Is Ethan Allen Bucking the Market?

Money has been rolling out of certain stocks and sectors and into others. But the major indexes are stuck in a downward-sloping tight trading range. The key is volume. As the chart below shows, volume is a bit higher on recent down-close days (red volume bars). If volume drops off, a breakout on the upside is more likely. If volume picks up on down-days, then a breakdown is likely.

5.23.16.1This matters to me because, as William J. O'Neil covers in his books and in Investor's Business Daily, something like 70% of stocks typically follow the overall market.

Back to the ‘money is rolling into certain stocks' situation, I'll address why I'm not considering short/bearish trades right now. We're just starting to enter that brief period each year where the number of big-name stocks with bearish seasonal patterns outnumbers the ones with bullish seasonal patterns.

For example, Ethan Allen Interiors (ETH) has a pretty bearish seasonal pattern right now. Over the next 7 weeks, ETH has lost an average 5%, with losses in 18 out of 23 years. That's a 78% track record of losses over two-plus decades.

5.23.16.2But ETH's chart patterns, On Balance Volume (OBV) and Up/Down Volume Ratio indicators, and volume patterns suggest there is mild accumulation going on in the stock – or at least not noticeable selling. This is not a good situation to bet against. And there are several stocks like this.

It's best to just sit on the sidelines and not take bearish positions against these stocks. Remember the recent article I wrote about Scott Miracle Gro's bearish seasonal pattern this time of year? (see Is Scotts Miracle Gro a Portfolio Builder?) SMG has fallen off slightly, but it actually looks like it is building for a rebound. My whole focus is on identifying higher probability trades, and betting against the market or certain stocks right now is not increasing the odds of success.

 

 

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

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Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

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MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.


This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.


The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.


The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.