Trading Places with Tom Bowley

Familiar Names Pace Healthcare, Technology; Major Indices Rise Again

Special Notes

First, please join me and Erin Swenlin for MarketWatchers LIVE every day from Noon EST to 1:30pm EST.  We discuss key technical developments that you need to be aware of as you manage your wealth.  Previously, MarketWatchers LIVE aired just three days a week, but beginning today, you can join us five days a week!  


The link is www.stockcharts.com/webinars.  Then click on the green "Watch Now" button and join us!  Again, we'll get started at Noon EST and cover my and Erin's Monday trade setups, a 10 in 10 segment at 12:50pm EST where I'll review 10 stocks in 10 minutes - with annotations, Erin's DecisionPoint report and much, much more!

Next, later this afternoon, I'll join John Hopkins, President of EarningsBeats.com, for a timely discussion on how to best trade companies that recently reported better than expected revenues and profits.  John will take you through some of his favorites from recent reports, while I'll demonstrate how to set up a ChartList here at StockCharts.com to organize and better strategize to improve your trading results.  I'll also discuss the importance of "risk-adjusted" profits and how patience and discipline can improve your profits while lowering your risk.  For more information to register, including cost, CLICK HERE.

Market Recap for Friday, November 3, 2017

Well, Apple (AAPL) delivered great results on Thursday after the market closed to lift technology (XLK, +0.79%) on Friday and Align Technology (ALGN) continued its impressive 2017 ascent with another solid earnings report as well, lifting healthcare (XLV, +0.83%) to the top of the sector leaderboard.  Medical supplies ($DJUSMS), the home to ALGN, jumped 2.73% and is in a very bullish pattern.  The DJUSMS is covered below in the Sector/Industry Watch section.

Biotechnology ($DJUSBT) was also very strong, rising 1.28% and printing a bullish engulfing candle near key price support.  Take a look:

After the recent gap down, we've seen biotechs mostly consolidate, but with the potential reversal on Friday, watch for a gap higher to leave the recent consolidation on an "island".  Island cluster reversals like this one can mark significant short-term bottoms, especially in a previously uptrending group.

Financial stocks (XLF, -0.41%) were the day's laggard as the 10 year treasury yield ($TNX) continues to struggle.

Pre-Market Action

There's not a lot going on this morning and Dow Jones futures reflect that.  With 30 minutes left to the opening bell, Dow Jones futures are slightly higher, up 21 points.

Current Outlook

We're gapping lower on the TNX this morning with little or no economic news out, so traders will be watching to see if we can find a floor here.  A reversal in the TNX and subsequent rise would indicate money flowing away from the bond market and make more available to flow into equities.  For now, however, the short-term downtrend continues:

The next key level is near 2.27%.  A move below that level and I'd expect to see some selling in the benchmark S&P 500.

Sector/Industry Watch

The Dow Jones U.S. Medical Supplies Index ($DJUSMS) broke out in October and is showing very bullish indications.  There was a bullish cup with handle pattern in play that broke out and measures in the near-term to roughly 940:

The measurement is determined by subtracting the bottom of the cup (820) from the top of the cup (880).  That difference of 60 is added to the 880 breakout to arrive at the initial target of 940.  That shouldn't be expected to be the final high, just the next high.

Monday Setups

Every Monday, I provide several trade setups, one of which I highlight here in this blog.  All of the potential trade setups can be viewed by CLICKING HERE.  This list of annotated trade setups includes the past few weeks so feel free to peruse the charts to get a sense for what I look for when I trade.  These are provided for educational purposes, so if you decide to trade them, please understand the risks of trading and remember to keep stops in place to avoid large losses.

If you've followed my Monday setups for awhile, you've probably noted that most of my setups involve uptrending stocks that have pulled back to unwind overbought oscillators.  Not this week!  Instead, I really like the setup on Las Vegas Sands (LVS), which broke out on Friday on better than average volume.  The gambling index ($DJUSCA) is currently in a very bullish ascending triangle pattern and the consumer discretionary sector just broke out.  So LVS is an extension of both.  Here's the chart:

I would be looking for a target in the 70-71 area.

Historical Tendencies

It will be interesting to see whether the stock market pauses this week.  Historically, the 7th to 10th (tomorrow through Friday) represents a period of profit taking.  Since 1950 on the S&P 500, here are the annualized returns of each of these calendar days:

7th:  -11.24%
8th:  +2.49%
9th:  -19.68%
10th:  +4.75%

Keep in mind this isn't just the 7th through 10th of November.  This represents the 7th to 10th of all calendar months.  Also, for comparative purposes, the S&P 500 has averaged gaining 9% per year since 1950.  You can see that each of the annualized returns above is well below that 9% average.

Key Earnings Reports

(actual vs. estimate):

CAH:  1.09 vs 1.01

CVS:  1.50 vs 1.49

FNV:  .30 vs .27

HSIC:  .87 vs .90

MYL:  1.10 vs 1.22

SYY:  .74 vs .73

(reports after close, estimate provided):

FMC:  .63

IFF:  1.42

MCHP:  1.35

PAA:  .22

PCLN:  34.31

SWKS:  1.75

Key Economic Reports

None

Happy trading!

Tom

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