The Daily Breakout

There are some gorgeous breakouts happening. If the number of stocks breaking out from sound bases continues to increase, a tradable bottom is probably near.

Cajun and ADawg have been all over the Bio-tech move. Here, [[BBH]] looks great.

However, this 3 year weekly chart of BBH shows that the move may get faded. Note the deplorable volume. Anyone trading biotech here should keep his eyes on this weekly chart. A breakout above the 3 year range would be outstanding. A failure would be, a failure.

[[IBB]] looks decent here too.

Great volume on this move. [[BAX]] Baxter International, Inc. operates as a healthcare company worldwide. It offers medical devices, pharmaceuticals, and biotechnology products for the treatment of hemophilia, immune disorders, cancer, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions.

Technically, [[CIR]] has already broken out. However, not adding this to a watchlist would be a mistake. CIRCOR International, Inc. engages in the design, manufacture, and distribution of valves and fluid control products in the United States and internationally.

[[JNJ]] Note that everytime Johnson has gained this level, the market has turned. When everyone is getting defensive, maybe it is time to go on the offense?

[[UTHR]] I profiled this one Sunday evening in my squeeze the shorts post. It is working like a charm. United Therapeutics Corporation, a biotechnology company, engages in the development and commercialization of therapeutic products for patients with chronic and life-threatening diseases.

Full Disclosure: Long UTHR

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There is a list at the bottom of the post. However, I suggest that you read how that list was created, so that you understand the methodology.

The FDIC grades banks based on Safety and Soundness. Here is the FDIC’s composite ratings definitions for Safety and Soundness/Risk Management.

Safety and Soundness/Risk Management Examination Composite Ratings

Rating	Rating Definition
One (1)	Financial institutions in this group are sound in every respect and generally have components rated 1 or 2. Any weaknesses are minor and can be handled in a routine manner by the board of directors and management. These financial institutions are the most capable of withstanding the vagaries of business conditions and are resistant to outside influences such as economic instability in their trade area. These financial institutions are in substantial compliance with laws and regulations. As a result, these financial institutions exhibit the strongest performance and risk management practices relative to the institution’s size, complexity, and risk profile, and give no cause for supervisory concern.
Two (2)	Financial institutions in this group are fundamentally sound. For a financial institution to receive this rating, generally no component rating should be more severe than 3. Only moderate weaknesses are present and are well within the board of directors’ and management’s capabilities and willingness to correct. These financial institutions are stable and are capable of withstanding business fluctuations. These financial institutions are in substantial compliance with laws and regulations. Overall risk management practices are satisfactory relative to the institution’s size, complexity, and risk profile. There are no material supervisory concerns and, as a result, the supervisory response is informal and limited.
Three (3)	Financial institutions in this group exhibit some degree of supervisory concern in one or more of the component areas. These financial institutions exhibit a combination of weaknesses that may range from moderate to severe; however, the magnitude of the deficiencies generally will not cause a component to be rated more severely than 4. Management may lack the ability or willingness to effectively address weaknesses within appropriate time frames. Financial institutions in this group generally are less capable of withstanding business fluctuations and are more vulnerable to outside influences than those institutions rated a composite 1 or 2. Additionally, these financial institutions may be in significant noncompliance with laws and regulations. Risk management practices may be less than satisfactory relative to the institution’s size, complexity, and risk profile. These financial institutions require more than normal supervision, which may include formal or informal enforcement actions. Failure appears unlikely, however, given the overall strength and financial capacity of these institutions.
Four (4)	Financial institutions in this group generally exhibit unsafe and unsound practices or conditions. There are serious financial or managerial deficiencies that result in unsatisfactory performance. The problems range from severe to critically deficient. The weaknesses and problems are not being satisfactorily addressed or resolved by the board of directors and management. Financial institutions in this group generally are not capable of withstanding business fluctuations. There may be significant noncompliance with laws and regulations. Risk management practices are generally unacceptable relative to the institution’s size, complexity, and risk profile. Close supervisory attention is required, which means, in most cases, formal enforcement action is necessary to address the problems. Institutions in this group pose a risk to the deposit insurance fund. Failure is a distinct possibility if the problems and weaknesses are not satisfactorily addressed and resolved.
Five (5)	Financial institutions in this group exhibit extremely unsafe and unsound practices or conditions; exhibit a critically deficient performance; often contain inadequate risk management practices relative to the institution’s size, complexity, and risk profile; and are of the greatest supervisory concern. The volume and severity of problems are beyond management’s ability or willingness to control or correct. Immediate outside financial or other assistance is needed in order for the financial institution to be viable. Ongoing supervisory attention is necessary. Institutions in this group pose a significant risk to the deposit insurance fund and failure is highly probable.

Based on this composite guide, we, as ruthless, criminal, and thieving short sellers, want banks that have a rating of 4 or 5.

But the FDIC does not make it easy on us to short banks to zero. They do not publicly publish their ratings on banks. However, Bankrate does!!! In fact, the FDIC plainly lists Bankrate as a place to find out information about banks.

Bankrate publishes what it calls a Safe and Sound rating. Sounds remarkably similar to the FDIC’s Safety and Soundness rating. Odd, no? In fact, Bankrate’s system is based on the same 5 point scale, except that a 1 is the highest rating for the FDIC and the lowest rating for Bankrate.

To begin using Bankrate’s composite rating system, go here: Safe and Sound Ratings.

Now, I’ve done some leg-work for you, as I know how you internet leeches want actionable lists and shit. What I’ve done is screened Bankrate for the 1 star banks (the lowest rated) in California. Of course, choose whatever state you want (Florida would be a safe bet). Here is the list:

Now, I’m sure you’re thinking, “Thanks Mr. Woodshedder. In between your fried chicken and dumplings, you managed to slap me upside the head with exactly what I was looking for. What can I do for you?”

I’m glad you asked. Please, if you look up some of these fuckers, list me the symbols in the comments section.

 

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“The Ballad of The Woodshedder”

Come and listen to a story ’bout a guy named Wood
A poor stock trader, could barely buy his food,
Then one day he was struggling what to do,
And there on his chart he saw Number 2.

RSI, that is. Double bottoms. And tops.

Well the first thing you know ol’ Wood’s a bloggin’ fool,
Kinfolk said “Wood you’ve invented quite a tool”
Said “On the Web is the place you ought to be”
So he booted up his ‘puter and moved to iBC.

Dot com, that is. Home of The Fly. And Dawgg.

Well now its time to say good-bye to Wood and all his spin.
He’d like to thank you readers fer kindly droppin’ in.
You’re all invited back to woody@ibc
To share a heapin’ helpin’ of his prosperity.

Woodshedder, that is. Buy some puts, Sell your winners.

Y’all come back now, y’hear?.

Courtesy of the mad song and rhyming skillz of the one called Zenprofit.

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The market cannot continue to sell-off forever. There will be a bounce, and you should have a list of longs ready to pounce on when it happens. Maybe with the [[FNM]] and [[FRE]] “backstopping,” this week will be the week to grab some longs and reset for shorts.

I have run some screens to find stocks with sound chart patterns and high short interest. I think there is a good chance for some explosive moves in all of these. One warning though…I would not hold these through earnings. Typically, large short interest is a sign of bad things ahead. These bad things typically are unveiled during earnings, (or worse, secondaries). In the mean time, should these stocks continue to head for new highs, most short positions will be deeply under water and the pressure to cover will be strong.

After a strong breakout in May, [[TRLG]] has begun to consolidate and looks as if it might be ready to spring from its first test of the 50 day moving average.

Short Interest (Shares Short)	9,535,000
Days To Cover (Short Interest Ratio)	21.0
Short Percent of Float	60.54 %
Short Interest – Prior	11,738,200
Short % Increase / Decrease	-18.77 %
Short Squeeze Rankingâ„¢	192

Obviously, the short interest in this one is huge. A squeeze here could be very profitable.

————————————————————————————-

Danny and I both had positions in [[UTHR]] after its breakout. It has since carved out a nice cup-with-handle pattern. This one is obviously under accumulation, evidenced by support at the 50 day average.

Short Interest (Shares Short)	4,602,100
Days To Cover (Short Interest Ratio)	12.8
Short Percent of Float	20.77 %
Short Interest – Prior	5,065,000
Short % Increase / Decrease	-9.14 %
Short Squeeze Rankingâ„¢	144

————————————————————————————-

Up next is [[ALTH]]. As this is a biotech who seeks treatment for cancer, beware that trading this can be like playing catch with a hand grenade. That being said, it is a pretty chart, with good volume. At this point, the shorts have got to be nervous that ALTH is going to go on a full-on breakout run.

Short Interest (Shares Short)	4,677,900
Days To Cover (Short Interest Ratio)	12.3
Short Percent of Float	17.95 %
Short Interest – Prior	4,945,400
Short % Increase / Decrease	-5.41 %
Short Squeeze Rankingâ„¢	125

————————————————————————————-

[[AMED]] is overbought. However, the short interest in this one is high. Its hard to say if it will have a significant pullback, or if the short interest will keep it propped up. This company is not a biotech. They provide home health nursing services.

Short Interest (Shares Short)	6,868,500
Days To Cover (Short Interest Ratio)	15.0
Short Percent of Float	26.39 %
Short Interest – Prior	6,740,400
Short % Increase / Decrease	1.90 %
Short Squeeze Rankingâ„¢	186

Should you all have any other stocks near new highs with large short interest, feel free to leave the symbol in the comments section.

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The break was nice, but I really miss writing and the interaction with everyone. The Fly was kind enough to allow me to return to my blog (on his terms, of course) with the understanding that I will not be posting on a regular, day-to-day basis.

Thanks for all the kinds words during my absence.

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It is with great regret and trepidation that I tender my resignation from iBankCoin. This decision is not an easy one and is not one that I made hastily. I feel it is in the best interest of the iBankCoin brand, and in the best interest of my family.

As most of you know, I work full-time, outside of the financial industry. Near the end of 2007, it became very difficult to blog and trade from work. To do so regularly, threatens my employment. Making things even more hectic, I have received another promotion, and it will require more time in the evenings. Also, my wife and I have two children, and we have an older child coming in August to move in with us.

As for the regular visitors to my blog, my traffic has held steady, and is nothing to laugh at. However, it is obvious from watching the traffic stats of other iBC bloggers that what the audience wants is copious amounts of posting. I have simply run out of time to blog with the frequency necessary to drive traffic. This is unfair to the other bloggers, as we all depend on each other to keep the site fresh.

I am giving up a lot here, and it is a bit painful. The site is on the verge of some fantastic wins, and I will likely have “sold at the bottom,” if you will. I will miss all my friends, and especially my iBankCoin internets family. The Fly is God. Period. Danny, Cajun, ADawg, Adam, and King Peanut, I will truly miss working with you all.

As for my readers, I am humbled at the numbers of you that turn up every week to read and consider what I have to say. Thank you…Blogging here has been fantastic, mainly because of all that I have learned from my regular readers. The wisdom in your many comments has made me a much better trader.

I do plan on opening another blog, at some point. Nothing special…Just a place to post some charts, discuss some strategies, etc. It certainly will not be updated daily, and it will likely have a stupid .blogspot or .wordpress address. When that time comes, hopefully The Fly will give me a link-whore, just like the old days, and you all can stop by and say hello.

Best wishes to you all, and may you always bank egregious coin.

Woodshedder

p.s. Should there be anything added to this post, it is on the Fly, playing his games. I am not a violinist.

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Most of the people I talk to about the markets are still in the “it’ll come back” mode. Obviously, they are not technical analysts, or they would realize the folly of their beliefs. I mean, of course the market will come back. The issue is how much are you willing to lose, and how long can you wait before this happens?

Looking at the above chart of the Dow Jones 3 Year Weekly, it seems obvious to me, even without all the lines and moving averages, that what is transpiring here is monumental. Looking back at 40 years worth of Dow Jones Weekly Charts, what is happening the last 6 months looks much like the Dow of the 70s and early 80s. If that remains to be true, then we can expect more downside, with continued volatility, broken up by long periods of range-bound trading, and then, more downside. Obviously, my eyes are not a quantitative tool, but this top looks much more like a “top” than during the 2001-2003 Dow bear.

I do expect many tradeable bounces, in the mean time. I define tradeable as a rally that lasts at least 3-4 weeks, where breakouts begin to again work in large numbers. I see 10,750 as a likely area for the Dow to find enough support to attempt such a rally. The lower channel boundary will come into play in this area, as well as a previous area of support and resistance.

Cajun noted the other day that the Dow looked like it would break beneath the 200 week moving average. The chart shows that it has broken the 200 week. My historical data shows that the Dow traded beneath this average through most of 1973-1983. As you know, that was a bear market period. The only other time in the past 40 years it has traded beneath the 200 week was during 2001-2003. Obviously, a break of this average should not please the bulls and portends that a very difficult period is upon us.

Over the next week, I am expecting a small rally. The index is tremendously oversold, on all time frames. It would be natural for the Dow will re-test  the 11,750 area. Whether it can muster the strength for a 500 point rush is worth considering. I will contribute a little capital, betting that it will bounce a bit, or at the very least, stabilize.

In the end, I will keep trading the bounces, in both directions. However, I am left with the distinct feeling that this market is going to be very challenging, for many many years to come.

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