[isatrader]

One of today's breakouts from the Daily P&F Breakouts and Breakdowns in S&P 500 thread: http://stageanalysis.net/forum/showthrea...943#pid943 was E*Trade Financial (ETFC) which looks to be making a Stage 2 continuation move and potentially is close to completing a larger two year base, and so could be a possible investor play as well.

[isatrader]

Lennar (LEN) has been one of the star performers of the last few years since the 2011 lows, but has finally broken down into Stage 4 this week after forming a Stage 3 top over the last six months or so. Swing target is 28.74 imo. Attached is the charts.

[gbarbs]

Do you have any concern over the short interest? The latest I can find is on yahoo finance and is dated May 29th. The ratio then was 7.9. I don't have the book in front of me but I recall 10 being high and ideal being 3 to 4. My broker gives me a % of float as 17.17%. For now, I added to my watchlist. If it gets closer to the buystop I will look at shorting with the buystop closer to lower the risk.

I am new to the site by the way. It is fantastic.

[goodtyneguy]

Do you have any concern over the short interest? The latest I can find is on yahoo finance and is dated May 29th. The ratio then was 7.9. I don't have the book in front of me but I recall 10 being high and ideal being 3 to 4. My broker gives me a % of float as 17.17%. For now, I added to my watchlist. If it gets closer to the buystop I will look at shorting with the buystop closer to lower the risk.

I am new to the site by the way. It is fantastic.

Hi gbarbs and welcome to Stage Analysis. That's a good question and something that had slipped my mind when considering short positions. I'll try to answer it as isatrader is out of the country for the next few days.

You can get a more up to date short interest figure from here. My calculation of the ratio is a tad over 4 on a look back period of 22 days for the average volume. Weinstein got his average daily volume from the Wall Street Journal whose tables were published on a monthly basis so I guess the look back period for the average would be about 22 days. I believe that's about the average number of trading days in the month.

Weinstein said that many stocks have ratios of 3 to 4 the average daily volume which he considered to be on the high side but the stocks he was referring too in the book as "sucker stocks" had ratios of 5 and over. So it really depends how aggressive you want to be.

Good luck with it.

P.S. Page 222

EDIT: The WSJ published their tables from monthly data compiled by the New York and American Stock Exchanges.

[gbarbs]

thanks a lot for your response. i added that site to my bookmarks.

i went and scanned the homebuilders stocks and there are many weak looking charts so maybe not bad if you wanted to try a short in that group. the best ones i found to go with LEN were MDC, MHO, NVR, and RYC. NVR is attached. Short ratio was 4.7 as of May 31st but the site you sent has it up to 5 now. I liked this one because the RS is close to 0 crossing, but support is not as clear to me as the others. I think it just broke down. See attached. Buy stop is about 9% away.

HCBK was on my watchlist and broke above support, but no volume to speak of yet, and RS is just ok.

   
   

[goodtyneguy]

gbarb, I've been on the side lines for a couple of weeks after having a series of losses using the trader method in this market. I will continue to be on the side lines until we get in my opinion a more conducive market to using the trader method. Since I started using the method many of the sectors and stocks in the US have been in very bullish territory but we've had at least one swing to near bear territory. Most stocks were in late stage 2B territory therefore the momentum in most stocks that have been breaking out has not been there and very few have been showing decent volume to follow through. Consequently the failure rate has been high. Many stocks I think are now arguably in either stage 2B, 2B- or stage 3 tops . Even Stan Weinstein said that we were in a challenging market when he recently replied to isatraders email enquiry.

My view is that this type of market action will continue until QE is stopped at some point whether voluntarily or otherwise. We had Bernanke recently saying that he "might" taper QE so the markets drop and just today we have had Fisher, one of the Federal reserve bank officials jawboning the other way and the markets rally hard. Crazy times!

Back to your picks and I would like to point the following with regard to selling short. The following comes from the the book and a from what came to light in one of Weinstein's Financial Sense interviews. Isatrader and I recently had a discussion about it in the private section of the forum but I'm sure he won't mind if I quote him here.

Weinstein on short selling page 230:

The Market – The very important starting point is the overall market trend. While I'm not going to tell you that you can never sell a stock short when the major market trend is bullish, this should be the exception, certainly not the rule. Just as I showed you back in chapter 5 how an outstanding bullish chart pattern could have been bought in the 1973 bear market, so too, an outstanding bearish chart pattern can be sold short even when the overall market trend is favourable.

So he did not advise against short selling when the trend was bullish but he did say that one could become aggressive when, and I think these a relevant to your short picks:-

1) When all market averages are below their 30 week MA's and in stage 4 with other bearish indicators – Then look for sell candidates.

2) Look for vulnerable stocks in a week group especially when overall market is negative

3) The stocks group must be below 30 week MA and RS trending down.

There is an exception to the 30 week MA rule in 1) and 3) above and that is when stocks are in stage 2B-. This is isatraders quote so that you can understand stage 2B- if you are not already au fait with it.

listen to the first interview around the 30 to 33 minutes period of it http://www.financialsense.com/financial-...-territory. He talks about trading oversold 4B- stocks. Tickers ANR, X and one that wasn't yet a 4B- which was AKS, and then he went on to recommend some home builders which were also 4B-. The interview was on 11th November 2011, and all are way below declining 30 week MA's, and I'm sure I've seen a few more over the years in the GTA reports I've read.

I looked at ITB the housebuilders ETF, I do not see it as a week group. The 30 week MA is still rising and unless I am missing something it does not qualify to be in stage 2B- and neither does LEN.

I may have missed something but that's my take on the house builders, I'm sure isatrader when he get's back will have some input on it to clarify things.

[gbarbs]

I am not up to speed on the stage A & B's yet. I'll need to read the site. Now, I only know what I know from the book and have not ever discussed with anyone else or have ever seen any of the GTA's. So I will read the site and learn the A's & B's. Having said that, I did recall that shorting is ideal when everything is looking bearish, so I was looking at this as a possible small position to test the waters. I am not seeing the homebuilders chart the same as you. There is a chart in my brokerage site that is a little different and it appears they have their own list of stocks to represent the group. That is attached and looks like its broken down whereas the ITB has not (although it looks like it broke a trendline). The fact that it has dropped well below the MA I think is what gives me the stage 3 impression. Also, I went through the list of stocks in ITB. I came up with:
1 stage 1
9 stage 2's
12 stage 3's
6 stage 4's
4 I could not decide stage 2 or 3
1 I could not decide stage 3 or 4.
Also, you mentioned the MA is rising, but not very much. The EMA started to decline.
I am not convinced enough to short anything, especially with the high short ratios its just another reason to wait.
Charts attached for ITB and the homebuilder group from TD

   
   
   

[notanewmember]

NMX3720 - Household Goods and Home Construction UK FTSE350
I'm still bullish on home builders - Turn the chart upside down - you then see a lot of "over head resistance" as if you were long! You need a good 2yr "base".