Digging into HA Smoothie

Quill,

Here’s a chart for AZO as of yesterday’s close, done with hollow candlesticks and found by my scanner when fed with just data from yesterday. By your definition, the stock is “at the starting gate”, and it should have been bought today at market open.

Here’s how it’s playing out today (as of 12 AM eastern). Yes, my scanner nailed it, just as it (nearly) always does.

Now here’s AZO done with HA bars as of yesterday’s close.


There is little in that chart that would suggest a move up today other than positive volume. But you don’t pay any attention to volume. Here’s that same stock as of 12AM today.

Yep, retrospectively. AZO coulda/shoulda been bought.

My take away is this. For conservative traders, HA Smoothie does a superior job of filtering out false starts. But it also discards a lot of opportunities that more aggressive traders could be profiting from. As for ‘investors’, HA Smoothie is exactly the tool they should be using to keep themselves out of trouble, because HA Smoothie will only let them get into situations in which there is a clearly defined, upward trend, and it will kick them out of their positions when the trend breaks down.

“Buy the green bars. Sell the red bars.” Wash. Rinse. Repeat. (More testing needs to be done. But I’m pretty sure I’m right about this. )

Arindam

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Quill,

Here’s some follow-up on the diff between what 'HA Smoohie 'says should be done and what a conventional, hollow candlesticks chart would suggest.

Using my super-duper scanner --a legacy charting program called Candle Power Ultra– I ran a scan on the stocks in the SP400 index. Based only on yesterday’s closing prices, my scanner suggested that seven of them were over-sold and might be going to break out today to the upside. Which they are doesn’t matter for now. But do note how aggressively my scanner filters. Of the 401 stocks in the index, my scanner threw away 98.25% of them. (Yeah, we’re in a bear market.)

That cuts down the number of stocks needing further vetting --fundamentally and/or technically-- to a very manageable number, and that’s why scanners are needed. Of the seven my scanner suggested, hand-charting threw out only one of them. Six good tips out of seven is a very high hit rate. More generally, only about half pass my hand-charting tests, and screening for fundamentals might eliminate a couple more. But what’s left is generally pretty solid stuff.

Rather than me repeat the same exercise as before of plotting a stock with HA Smoothie based on yesterday’s close and then what’s happening today, and then again with a yesterday and today version done with hollow candlesticks, here’s some tickers to look at: SAIC, CW, SLGN, SWAV.

Caveat: I haven’t pulled fundamentals on any of them, and I have no idea how any of them make their living. Do your own Due Diligence.

Arindam

Quill,

I ran a scan on the 601 stocks in the small-cap, SP600 index. My scanner threw out all but but eight of them, and only two passed my hand-charting test, namely, based only on yesterday’s closing prices, what was the likely forecast for today?

Both of them are playing out today as predicted yesterday: JJSF and CLW.

Again, the same caveats as before: I haven’t yet pulled fundamentals, and I have no idea how the companies make their money. Do your own Due Diligence.

Simply Wall Street’s “snowflake” for CLW is pretty sucky.

But it likes JJSW, or at least rates it as “tolerable”.

Note: The “snowflake” is their quick, graphic summary. Clicking on any of the five categories will pull up further info , including explanations of how they arrive at their judgments. A subscription that allows running unlimited tickers is $240/year. Not cheap. But the time saved, and the grief their analyses keep me out makes the price worth it to me.

There’s a free website, Wall Street Zen, that offers much of the same, fundamentally-based analysis. So if back-office expenses are a concern to you --and they should be-- use them, or use the research offered by your broker when you need to vet stocks fundamentally. What you’re looking for isn’t reasons to buy, but the warning flags that will help you stay out of trouble. Or, as a traders’ proverb goes,

“Amateurs look to their upside, Pros look to their downside.” a sentiment echoed in Buffet’s Two Rules for Investing.

Rule #1. Don’t lose money.
Rule #2. Remember Rule #2.

Hi Arindam,
I can help with Swav since I have been watching it and looking for an entry point. Taken from Yahoo(ShockWave Medical, Inc., a medical device company, engages in developing and commercializing intravascular lithotripsy technology for the treatment of calcified plaque in patients with peripheral vascular, coronary vascular, and heart valve diseases worldwide. The company offers M5 catheters for treating above-the-knee peripheral artery disease (PAD); C2 catheters for treating coronary artery disease; and S4 catheters for treating below-the-knee PAD. It serves interventional cardiologists, vascular surgeons, and interventional radiologists through sales representatives and sales managers, and distributors. The company was incorporated in 2009 and is headquartered in Santa Clara, California.) They have been growing sales big and are now profitable. Here is their last Quarter.

** SWAV Q322 CC

Doug Godshall

Sales in the third quarter of $131.3 million represented an increase of 102% from the third quarter of 2021. The team delivered these results despite some of the macro headwinds that have been described by others in our sector. Fortunately our team and our customers have become very nimble in their ability to adapt to the changing circumstances around them and to remain focused on optimizing patient care.

In the US, quarterly coronary and peripheral sales both more than doubled from the third quarter of 2021. Internationally our progress was also quite impressive with sales up 68% from a year ago. The direct investment we have been making is paying off nicely and our international sales and marketing team now stands at 53%.

We’re pleased to be granted CE mark of our C2+ coronary product in Europe in late August. C2+ adds 50% more pulses going from 80 to 120. Since our initial launch of C2 in Europe our customers have often wished they had more pulses so they could deliver more energy to a particular lesion or treat additional lesions identified during the procedure.

The additional 40 pulses should go a long way towards satisfying our customers and further enhancing outcomes. We started a limited market release in Europe and if all continues to go well, we’ll move forward with the U.S. regulatory process.

We also received FDA approval of our L6 peripheral catheter, a bit ahead of schedule and are about to commence a limited release of that product. L6 offers two new features, larger diameters and more concentrated power.

Our customers have expressed interest in larger diameters for the larger vessels above the SFA. And in response L6 has eight, nine, 10 and 12-millimeter diameter versions.

We positioned these six emitters in L6 closer together than in our other catheters which concentrates the power and will enable delivery of the sonic energy over a greater distance. This product will enable L6 to maintain superb efficacy in large vessels that our customers have become accustomed to in small diameter vessels.

Next, M5+ continues to perform extremely well, and we are encouraged to see an increasing use of the 3.5 and four-millimeter sizes, which indicates an increasing use for below-the-knee lesions. The longer protrusion of M5+ enables it to be used below-the-knee whereas the original M5 was generally unable to reach those lesions.

M5+ offers a 50% longer treatment zone than S4, which is attractive for longer lesions. And we see the expansion of M5+ into the BTK segment, as a first step towards a more sophisticated below-the-knee portfolio.

Historically, females with coronary artery disease tend to have less favorable outcomes than males, particularly when using atherectomy. Our existing data have consistently shown similar safety outcomes for IVL in both sexes, which caught the attention of our investigators and motivated us to explore a female-only study which will include a broader set of real-world lesions that were studied in our earlier trials.

As we remind the data from our trials the results across our studies confirm that IVL delivers consistent results in terms of stent expansion, minimum stent area and procedural safety regardless of the presence or absence of nodular calcium within these target lesions.

These findings have been very well received by our customers at large and we are anticipating a publication in the not too this in the future. Lesions with calcified nodules account for roughly 20% of the problematic calcified side lesions and we see a meaningful opportunity to move these nodular cases into the IVL camp now that we have such compelling data from our trials to help our customers make the right choice for their patients.

Those present at the meeting were impressed by our commitment to generating robust data in the peripheral space. The key takeaways we heard from the attendees were that our results are remarkably consistent in terms of the efficacy of our therapy regardless of which vessel is treated and that IVL continues to demonstrate extraordinarily low adverse events in very complex population. These data capped off an overall strong ShockWave showing at Veeva.

And lastly, a quick reimbursement update. We were pleased last month to be branded a Category I CPT code for coronary IVL, which means that physicians will receive an additional professional fee when they use C2. This process now gets turned over to the RUC committee to determine payment level would be memorialized in the final rule about a year from now and will become effective January 1st, 2024.

Our C2 system will be officially reimbursed in December and our current plan is for our team to launch C2 in January in Japan. We expect that the Japan launch will start slowly, but will become a meaningful contributor to our business starting in late 2023 and will be a great complement to our other growth engines.

Given the various internal and external considerations we now anticipate delivering topline revenue in the range of $483 million to $488 million for the full year of 2022, representing growth of 104% to 106% from 2021.

Isaac Zacharias

Thank you, Doug. As Doug mentioned, we had another strong quarter across US coronary, US peripheral, and international. The M5+ launch continues to go very well. Physicians appreciate the enhancements that M5+ brings compared to its predecessor and we are seeing strong volume growth in the US and international markets.

Our target is to complete the launch in the US this year so that we can enter 2023 focused on driving penetration versus lunching accounts. We are very pleased with the unit growth we are seeing for the M5 product this year.

In the US, the volume for the M5 product family year-to-date is nearly 70% higher than the same period last year. The M5+ price uplift further contributes to the revenue growth of M5 product line in the US. The team has executed very well in this launch and we have seen year-on-year growth rates of the average daily sales for the M5 products accelerate in 2022 with Q1 up 52%, Q2 up 75%, and Q3 up 124% compared to the respective quarters in 2021.

In our international markets, we added marketing resources last year to focus on the peripheral business. With the efforts from the marketing group and the launch of M5+, we are seeing over 100% growth in the unit volume of the M5 products internationally.

While still a relatively small component of our revenue, the international peripheral business will be an important long-term contributor. We also continue to see solid progress in the S4 business and we look forward to increasing the growth in our BTK business with improved products and strong clinical data, both of which are currently being developed.

Turning to the coronary business, we continue to see strength in all geographies. This is a credit to our sales teams and distribution partners as they have been able to deliver strong growth in the coronary business, while executing the launch of M5+. In 2023, we expect incrementally more focused on driving coronary adoption.

Our goal is to maximize the penetration of IVL in calcified PCIs. Relative to the prevalence just mentioned, we are still in the early innings. To realize this potential, we need to have a steady cadence of new products supported by robust clinical data. The first of these new products is C2+.

We are also focusing on optimizing the structure of our territories. We currently have approximately 1.6 clinical specialists in each territory. The ratio of clinical specialists to territory managers has increased from 1.2 in Q3 of 2021 and as we added approximately 20 territories and 50 clinical specialists over the last year.

By the end of 2023, we expect to have between 110 and 120 territories and will average over two clinical specialists per territory. As we grow next year, we also expect our territory productivity to increase so that our average territory in Q4 of 2023 will have substantially more revenue than our average territory does today.

Using the peripheral US business as an analog, I noted previously that we have seen the average daily sales growth of the M5 product family accelerate each quarter this year in the US. This acceleration was based on the launch of a new product coupled with improved hospital economics.

With the reimbursement change this past January, hospital payments for an outpatient above-the-knee procedure involving IVL increased by $5,000 to $7,000, which is greater than the hospital’s cost to purchase an IVL catheter. Currently, coronary IVL catheters are reimbursed under a transitional pass-through payment which is intended to offset the cost of the device. This clearly has helped facilitate access to the C2 device, while CMS gathers data on the cost of coronary IVL procedures.

As we look beyond the transitional pass-through program to the eventual long-term reimbursement scenario, we are on a path that is similar to peripheral. The incremental payments to hospitals for procedures involving coronary IVL should exceed the cost of the device. We expect that the cost data from the TPT program will support an incremental $7,000 payment to hospitals for coronary IVL procedures compared to the payment for a standard stenting procedure. Similar to our above-the-knee situation, this incremental payment would be greater than the cost to purchase a C2 catheter.

Dan Puckett

Peripheral products accounted for $32.9 million in US revenue, an increase of 111% from $15.6 million in the third quarter of 2021. Generators accounted for $0.3 million of US revenue in the quarter. The growth in US revenue was driven by increased utilization of existing accounts new account adoption of IVL and continued sales force expansion.

International revenue was $20.8 million in the third quarter of 2022, a 68% increase from $12.4 million in the third quarter of 2021. International revenue from coronary products was $15.7 million in the third quarter of 2022, a 54% increase from $10.2 million in the third quarter of 2021. International revenue from peripheral products was $4.1 million in the third quarter of 2022, a 95% increase from $2.1 million in the year ago quarter.

Looking at total revenue by product line. Our Coronary products accounted for $93 million of total revenue in the third quarter of 2022, compared to $47.2 million in the third quarter of 2021, representing a 97% increase. Our peripheral products accounted for $37 million of total revenue in the third quarter of 2022, compared to $17.7 million in the third quarter of 2021, a 109% increase.

In addition the sales of generators contributed $1.2 million in revenue in the third quarter of 2022, compared to $0.3 million in the third quarter of 2021, a 369% increase.

Adam Maeder

Hi, good afternoon, guys. Thanks for taking the questions and congrats on another nice quarter. Maybe you could start just on the new guidance. I think it implies Q4 revenue of about $140 million at the midpoint, if I’m doing the math right, which is up about 6% quarter-over-quarter sequentially. And Q4 is typically a seasonally strong quarter for MedTech. You grew close to 9% sequentially Q3 over Q2. Maybe just walk through some of the assumptions and the new guidance range and how you’re thinking about Q4. Any color on kind of, how the business has trended in the past weeks? Was there some conservatism baked in? And then, I have a follow-up. Thanks.

Doug Godshall

Yes. Thanks, Adam, I’m going to probably tag the team on this one. Certainly, as reflected in the past quarter we have great underlying momentum in the business and traction across all of our – all of our product lines in all of our geographies. So business is very healthy. What we tried to factor in to our sort of the next – well this quarter is the – that strong momentum overlaid against the fact that there are other things, like we do have more FX headwinds as we get to the back end of this year than we’ve seen historically. There are a few shorter – a few fewer days selling days than in the third quarter. And while we’ve – the team has executed incredibly well in the face of staffing shortages and the like. There are some larger centers where we see some impact on their volume and we tried to as best we could factor and the fact that they’re both in the US and to some extent internationally.

There are some procedure movements that we tried to consider what modest impact they might have in the quarter. So we factored – what we considered some impact on the volumes that we might see in the top line versus the fact that we continue to see tremendous traction with our customers.**

Here is their financials

As you can see their Revenue growth is top notch and their margins are really improving.

Andy

Hi Arindam Are you using HA smoothie for that screen? Because when I use it I do not show a green candlestick yet. But when I set it up for candlestick open to close I do. Could you explain how you have yours setup?

Andy

Andy,

You’re seeing what I’m seeing, because our setups are exactly the same. When AZO is plotted with HA Smoothie, yesterday’s bar (Jan 24) was ‘red’. But when AZO is plotted with hollow candle sticks, yesterday’s bar was green.

In Candle Patten Analysis talk, the candle was part of a pattern called ‘Bearish, 3-line Strike’, and my scanner assigned the day a ‘down’ arrow. However, the program also throws a suite of ten, Western-style indicators at each day’s prices, six indicators of which earned an ‘up’ arrow. Therefore, the composite signal for the day was a clear ‘Buy’ signal. Here’s a screen shot of the program.

When I get those signals, I then hand-chart them at BarChart, using whatever template matches my inclinations. But I’d really suggest that most people stick with Quill’s version of HA Smoothie and Quill’s rules for using it. He’s the man to listen to for being someone who makes his living from trading. I’m just a tinker for whom this stuff is a hobby.

I’ve owned and used MetaStock, AmiBroker, OmniTrader, StockAnalzer and demoed dozens more. Nothing beats Candle Power Ultra for its ease of use and the accuracy of its signals. Quill will attest to this as I’ve fed him stocks that are “right at the starting gate” over the years. But he also has his own scanners (from which he gets the bulk of his ideas), and he tends to invest/trade far more frequently, broadly, and consistently than I do, and in far larger size.

Regrettably, Candle Power Ultra is no longer sold, nor supported, because the programmer died, and his son wasn’t able/wasn’t interested in keeping it going. But the program’s functionality should be reproducible, because a good description of it can be found in the 2nd edition of Greg Morris’ book.

Arindam

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Andy,

Here’s why I like, use, and depend on Simply Wall Street for vetting stocks fundamentally. Rather than grind through 10Q’s or listen to or read conference transcripts, a glance at SWS’ “snowflake” tells me all I want to know, which is an answer to this question:

“Am I likley to get into trouble if I try to trade this stock?”

What I do when I’m vetting preferreds (that I intend to hold) is a whole 'nother matter, as is what I do when I’m buying corporate bonds. Then, I do the green eye shade routine. But a trade, especially one that’s meant to be short term and that I could easily be in and out of in a hour or two? Nah, I’ll give fundamentals a quick glance, but nothing more.

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Thank you Arindam, great stuff.

Andy