Klein Market Summary-July 15th, 2013

Klein Market Summary

July 15th, 2013

Current Market Facts:

Technical Status

Confirmed Rally – Beginning Week 2

Other Observations

NASDAQ leads as uptrend resumes

Leading stocks have been breaking out for two weeks

Feel of the Market

The uptrend has returned in earnest, with the best stocks acting with power

 

Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3532

3600

3700

Nasdaq 100

3053

3079

3100

S&P 500

1654

1680

1687

 DJIA

15464

15340

15542

 

Market Interpretation:

As we take inventory of the current market, let’s focus on the technical action first.  The NASDAQ has now risen 12 of 13 days, with the 12th day of that series, last Thursday, being the Follow-Through Day.  Leading stocks in biotech, finance, and consumer tech have surged.  The NASDAQ is now leading, for the first time since the rally that began at the end of December.

The Follow-Through Day was catalyzed by comments from the Fed chief and by the Fed minutes.  The underlying reason for the recent short-term correction was the escalating fear that the Fed would reduce its Quantitative Easing program too quickly and too suddenly, but the most recent comments assuaged this fear.

Even prior to these comments by the Fed, leading stocks began to firm up.  Leader TSLA broke out on June 27th, nine days before the Follow-Through Day.  PCLN broke out on July 1st, and many others broke out early.  These and other stocks were early clues that the market uptrend was likely to resume.

Joel’s Take:

I would like to take a moment to review how I look at leadership and why.  I generally interpret market leaders as those stocks that are very liquid, trading about $ 100 Million Average Daily Dollar Volume (average volume x stock price) or more, though sometimes they can be thinner.  These stocks are relevant both for trading and for market interpretation.  Market leaders are also under professional institutional accumulation, usually because they have exceptional fundamentals, especially earnings growth.

I prefer to trade liquid stocks because even after several cycles of successful trading, I can still trade with the same style – it is scalable.  Also, these stocks are the ones where there are many institutional sponsors.  These sponsors will provide the eventual exit strategy.

TSLA:

There has been much made about the powerful move of TSLA.  The stock emerged from a long series of bases, culminating in a shallow cup, with a breakout at 40.  At this time, the stock showed negative earnings, though it showed a massive increase in sales as the ground-breaking Model S began to sell.  The stock surged, powered by a strong news flow, a massive short interest, and eventually a big earnings beat.

TSLA tripled in 11 weeks, forming a structure known as a flag pole.  Subsequently, beginning on May 29th, the stock began to base, forming a High Tight Flag.  It built this base for 21 days before breaking out on June 27th.  Such has the difficulty and complexity of the markets been this year, that the breakout occurred on below average volume 9 days before the market uptrend resumed.  To buy it properly meant making an exception to market timing rules.

A solid precedent for TSLA was the QCOM High Tight Flag in late 1999.  While the charts bear several important similarities, especially on daily charts, the key difference is that QCOM’s base happened at the end of a long uptrend.  TSLA’s HTF is a second stage base, which may be more similar to the action of MA in October 2006 or Syntex in 1963.  Both of these Model Book Stocks went on to much larger moves.  Fundamentally, TSLA resembles GM in 1915.  TSLA is also a candidate for a much bigger move, given the incredible demand that remains for this stock, even at current price levels.  I would like to hear your thoughts on TSLA.  What do you think of the stock?  What is a reasonable price target for year-end?

  • The Klein Market Summary is a professional interpretation of the general stock market conditions that is updated on a weekly basis.  Joel T. Klein is the portfolio manager of the investment partnership Blue Diamond Capital, LP. He writes the summary using select technical and fundamental data.  The Klein Market Summary is not intended to provide investment advice of any kind, and is only provided for the entertainment of the reader.  It is typically updated Monday morning, weekly.  Please e-mail info@kleinasset.com, if you are interested in receiving this free weekly update.
  • Past performance is not a guarantee of future results.  Due to market volatility, a fund’s performance may fluctuate.  Current performance may be less than previous results.  An investment a hedge fund when redeemed, may be worth more or less than the original cost.  Information above is not a replacement for the Fund’s prospectus.  This webpage does not constitute any kind of offer or solicitation.  Additional information on investment objectives and policies is in the Fund’s prospectus.  Ask your representative for a prospectus.
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About kleinmarketforum

Klein Asset Management, LLC, formed in 2003, serves individual investors via a directional growth stock approach. When the market is in an uptrend, the firm seeks to exploit investment opportunities. When the trend is down or neutral, assets are protected. Klein Asset Management undertakes major market research projects. In many cases, these result in improved investment methods, which ultimately improve performance.

3 responses to “Klein Market Summary-July 15th, 2013”

  1. bsimrrd bsimrrd says :

    TSLA…. in case you are interested. pls read attachment…  It is written by Gil Morales and his partner in forbes in June 2013. 

    ________________________________

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