that our social media indicators for the S&P 500 (SPX) Index warned last week of a short term top so AAPL may get dragged down with the general market. As a result, it might be most prudent to close the trade completely.

facebooktwittergoogle_plusredditpinterestlinkedinmail

Strongest Stocks on Twitter Continue to Climb

For the third month in a row the strongest stocks on Twitter have advanced. This advance comes after a period of weakness from October through November 2014. Over the past two years the portfolio is still lagging the S&P 500 index. This is mainly due to the recent weakness and the decline during March and April of 2014. High beta stocks got hammered during those two periods.

Although last months picks moved up roughly 2% the individual stock performance varied widely. As an example, the two best performers were FireEye (FEYE) up 20% and Skyworks (SWKS) up 11%, while the two worst performers were Alcoa (AA) down over 12% and Gold stocks (GDX) down 12% as well. I prefer to see all of the stocks moving together so some caution is warranted.

It’s the first Friday of the month so it’s time for new picks to track over the next month. We track the first ten stocks in the following list.

Best Stocks on Twitter

Subscribers to Trade Followers can see the strongest and weakest stocks on Twitter over several time frames.

Below is a performance chart and details of last month’s picks.

150306TwitterPerf

Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
2/6/2015 $TWTR 238 48.01 11426.38 47.29 11255.02 -1.50%
$FEYE 370 36.05 13338.50 43.50 16095.00 20.67%
$DIS 112 102.02 11426.24 103.79 11624.48 1.73%
$CELG 106 118.75 12587.50 118.62 12573.72 -0.11%
$GDX 536 21.33 11432.88 18.66 10001.76 -12.52%
$SBUX 141 89.00 12549.00 92.15 12993.15 3.54%
$BA 77 148.00 11396.00 153.31 11804.87 3.59%
$SWKS 140 81.44 11401.60 90.53 12674.20 11.16%
$AA 690 16.57 11433.30 14.48 9991.20 -12.61%
$BIIB 28 402.00 11256.00 417.37 11686.36 3.82%
Cash 247.28 247.28
Totals 118494.68 120947.04 2.07%
facebooktwittergoogle_plusredditpinterestlinkedinmail

Strongest Stocks on StockTwits Diverges from Market

The strongest stocks on StockTwits during the month of January lagged the market during February. The under performance was mostly a result of Alcoa (AA) down nearly 13% and Exxon Mobile (XOM) down over 6%. XOM was in a clear downtrend when it made the list. This is yet another example of why we tell you to use the bullish lists as a starting point and not an automatic buy list.

On the first Friday of every month we post the stocks that had the most support on the StockTwits stream over the past month. The top 10 stocks in the list will be tracked over the next month. Note: because both Google stocks (GOOGL and GOOG) are in the top 10 we’ll use only GOOGL then select the eleventh stock in the list (Best Buy – BBY) as a replacement for GOOG.

Best Stocks on StockTwits

If you’d like to see more stocks showing strength or weakness on StockTwits they are available with a featured subscription.

Below is a performance chart and details of last months picks. I’ll update the details sometime over the weekend.

150306STperf

 

Start Date Symbol Shares Start Price Start Total End Price End Total % Gain / Loss
2/6/2015 $DIS 100 102.02 10202.00 103.84 10384.00 1.78%
$JCP 1312 7.80 10233.60 7.745 10161.44 -0.71%
$XOM 111 91.50 10156.50 85.87 9531.57 -6.15%
$BIIB 30 402.00 12060.00 417.13 12513.90 3.76%
$AA 617 16.57 10223.69 14.44 8909.48 -12.85%
$SBUX 125 89.00 11125.00 92.05 11506.25 3.43%
$YELP 226 45.11 10194.86 47.5 10735.00 5.30%
$CELG 111 118.75 13181.25 118.35 13136.85 -0.34%
$X 441 23.19 10226.79 23.215 10237.82 0.11%
$GM 284 36.00 10224.00 36.91 10482.44 2.53%
Cash 158.43 158.43
Totals 107986.12 107757.18 -0.21%
facebooktwittergoogle_plusredditpinterestlinkedinmail

Twitter Sentiment Never Confirmed Alibaba

As I’ve mentioned before, IPOs take patience. I like to wait for a new stock to shake out a bit before making a purchase. I’ve been watching Alibaba (BABA) since the IPO and haven’t built a position or made a trade because the Twitter and StockTwits streams haven’t been able to confirm a good entry point. I first warned about BABA in November when both Twitter and StockTwits momentum were painting a negative divergence with price.

141113baba

Since that time Twitter momentum has created one potential long setup. This occurred in January when 7 day momentum started to compress in a triangle created between a confirming down trend line and a positive divergence between with  price. The triangle broke to the downside (similar to Twitter’s first attempt). This leaves us waiting for another positive divergence, preferably after an over sold reading that indicates traders and even some investors have been washed out of the stock. BABA will eventually make a durable low so subscribers should keep an eye on it over the next month or two.

150303baba

facebooktwittergoogle_plusredditpinterestlinkedinmail

Twitter Predicting Decline for Stocks

Over the past week we got several signals from the Twitter stream that a short term top is likely. At the very least we should see a choppy market rather than a strong rally higher. Momentum and sentiment generated from the Twitter stream for the S&P 500 Index (SPX) has turned down from over bought levels which often precedes a short term decline. In addition, the turn lower has created a negative divergence between 7 day momentum and price. If the newly formed uptrend line in momentum is broken to the downside (after this negative divergence) it will create a consolidation warning and increase the odds of a larger decline. The setup is similar to late September 2014.

Twitter predicting lower stock market

Support and resistance levels gleaned from the Twitter stream for SPX show traders mostly targeting higher prices. There is virtually no support below 2100 being tweeted for SPX. This creates a situation where prices could fall rapidly if 2100 is broken to the downside. 2065 and 2040 are likely places for the market to pause if 2100 breaks. Above the market 2140 is the most tweeted price target and as a result is strong resistance. The recent high at 2120 is a minor resistance level.

150301spxsr

Sector sentiment is flashing a warning sign this week as well. Almost every time all sectors have been positive over the past two years the market made a short term top within a few days. The one exception saw sector sentiment stay positive for all sectors for two weeks, then the top was put in place. When all sectors are positive it shows rotation to safety at the same time as leading sectors are being pushed higher.

Sector sentiment on Twitter predicting lower stock market

The one bright spot this week comes from breadth between the most bullish stocks on Twitter and the most bearish. It has recovered from the previous negative divergence and is now showing healthy numbers. It is telling us that everything is being bought (similar to sector sentiment). A warning would come if we suddenly saw breadth decline and leading sectors showing weakness.

Stock market breadth from Twitter

Overall the social media indicators are predicting at least a short term decline. A break of the newly created uptrend line in 7 day momentum that is associated with quickly declining breadth would warn that a larger down turn is probable.

 

facebooktwittergoogle_plusredditpinterestlinkedinmail