Given the Facts, Should We Trade AMD, ROKU or JNJ?
Let’s examine a trade on ROKU, AMD, and JNJ by running a simple test. We’ll look at money flow and weigh our options. Why AMD, ROKU, and JNJ? Because these are three stocks we’ve traded over the past six months. We’ll see how bullish money flow is required to propel a stock higher and how there is little chance a stock will move higher if money flow is waning.
Summary
JNJ Money Flow
Johnson and Johnson (JNJ) broke out of a Phase IV markdown period in early July. Money flow graphically confirmed the bearish trend, as price action remained below the descending 50d moving average.
Just before the stock broke out of its accumulation stage or Phase I, money flow began to build and the stock created a series of higher lows just below the 50d moving average.
Once the stock broke above the 50d, money flow confirmed as it remained above the zero line. In addition, pullbacks to the 20d, not shown, were bought by as institutions added to positions. The change in character was picked up by traders and investors as the stock continued along its rising 20/50d. For example, the pullback in August was met by a surge in money flow and several bullish follow-through days. The third pullback consolidated these gains into September, which was met by even higher money flow levels.
Finally, the stock pulled back for the fourth time, though on this consolidation, money flow suddenly dropped off at Point “A” as institutions reduced positions into earnings (October 16). As a result, traders saw price action drop out of its descending pattern.
JNJ Earnings – October 16
Johnson & Johnson (JNJ) reported 3rd Quarter September 2018 earnings of $2.05 per share on revenue of $20.3 billion. The consensus earnings estimate was $2.03 per share on revenue of $19.9 billion. The Earnings Whisper number was $2.06 per share. Revenue grew 3.6% on a year-over-year basis.
The company said it expects 2018 earnings of $8.13 to $8.18 per share on revenue of $81.0 billion to $81.4 billion. The company’s previous guidance was earnings of $8.07 to $8.17 per share on revenue of $80.50 billion to $81.30 billion and the current consensus earnings estimate is $8.14 per share on revenue of $81.13 billion for the year ending December 31, 2018. – Source earningswhisper.com
Institutions and investors began buying JNJ. Money flow confirmed as the stock surged back above the ascending 50d.
Yesterday we re-entered JNJ as the stock tagged the 50d on higher volume. The stock finished higher with a gain of $1.85/share. Taking the alert Tuesday morning at 10:30 AM provided a maximum $2.77 gain to members in the trading room, depending on your entry of course.
Using money flow confirmed our positioning and made it a higher probability trade.
ROKU Money Flow
We recently traded ROKU as well, though money flow has confirmed a bearish trend or short position since the stock peaked in late September. ROKU is currently in Phase IV or the markdown period. Phase I will start when institutions begin building positions, similar to JNJ in June (chart above). Until then, steer clear of ROKU or ride your shorts lower. The overhead moving averages are resistance until Phase I starts.
Advanced Micro (AMD) – Money Flow
Given the bullish money flow, prospects for this candidate are pretty bullish. We began buying at 16.90 (+/-) as the stock briefly dipped below the 200d. We will stick with the trade as long as money flow confirms.
If you are a Stockcharts member build a chart style like those herein. Whenever you consider a long or short, run a scan using this style to sort through many stocks in a hurry. You can also build a chart list and scan for bullish money flow by selecting “candleglance” format and enable “money flow.”
Stockcharts also has a pre-defined scan at line 9 titled “Improving Chaikin Money Flow.”
Make a note of settings in the top part of the image.
It’s easy to see why we would be more interested in long positions using money flow as a guide. ATHM, BABA, BIDU and BITA have bullish money flow. Only ATHM and BABA are above their 20/50d. We’d be less interested in a position in BZUN.
In summary, using money flow will help you select candidates with potential. It will also help you avoid stocks where institutions show a lack of interest.
Futures are green this morning.
Check the Tuesday BLOG POST to see why we see a bullish trend developing.
Join us today for our LIVESTREAM broadcast during market hours where we will expand on this discussion. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
https://theclosingprint.com/CV_Blog/marketsmith-workflow-strategies-scans/
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