On February 8th, I ran an extensive scan looking for C&D (Cats and Dogs) trades, I described what I found in the following terms...
"I've run about 6 different scans, went through 300 charts, came up with a 1st round of 64 candidates, narrowed that down to 32 and that down to 14, out of those 14, I found a mere 5 trades that look good, I will say that I'm pretty shocked, I expected to have more like 30 or so, but going through the 32 stocks in a narrowed down watchlist, I found a lot of these Cats and Dogs trades are already burned out, meaning they drove them up and got the heck out of Dodge taking their profits with them, not at all what I suspected I would find."
As for what C&D trades are:
"these are trades that can move very fast and put in some spectacular gains, very few are lasting trades so I generally take at least partial profits on any double digit move, especially if it comes in a single day. The rest of the trade (if it still looks good-decent volume, closes near the top of the range, etc) should be put on a tight intraday trailing stop. The ideal situation is to get enough profit to take your original investment off the table and let the profits run. Don't underestimate their ability to move, they can easily make 30-50% 1 day moves and several hundred percent in a run, but don't fall in love, know when to take your winnings."
Friday, as suspected, many of the C&D trades that had been leading the market and dominated the top 25 percentage gainers last week as well as the top 150 percentage gainers, quickly reversed and as I had found in my original scan, many were burnt out and were now the worst performing 25 and 150 stocks.
Most of the candidates still have the original set up in preparation for their breakout move, so they for the most part, still look very interesting. I had to cull a lot of candidates to come up with these 5.
The original 5 trade ideas I posted still look pretty good. Here's an update on where they stand.
DHT is a shipping company, generally these are not doing well, but have been in rotation among the C&D trades, breaking out, pulling back and breaking out again. None of these trades are meant to be anything more then trades and I explained above how I treat them, however at the same time, I believe in taking the opportunities the market offers where you find them.
DHT has advertised it's mark-up intensions with a series of volume spikes which are picked up by momentum traders running volume surge scans. The recent breakout and pullback has been on light volume and DHT HAS NOT collapsed like many of the other C&D trades did late last week. It's showing a little momentum today, watch volume carefully, even a seemingly minor uptick in volume can be a sign it is getting ready to pop. DHT stands at about break-even from when it was mentioned on the 8th (up .88%). The fact it has not crashed like many other C&D trades is proof of some relative strength there.
The hourly 3C chart was in near perfect confirmation of the down trend and recently saw a positive divergence and on an hourly chart, it still looks good here.
DRRX-Drug Manufacutrer
This one saw at least 1 capitulation event and then formed a nice, quiet lateral area before volume picked up. The volume pick up may not look like much, but it is the little movements that most don't pay attention to that are often the hints we are looking for. The pullback of the last several days has been on light volume. This one is only down 3.5% since Feb 8th which is nearly unchanged for a C&D trade when others are down 40, 50% or more. There's some slight interest brewing today that should be watched.
The 30 min 3C chart shows a positive divergence in that flat quiet period as I would expect, accumulation is done quietly and in a stable price environment. Volume only starts to surge when the accumulators start to move the stock to stage 2 mark up, announcing to momentum traders that this stock should pop up on their watchlists.
GERN
Here's another capitulation event and a rounding bottom-like pattern. It is also forming a symmetrical triangle (which considering the preceding trend is viewed as a bullish consolidation) right below resistance, which seems to indicate it is gathering strength for a breakout. Volume has been light on the consolidation as we'd like to see.
GERN's 5 min 3C chart at the bottom with a positive divergence and in line during the ongoing consolidation.
GSIT (semiconductor)
This one is a little more volatile, but it has held the 22 day moving average with a hammer candle thus far today indicating that it has most probably found support right where we'd expect to find it.
The hourly 3C in a flat and quiet base-like environment.
SCHS (Education & Training services)
This one has an interesting pattern, a breakout move and a bullish ascending triangle consolidation on lighter volume which is very close to a support level at the bottom trend line.
The 60 min 3C chart before the break out move and a current leading positive divergence in the consolidation.
The 15 min chart has also gone from distribution/profit taking on the first move up to some positive divergences as the consolidation has formed, this may be my favorite among the candidates. If you didn't already, make sure you read the original notes on these trades from Feb 8th which are linked at the top of this post.
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