Posted on September 26, 2008 - by andrew

Market Recap - September 25th, 2008… Confirmation Day

The markets confirmed the rally yesterday by making sizable gains in higher volume:

• NYSE: +2%
• S&P 500: +2%
• Dow: +1.8%
• NASDAQ: +1.4%

Be Careful with this Rally! Get back in SLOWLY

After reading Investors Business Daily’s Big Picture yesterday, I am not fully convinced its safe to get back in yet. Here’s why you should be careful getting back in:

1. Leaders didn’t make big gains - you want to see leading growth stocks lead a market advance.
2. The IBD 100 lagged the markets - IBD’s index of the top 100 stocks only gained +.5%. It usually gains a lot more than the markets on big days
3. Markets under pressure after-hours and pre-market - I definitely would like to see markets build momentum coming off of a confirmation day

Stocks to Watch RIGHT NOW

It’s too early to say whether this rally will succeed or not. But there were two stocks on my watch list that had black borders in Investors Business Daily’s Weekly Review. Stocks with black borders in IBD indicate that these are high quality stocks near buy points.

Here are the 2 stocks I’m looking to buy:

1. Varian Medical Systems (VAR)
   1. $65.94 buy point.
   2. Downside volume has been low
   3. Positive reversals
   4. 50 day moving average support
   5. Strong volume on previous advance before settling into current base
   6. Top ranked stock in #21 ranked group in IBD’s Industry Group Rankings
2. True Religion Apparel (TRLG)
   1. $31.92 buy point.
   2. Strong volume on right side of cup-with-handle base
   3. Top ranked stock in #20 ranked group in IBD’s Industry Group Rankings

Conclusion

Wait for stocks to cross proper buy points on high volume. But make sure you buy positions slowly:

1. Buy 1/2 shares of your full position as it crosses the buy point
2. Buy 1/4 shares of your full position as it crosses +2.5% above the buy point
3. Buy 1/4 shares of your full position as it crosses +5% above the buy point