Tuesday, May 3, 2011

PatternDNA - CANSLIM Analysis May 3rd.

Last week saw a shuffle in our CANSLIM Top-8 with the return of Netflix (NFLX) and F5 Networks (FFIV) at the expense of Intuitive Surgical (ISRG) and Free McMoran (FCX). What's the current outlook for the CANSLIM 8?

PatternDNA projections are derived from a pool of 18 U.S. stocks. Expected returns and win probabilities are calculated from patterns matched in these stocks over the past year and performance assessed as from the open price the day after the pattern completes. The Average Return per Trade is an expected long(er)-term return based on the use of a trailing target and stop (Average Return Per Trade assumes an initial stop of 10%, raised to 5% off the price reached on a 15% gain. Ultimate Profit Target of 25%).

The Median outlook for today and tomorrow is neutral, but there is a 59.5% probability for a higher close next Monday for these stocks.

Four stocks have a 60% or greater probability for a higher close Monday: Apple (AAPL), Barrick Gold (ABX), Baidu (BIDU) and Netflix (NFLX). Oddly enough, Barrick Gold (ABX) also has a 66% probability for a lower close tomorrow (Wednesday)! Certainly it will be a stock to watch over the coming days.

The long(er) term trade outlook using a trailed stop (initial stop of 10%, raised to 5% of the price reached on a 15% gain; ultimate profit target of 25% assuming stop not hit) was also positive. Barrick Gold (ABX) offered the strongest outlook with a 78.3% probability of a winning trade with an Average Return per Trade of 10.3%. Netflix (NFLX), Research in Motion (RIMM), Free McMoran (FCX), Vale (VALE), Baidu (BIDU) and F5 Networks (FFIV) all had probabilities of 70% or more for a profitable trade with an Average Return per Trade ranging from 5.9% to 6.4%. But particular reference should be made to Vale (VALE), Baidu (BIDU) and Research in Motion (RIMM) where the number of signals contributing to the probability factor were 244, 244 and 301 respectively - not a small sample size.

Only Apple (AAPL) underwhelmed with is 58% probablity and 2.8% Average Return per Trade.

With the markets starting the day weak, it might be prudent to adopt a more positive outlook for the coming week?

How did PatternDNA perform last week?

It was a mixed bag. PatternDNA had projected a greater than 60% probability for a higher close on the fifth day, post-pattern, for five of the eight stocks. Ironically, Research in Motion was the only one of the five to gain, posting 4.8% on the week, only for it to drop 14% the next day (what would have been day 6) on lowered guidance. Losses for the other four stocks ranged from a minimal -0.1% loss for Baidu (BIDU) to -8.2% for Barrick Gold (ABX).

The greater than 60% probability for a lower close for Cognizant Technology Solutions (CTSH) on day 1 and 2 post-pattern resulted in a gain on day 1, but a fall on day 2 to fulfill the latter day projection.

In summary:

2 of 7 projections which offered a 60% probability were true
0 of 1 projection which offered a 70% probabilty was true


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