It Might Be A Good Week

The Weekly BOB filter has a whole bunch of good candidates for this week and I'll just give you the top 5 of 26 (by volume)

SBUX
DHI
PALM
NDE
BPOP

Two of these BPOP and DHI already announced earnings on the 19th. SBUX is coming up on the 3rd of May, PALM isn't until June, and NDE is announcing on the 26th.

None of these appear to be bad on the daily charts but do your own due diligence.

This is not an invitation to speculate in the biggest casino on earth - the U.S. stock exchange where fortunes are lost, hearts are broken and total ruin is the only possible outcome. There is a good reason why the sign - Abandon Hope All Ye Who Enter Here - is posted above the portals of the NYSE. You've been warned.

SBUX and CMGI

No sooner do I say keep an eye on SBUX than Notable Calls reports that they are having their annual meeting today. This might engender some interest in the shares during the session.

In the same Notable Calls article there is some talk about CMGI. This was a real MoMo stock in the roaring 90's. It peaked in Jan '00 at 160 and went down for the next 2 years to cents. And it was being purchased the entire way because it took it two years to get to cents. I remember this one (never owned it directly probably owned it through one or more mutual funds but who didn't in those days) because I was listening to a radio program - one of those call in shows about the stock market that were so popular back then and this was probably about April '00 or so - the stock was about 60 then. Anyway someone called in and that person was in a panic over the fact that they owned so many thousand of shares of CMGI bought on the say so of this host at 120 or so going up. And then they didn't sell on the way down because all of these hot shots kept saying "stay the course" - hmmm, that sounds familiar. "Where'd the money go," the person asked, in tears. "Just gone," said the host, "just gone." The person tried to argue but the host just kept repeating, "Nope, just gone." There was some real sadness in his voice. He was gone too in the next week and the station changed formats shortly thereafter. I think they're in the religion business now. I don't know how many of these early Jimmy Crack Corn's were sued but all of them should have been taken out and hung.

Anyway - somebody is buying CMGI. It is a day traders favorite - lots and lots and lots of shares and 2 and 3 cent runs all day long - 27 cent ATR on the weekly basis so you can't get too hurt even if you have 10 or 20 thousand or more shares. But somebody big is buying - it has had two months of increasing volume and increasing price. So either somebody knows something or nobody knows nothing but it looks like a spec play if you play it at all.

Cathedral of Dead Money

Now that we have NewMoMo in the public arena it is time to put another Marlynism on everyone's tongue - the Cathedral of Dead Money.

I've written before about steeples and that in days of old when the weary Knight was coming to the town the first sight he would see looming in the distance were the church steeples - often the highest point of the towns and cities. To the traveler it meant that soon he could sleep.

The same goes for the weary stock - it shows its weary owners a set of steeples and sometimes one or more of these are what I call the "cathedral of dead money". The "cathedral" is always built on a hill (e.g. - EMA4) and always has a longer neck (or wick) than tail (or leg) The wick is larger than the body. The Japanese called this a "shooting star". Sometimes there are two or more but they nearly always mean that end of the road for the stock is approaching. This pattern can be used on any time scale from minutes to months - it always means the same thing - it can be either white/green or red/black.

Here in the Village of SBUX we saw two back in January and they managed to build a new one recently - in the ever popular red color so much in style lately in the Village. This chart is dated March 9th and I'm not going to update it even though I'm publishing on the 14th.

The downtrend doesn't have to be as severe as the one shown here. This one just avalanched after it began - with ever increasing volume. Note that it hasn't produced a BOB yet - that doesn't mean that it can't go up but that new cathedral that they just built will have to be dealt with first.

Candlestick chart pattern reading can be extremely rewarding both to your psyche and your trading account. I recommend starting at this site and moving on from there. You can "name your own" like I do but you really need to know the tradition before you start branching out on your own.

SBUX - Part II

Maybe it's me - maybe it's because I don't particularly like their product - maybe I think their business model is way overdone and probably old - already - maybe it's because I don't like paying more than 2 bucks for a cuppa joe - maybe it's because I like a cuppa joe and not a lattemochamotherhuncher - but this chart just doesn't look good to me - right now.



OK - you are looking at a monthly chart - that's because the folks over at JP Morgan said 3 months to a year and when you are looking for short term trades you use dailies (or less), swing trades you use weekly, and long term relationships - monthly. And this is going to be a long term relationship.

Let me count the ways.

First - it's been here before - several times. That is never a good sign especially in a company who is selling a commodity that you can buy just about anywhere - I mean Mickey D's just got on the flavored coffee bandwagon - how many more hints do you need that a fad is over? No matter how many stores SBUX can open Mickey got them beat.

Second - this is the first time it has closed below the 21-EMA - not necessarily a bad thing but not too good either.

Third - it spent most of '05 declining, got a second wind and broke down from there.

Fourth - The ATR at this level can't be sustained - that we know - but it has been here for a long time and since it crossed 3.00 there have been more red volume bars than black ones. If you look at the ATR in relation to the shank of the growth spurt (Apr 03 - Dec 04) you see that it is almost declining. Towards the end of '04 it begins to go up and that appears to be the beginning of the end. Volatility is a funny beast - there is only high or low and most often you want to begin a relationship low or when it is declining and the stock is rising.

Fifth - I will try to never buy a stock off a rounded top and it doesn't take 20-20 to see that this is rounding - and not only that but it also appears to be a twin-peaks set-up - or a natural short.

If I were inclined to buy it for an investment I'd put the position on when the ATR came back below 3.50 and the stock closed over the EMA 21 (on the monthly charts). But even so I'd put a very tight (2.5 - 3%) stop on it until it crossed 33 or 34 again. In other words I'd want to see a breakout before I bought a breakout. If it did cross 34 again with a declining ATR I'd be inclined at that time to double up.

And that's my take from a chart perspective.

SBUX Makes Notable Calls

Notable Calls reports that JP Morgan is defending Starbucks.

I'm saying I don't like this one -


The reason is simple - even though the RSI is very low - and you might get a little pop out of it in the short term look at the ATR. The ATR seems to be saying that this is a company in distress. When nearly every other stock known to man has an ATR that is extended into the atmosphere to see one this benign is unsettling - it's like no one cares. Contrast this with one I mentioned earlier - AMMD


At any rate read Notable Calls and then make your own decision.