EB Watch List Update Report

Dear Members, NOTE: EarningsBeats.com is designed to uncover stocks that are performing very well on a fundamental basis (hence, the name), but also appear to be in an accumulation phase with each stock on our Watch List possessing strong technical attributes as well. ANY trading strategy should take into consideration the overall stock market environment - bear market vs. bull market vs. trendless market. While our other service at Invested Central deals with market guidance in addition to education and stock selections, I do feel somewhat compelled to let EarningsBeats.com members know my thoughts on the overall market from time to time. I am currently bullish overall. But as I just mentioned this morning to IC members, I'm nervous in the near-term as many areas of the market over the past couple of days are suggesting that traders are once again preparing for the possible tapering of asset purchases by the Fed. Why do I mention this? Well, we've been in a market environment where we seem to move higher nearly every day. As a result, many of our Watch List stocks have not pulled back to key gap and price support levels (2nd and 3rd entries). Accordingly, we recently adjusted our trading strategy to initially enter Watch List stocks at their price at the time they're added. While this is a benefit during periods when prices continue rising without much selling, it can be a hindrance to portfolio returns if the market enters a short-term period of selling like we've seen lately. I can't possibly determine each member's risk tolerance, so that responsibility has to lie with each member. What I would say is this - if you're a shorter-term trader, then understand that risks are rising in the near-term, especially if this short-term rise in 10 year treasury yields ($TNX is the ticker symbol at Stockcharts) continues. Also, watch the Volatility index ($VIX). A break above 14 would suggest traders are growing more nervous and that too could lead to additional near-term selling. Finally, check out the relative performance this week of the high growth Russell 2000 index (vs. the S&P 500 index). This relative weakness is an indication that traders are growing more nervous in the near-term. So how does this all affect EarningsBeats.com? Well, as we are seeing as the market sells off, 2nd and 3rd entries are being triggered on multiple stocks. For those who tend to be much more patient in allowing stocks to pull back off of recent uptrends, this is welcome news. But given the overall risk environment, just be sure to keep your stops (I prefer closing stops as opposed to intraday) in place in the event the selling grows deeper and stocks fail to hold support. I want to emphasize that I do not believe we are topping in the overall market. And I don't believe that we're entering a bear market. In fact, November, December and January historically represent the best months of the year to be invested in equities - so quite the contrary. But short-term, the risks may be greater trading these Watch List stocks, particularly from the initial entry points. A reversal today, especially a strong reversal in the Russell 2000, would negate much of this discussion. Still, like I said earlier, I feel compelled to tell you what I'm seeing. On to today's report.... KEY EARNINGS REPORTS: Friday: CBOE, CVX, LNG, POR, WCG Monday: APC, CF, CME, ED, EXTR, K, MRO, SYY, UNM, VMC, VNO These are just a few of the companies reporting today and Monday. Please check earnings dates for any stocks you own. ADDITIONS TO WATCH LISTS: There are no additions to our Watch Lists today Keep in mind that we have adjusted our trading strategies to allow for an initial entry at the current price. 2nd and 3rd entries will be provided on the annotated charts that will be provided this evening. If you prefer keeping risks low, even if it means missing out on upside, consider waiting for the later entries instead of taking an initial position at current prices. Also remember that stocks will continually be added throughout earnings season. Therefore, review the stocks identified and consider owning those that are most appealing to you. Don't feel compelled to buy every stock added. BRIEF COMMENTS ON WATCH LIST STOCKS: Large Cap Watch List: A - Continues to consolidate between 50 and 53. SCHW - Volume is increasing slightly today as it bounces off of recent price support and its rising 20 day EMA. NUS - Has established a new recent high near 120.00. On a pullback, 111.00 now looks like a solid initial entry. I'll update our trading strategy by annotating this chart over the weekend. PCLN - An updated chart will be provided over the weekend to highlight new entry levels, closing stop and target. Mid Cap Watch List: AYI - We're changing our strategy on this one to include entry at the current price of 99.39, close to 20 day EMA support. Also, there's price support close to 99.00. The balance of our trading strategy on this one has changed as well, so check out the updated annotated chart this weekend. CIEN - Closed Thursday just beneath short-term price support at 23.37. It's down slightly today, but still remains above 22.40 gap support, which represents our final entry. DXCM - Triggered second entry by testing its 50 day SMA. Updated annotated chart will be provided over the weekend. HAIN - Triggered first entry today at its rising 20 day EMA at 81.55. LXK - Hovering just above 35.00 with 2nd entry at 34.90. MEI - The long-term negative divergence has played out with the recent 50 day SMA test and our initial entry. There is some price support near 25.00 resulting from the reaction low established during the uptrend in September. A reversing candle today would be bullish. EGOV - Both entry points triggered - the first at 23.80 and second at 23.00. Our closing stop is the rising 50 day SMA, currently at 22.76. We bounced off that level earlier. NTCT - Low volume drop today approaching key price support and second entry at 27.50. TIBX - Triggered our second entry at 24.40. We will maintain a closing stop of 23.75. UNFI - Nearly triggered our initial entry at the rising 20 day EMA. Small Cap Watch List: BLDR - Triggered second entry at 7.30. Our third and final entry is at 7.00. That would average us in just above 7.30 for our entire position with a closing stop beneath 6.50. The rising 20 day EMA could be used as a closing stop for those wishing to keep the stop tighter. ELY - Continues marching slowly towards our second entry (gap support) at 8.11. FSS - Triggered initial entry at the rising 20 day EMA on Thursday. LIOX - Up another 11% today after being added to our Watch List on Thursday. TASR - Today's selling is moving TASR closer to price support near 16.75 - our second entry. DELETIONS FROM OUR WATCH LISTS: There are no deletions from our Watch Lists today. Happy trading! Tom Bowley Chief Equity Strategist EarningsBeats.com