Active-Trader - 5 Days of Fib - Day 2

Welcome back loyal blog readers.  This is post 2 in my 5 Days of Voodoo series where I will share my interpretation of the location of the Fib lines for popular stocks.

Next up is warehouse retailer Costco (COST).  Wave 1 started at the low of $63.22 back on 8/8/2011 and ended at $80.84 on 12/5/2011. Since then, prices topped out just short of the 61.8% extension of the 281% line at 109.35.  The 109.35 line has served as an important line of support for nearly the past year as you can see from looking at a weekly chart.

COST was a challenge since I could not verify it against any external sources.  The low was easy to identify - TOS does it for you - but there were several interpretations of where Wave 1 could end.  I chose this interpretation since the resulting levels proved to be important lines of support as shown on the chart.

That is an interesting point it itself - if  you think this work is purely scientific and objective, think again.  It may be based on scientific principles - but coming up with the lines is a subjective and often backward-looking process.

Next up in drug maker Celgene - CELG.  Wave 1 began on at the low at $51.70 back on 8/8/2011 and ended at $80.48 on 4/16/2012. Since then the stock topped out just beyond the 423.6% line.  Since then it has been in correction mode like many of the big drug stocks.

I featured CELG in my 4 Horseman of Biotech post back in July of 2013.  Of the 4 horseman, CELG has the highest 5-year earnings growth rate at 32% but with a PE of 47, it is fairly valued.   The entire group is now in retreat and with many buyers trapped at higher levels, I'm not likely to tread here on the long side any time soon.  Instead, I prefer stocks much closer to all-time highs and much earlier in the speculation cycle.

Last up for this week is Catamaran - CTRX.  Wave 1 began at the low of $20.18 back on 10/24/2011 and ended at $32.36 back on 1/16/2012.  Since then, the stock topped out just beyond the 32.8% extension of the 161.8% of wave 1 and has been a complete slop fest since.  CTRX recently found support at the 161.8% extension at the $39.3 level.

Even though the stock is acting poorly, 5 year earnings growth is 34.59% with a PE ratio of 31.95 so the valuation is pretty respectable.  That said, I'm not likely to tread on the long side here anytime soon.

Have a great week and keep your cash levels high since this market is in a stealth correction.