Market Comment

Shares Show Health

September 2, 2012

There are old traders, and there are bold traders, but there are very few old, bold traders.”

— Ed Seykota

Shares continue to discount a positive economy in ’13 with attendant earnings growth. Another round of Federal Reserve accommodation is part of the story, but perhaps less than some believe. Whether the Fed goes or not is immaterial to the equation.

The equation is growth, no matter how slow or fast. Slow growth is still growth, and unless it is accompanied by inflationary concerns, normally results in upward revaluation. Geopolitical events deserve an asterisk, but these can never be factored into the equation ahead of time. Usually, they lead to fantastic buying opportunities.


Technically, the averages see price follow a more deliberate, methodical, lower-volatility path over the past month. This change of character is shown in the above chart, just to the right of the vertical line. The action is consistent with “stronger hands” (longer-term holders) taking over from “weaker hands.” It is a plus.

Among the names, Acadia Healthcare (ACHC) was mentioned two weeks ago as potentially buyable above 19, using a wide, 10% stop at about the 17 area. Since then, price has dropped to as low as 17.90. The July 5 high at 19.92 potentially makes for a good add-on entry pivot, or for a fresh-money buy, as the case may be.

Acadia Healthcare (ACHC) Gilmo Report Stock Chart

Alexion Pharmaceuticals (ALXN) was noted here last week (“A potential entry would be on a takeout of the July 27 high of 109.96, using a 7% stop loss in case proven incorrect.”). The comment holds. Big revenue growth that is also very steady, not to mention the big earnings growth.

Alexion Pharmaceuticals (ALXN) Gilmo Report Stock Chart

Regeneron Pharmaceutical (REGN) was noted in the last report (“…[REGN] has one of the most constructive bases in the glamour complex. An entry could be made at current levels (145.09 was Friday’s close).”). Price is currently at a new high, but is not extended above its base, and thus can still be entered around Friday’s closing level of 148.05. A wide stop of about 10% that is just below the Aug. 21 swing low of 133.65 can be used, as long as it is used on a junior-sized position.

Regeneron Pharmaceutical (REGN) Gilmo Report Stock Chart

Zillow (Z) was mentioned in Aug. 19’s report (“The potential pivot drops from the July 19 high of 44 to a cheater pivot of Aug. 7’s high at 42.60.”). Price is now just a couple of percent from the 42.60 point. The Aug. 19 comment holds. Further, an initial entry using the 42.60 swing high (“A” in the below chart) could be followed up by an add-on entry above the July 19 high at 44 (“B”).

Zillow (Z) Gilmo Report Stock Chart

Linkedin (LNKD) was noted here on Aug. 12 (“The Aug. 6 high at 113 could potentially be used as an add-on point for entry or as a fresh-money buy.”). The comment holds. The longer LNKD does nothing but go sideways, the better its technical health. If it does so for another four weeks, great. The view here is that LNKD makes a run for the roses before that.

Linkedin (LNKD) Gilmo Report Stock Chart

The Fresh Market (TFM) was noted here Aug. 5 (“TFM can potentially be entered here with a junior-sized position that can be added onto if the follow-through continues. A stop can be placed at about 56.70, which is just below the prior swing high of July 17 at 57.08.“).

Wednesday, the stock broke out of a four-week ledge, then staged a violent reversal to take out the above stop-loss point.

The Fresh Market (TFM) Gilmo Report Stock Chart

Five Below (FIVE), a discount retailer with a focus on teens, is worth watching. Earnings estimates are 47%/45% for the January ’13/’14 years. The stock came public in July and virtually doubled in its first three weeks. It is now working on a three-week shelf.

Five Below (FIVE) Gilmo Report Stock Chart

Carters (CRI) was noted here July 8 (“…the entry pivot of which would be the July 5 high of 56.01.”). The comment stands. Earnings estimates are for growth of 27%/25% in ’12/’13.

Carters (CRI) Gilmo Report Stock Chart

Sally Beauty Holdings (SBH), and Ulta Salon & Fragrance (ULTA) are two others that set up.

In summation, other than seasonal weakness in the September/October period, there is nothing that concerns us technically with this market. At the same time, it is important to be open-minded and flexible to new technical developments as they occur. The risks include Europe, China, and the Mideast.

Kevin Marder

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