Rick Pendergraft: I have mentioned the daily scans I run in this column on several occasions. In addition to the daily charts, I run the same scans on a weekly basis with the same set of criteria only I use weekly indicators instead of the daily ones. I don’t take the scans as the gospel when a stock appears on the bullish or bearish list, regardless if it is the daily scan or the weekly scan. When a stock appears on any of the lists, it is a starting point. The appearance on the list brings the stock to my attention so that I can delve deeper into the analysis and see what is going on with the charts, what the sentiment picture looks like and look at the fundamental picture.
For instance, First Solar, Inc. (NASDAQ:FSLR) appeared on the weekly bearish scan this past weekend. At first glance, the weekly chart shows that the stock has just come out of an overbought status and just hit the upper rail of its trend channel. Does this mean I short the stock? I wouldn’t. At least not at this time.
The stock has been in an upward trend for almost two years now and is due for a downward cycle within the trend. But that doesn’t make the stock a great candidate for a bearish play, at least not to me. I look for a downward sloped trend channel where the stock his hitting the upper rail. That is the ideal bearish opportunity—at least from a technical perspective. Once I find that, then I look at the sentiment and the fundamentals.