Price and earnings momentum go together like rhythm and melody. Some of the best stocks you will ever find have a combination of both and the stocks can go a lot farther than most would imagine.
Some of the small and mid caps that are not at the forefront of media attention can be great plays especially if the economy recovers and analysts are faced with chasing estimates to catch up with increasing projections.
Stamps.com ($STMP) has been discussed at length on both for a while now and so is not unfamiliar to StockTwits members but there is still a world of investors out there who have never heard of the name.
$STMP is a company that recently reported that has both. It is under the radar with a market cap below 500m and average daily volume below 500k.
Earnings Momentum (The Melody): Earnings momentum is like a stock’s melody. It tells the story.
Below is a table with the earnings history relative to analysts estimates for $STMP including the most recent quarter reported Thursday. You will notice that the company is not only growing the bottom line but also handily beating analyst consensus estimates. The beat is key because analysts are only very slow to catch up to a story even as their projections remain a proxy of market expectations.
Analysts still have a bunch of catching up to do which could take another 2-4 quarters.
Price Momentum (The Rhythm): Price momentum is like a stock’s rhythm or as BAD once chanted, its demonic charge.
Well, it doesn’t take Charles Dow to tell you that $STMP is ramping. The chart below tells the tale:
Interest Momentum (The Harmony): The music to momentum analog would not be quite complete without a discussion of a stock’s harmony or interest momentum. When interest in a stock is also accelerating, then you have a growing market awareness of the stock rising and potentially more buyers.
Interest momentum is not as easy to measure as earnings or price momentum but volume gives some indication. Note how volume in $STMP began increasing significantly after the last earnings announcement in late July (see the above price chart).
One might also check out Google Trends in order to glean a bit about search volume and news references:
The point of this post is not to recommend $STMP although I think it needs to be on your watch list and another round of healthy consolidation here might beget more buying soon enough.
Its more to highlight how one might integrate earnings, price and interest momentum in order to identify stocks that can make you a lot of money if you buy them well, trade around the position and utilize options to manage risk and hang in there for multiple earnings reports.
If economic recovery is setting in, then there will be a number of these gems where analysts estimates have not caught up to fundamental reality.
Many missed the meat of this rally or were even caught on the wrong side of it.
The normal irrational reaction is to want to chase here and there were a ton who finally got long into yesterday’s monster move or who covered.
I use the phrase normal irrational reaction because its just that.
With psychopathology, the irrational thinking associated with a mental illness is abnormal as only a small percentage of the population exhibit the associated cognitive profile.
But in trading, its just the opposite as irrational thinking is actually normal as a majority in a specific provoking situation (including missing a rally) exhibit the associated irrational cognitive profile. Crazy but true…
If you have a good plan, you stick to it. Behind the scenes you might want to adjust for new market conditions but that needs to be a deliberate process. I would recommend this weekend as the market is closed and you might be less distracted.
If you don’t have a good plan, then what the hell are you doing?
The market is inhabited by sharks who eat people with no plans or who abandon their plans under anxiety.
Only one out of ten reading this who were wrong footed and got caught up in yesterday and this morning’s euphoria will heed this post, take a deep breathe and adjust their risk profile rationally.
While nine of ten chasers reading will ignore the advice.
This is the best social media guru advice I will ever give you….
Ignore The Haters.
The social web fosters real time communication, information access and an immediacy that is profound. But it brings with it a problem in that a small number of destructive people can get your attention easily.
When people attack you on the social web, it can be difficult to ignore.
Trolls will gnaw at your ego and say offensive things.
When you respond, you allocate valuable energy away from constructive pursuits. You comply with the hater whose intentions are to provoke.
For those who are busy sharing and gathering information, connecting with good people and building brand the best advice is to just ignore. No buts.
Its one of those simple rules that is hard to follow in practice but it is wise counsel.
No one ever accomplished anything brilliant bickering and life is far too short to waste time with such nonsense.
I just spent a couple hours reviewing the weekend Chartly Stream. There is so much good analysis and so many good trade ideas, it is ridiculous.
If you are interested in finding setups, sector analysis, technicals and learning – run don’t walk on over and spend some quality time there with a pad and pencil. You will be prepped for the Monday open.
Here’s just a smattering of charts I found of value. Click the chart for the post and a larger version…
@TrendTrace has quickly become a must follow on Chartly and provides relative performance anlysis and much more generously. In this quick sector and sub-sector break down he’s got financials and builders leading this most recent charge. Who’d a thunk it:
@FractalTrades does amazing work on Chartly 7 days a week. On this one, he outlines a possible melt up scenario on The SP500… “Never say never”:
On to a couple metals charts that were in play last week…
@TheEnergyTrader does fine work on the metals and this 60 minute gold futures chart gives you key levels for the coming week. I’m incorporating it into my own work on $GLD for sure:
Sharp pro @gtlackey has been observing weakness in Copper ($JJC) and provides some astute chart analysis on the recent weakness and prospects for next week on the daily here:
And now for a few notable setups in individual stocks…
Tempur Pedic ($TPX) and Select Comfort ($SCSS) have both been super strong and reported big earnings numbers this past week. @Nashill_22 captures the play on $TPX with a few simple lines and a sharp eye:
Exxon ($XOM) broke from the channel two weeks back and @TraderFlorida nicely chalks the continuation:
I continue to like $RAI and have posted the chart before in Chartly Review. Here, @Campagnatrading captures the setup in Halloween colors (also see @harmongreg’s work on the same name here):
The @Fibline loves these W patterns and seems to take money out of them when the opportunity arises consistently. He’s stalking $ABC here:
And finally, here’s one StockTwits was all over this past week and looks great tightening up here. @CommAveTrader observes $ULTA clean and simple:
I support Occupy Wall Street (OWS) and for those who read this blog that might already be apparent.
Nevertheless, I am concerned that it faces two urgent problems that, unless corrected very soon, will lead to the unsuccessful end of the movement before the Winter Solstice.
The below chart suggests that interest in OWS has already begun to wane. Average search traffic has reached its lowest level since September and news references, after spiking earlier in the month, have begun to level off also at lower levels.
The first problem concerns leadership which I have discussed previously. OWS urgently needs a leader. On October 9, I wrote:
If there was a single voice to better define the movement and inspire, OWS would accelerate focus and force.
This is even more true now than it was 2 weeks ago.
Causes require one person who steps up and motivates and, in a protest movement especially, there needs to be a single voice supporters trust, listen to and rally behind. The leader is also essential in communicating with the media and must be accepted as the definitive spokesperson of the movement who captures the attention and allegiance of those across America and the world who might not yet be involved in the movement.
Without this, there is no point person to speak in the interest of OWS and no one for the people to follow.
The second problem concerns the lack of a concrete, specific and well defined doctrine including principles, objectives, goals or demands.
It was reported earlier this month that OWS was working on a set of demands, which is only a start, but that progress was slow on this. This is not good. The result is that the OWS movement becomes more diffuse and various somewhat related agendas get mashed up together.
This obstructs momentum as the wider public perceives the diffusion of purpose and questions rather than joins in.
What I want is an end to privatized gains – socialized losses and all money out of politics now.
I can get behind this and I think many who are not yet involved in the movement can also, but this clear, straightforward and reasonable purpose is not etched anywhere definitively.
Perhaps Josh would make a great leader of the OWS given his understanding of the entire field, wisdom and trusted voice on both sides. I don’t know for sure.
What I do know is that the leadership and doctrine problems are most observable in the media because without them, OWS gets defined by anyone who is dissatisfied with the status quo and, importantly, by critics who, realizing there is no well defined frame, emphasize the most radical elements of the movement and attack these points of greatest vulnerability.
Occupy Wall Street needs a leader and a well defined and specific doctrine fast or risks faltering before Winter approaches Zuccotti Park, perhaps sooner.