I'm a big fan of buying stocks at support. On June 29th, Advanced Micro Devices (AMD) tested a very important price support level and printed a reversing hammer candlestick that same day. In my Daily Market Report to EarningsBeats.com members, I suggested mid-day that a bottom could be forming on AMD. It wasn't rocket science, it was basic technical analysis. AMD had been consolidating for a few months and had already tested 50 on two previous occasions. This is how AMD has reacted since:
The blue-dotted vertical line in mid-April is highlighting the relative strength of AMD when it hit resistance. While consolidating, its relative strength suffered, which is typical for many stocks. But that third blue arrow is what I pointed out to members on June 29th. AMD actually printed a new intraday low, beneath the two previous lows and that's a method for market makers to accumulate shares before a big advance. The rest is history.
That brings me to Equifax (EFX). Two weeks ago, EFX reported blowout quarterly results. The stock was cruising throughout the day and appeared to be breaking out above its prior June 8th closing price high. But then the reversal occurred. We saw a bearish shooting star candle and failed breakout. This was bad technical news for those buying into that rally and false breakout. The past two weeks have been a painful reminder that false breakdowns need to be respected - just the same as that false breakdown on AMD back in June. But now here we are, two weeks later, and EFX is at support. Will we see an intraday breakdown, followed by a strong afternoon recovery, marking a major bottom? Will we completely break down? I don't have the answers to those two questions, but I do know EFX is a much better reward to risk entry now than it was two weeks ago. Check out the chart:
The setups are very similar. AMD was a leader among semiconductors ($DJUSSC), but lost its relative zip while it consolidated. EFX has done the same thing. It remains part of a very strong business support services group ($DJUSIV), but it's fallen back on a relative basis while it's consolidated.
The next couple of days could be very interesting for EFX.
Buying the right stocks at the right time is literally in our tagline at EarningsBeats.com. "Better Timing. Better Trades." It's what we discuss and teach every single day. Our methodology of owning leading stocks in leading industry groups has proven to be a very successful one. Our Model Portfolio, which typically holds 10 leading stocks in 10 leading industries for three months has now racked up gains totaling 123.22% since November 19, 2018 (and through yesterday's close), the date of its inception. This return annihilates the S&P 500's return of 22.89% over the same period. We combine our overall market view, evaluate sector and industry relative strength, and then choose what we believe are the 10 best stock candidates......and we hold them for three months. Then we rinse and repeat. We're nearing the end of our 7th calendar quarter and the Model Portfolio has beaten the S&P 500 in 5 of the 6 prior quarters, and this quarter, barring a major reversal, will mark 6 out of 7. Currently, the Model Portfolio is up 32.92% since May 19th, the date of last selection. The S&P 500 is up 13.12% over the same period.
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Happy trading!
Tom
