Market Lab Report - Premarket Pulse 10/6/15

Published:

6 Oct 2015 12:44 ET

Major averages, with the S&P 500 just closing under its 50-day moving average, continued their bounce though on lower volume yesterday as sluggish domestic economic news pushed a rate hike further out. That said, just the other week after the Federal Reserve concluded its 2-day meeting, markets did not rally but sold off on worries the Fed would postpone hiking rates due to the global economic slowdown.

The schizophrenic behavior of this market is not terribly surprising as bulls and bears struggle to be heard, creating cross currents and riptides. Fortunately, such "noisy" periods usually end with a soft whimper as new profit opportunities begin to appear as they have a number of times this year.

It is key to keep a close eye on what stocks are telling you. We had a few pocket pivots in yesterday's trade which may turn into something more substantial should this bounce continue. That said, some stocks are beginning to also set up on the short side. For example, Tesla Motors (TSLA), which we indicated as a short as near to the 50-day moving average as possible, was discussed last week in a Short-Sale Set-Up report. The stock ran into its 50-day line yesterday and reversed. This morning it is moving lower in pre-open trade. Our webinars go into detail on how best to watch for short-sale set ups, as well as discussing in detail some short-sale candidates.

As always, keep a tight leash on profits in this environment.

As noted above, we had a number of pocket pivots in yesterday's trade. But should this market roll back over, it will be a tough headwind for stocks on the long side though the strongest ones can sometimes buck a downtrend.

Pocket pivots:

Web-based and mobile fleet management software company FLTX had a pocket pivot. FLTX is breaking out of a long base. Earnings are strongly accelerating, pretax margin 21.9%, group rank 21. Be cautious about breakouts as it is often best to buy on constructive weakness after the breakout.

Internet-based call handling service provider JCOM had a pocket pivot. JCOM gapped higher on a breakout on its prior earnings report but the market correction pulled it lower. Pretax margin 37.1%, group rank 20.

IT and lifecycle software developer EPAM had a pocket pivot breakout. Just as with FLTX above, buy on a constructive pullback. ROE 26.3%, steady and consistent earnings and sales, group rank 10.

Single family home building LGIH had a pocket pivot. It gapped higher on its prior earnings report. Strong earnings and sales, group rank 16.

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