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Posted on September 30, 2008 - by andrew

Market Update - September 29th 2008

The rally is dead now after markets suffered one of the worst days in history (…again):

There’s not much for me to say. The rally is dead now since the markets undercut their most recent lows yesterday.

Just be glad you didn’t jump the gun too soon after last week’s confirmation day. Leading growth stocks never followed the markets after the rally was confirmed. That was the main reason why I never got a chance to buy anything.

We’re gonna be in wait and see mode going forward. Don’t try to predict what will happen. Let the markets tell you what to do.


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:

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

Posted on September 23, 2008 - by andrew

Market Recap - September 22nd, 2008

Market Recap - September 22nd, 2008

The markets suffered huge losses yesterday, but volume was way lower than Friday’s:

I generally don’t like to see such big losses when the market is attempting a rally. However, according to Investors Business Daily, a rally attempt isn’t killed until the low of the rally is undercut. Here are other reasons why yesterday’s losses weren’t so bad:

  1. Quiet volume - not only was it lower than Friday’s levels, volume was below average for the first time in several sessions.
  2. Leading stocks didn’t suffer heavy losses

Conclusion

I am still optimistic about the rally until the market gives me reason not to be. Here’s what to do going forward:

  1. Watch for the rally confirmation to happen since today is Day 4 of the rally attempt.
  2. Be very stringent on what stocks to buy from your watch list. I’ve seen a lot of potential buy candidates that are flawed or are too thinly traded.

Posted on September 22, 2008 - by andrew

Market Recap - September 19th, 2008

Market Recap - September 19th, 2008

The markets followed up Thursday’s monster day with another session of big gains on strong volume:

Friday’s action was very encouraging. However, volume was mixed with the ending higher and the lower. Overall, volume was still very strong and way above average.

Seeing such strong action only adds to my confidence in the latest rally attempt that began on Thursday. If all goes well, we can start looking for a confirmation day on Tuesday, which would be Day 4 of the rally attempt.

Beware of red flags in some stocks…

After reviewing the action of a few stocks on my watch list, I noticed that a few of them reversed downwards on big volume:

This is definitely not something I like to see when buying stocks. Don’t fall in love with stocks on your watch list. If a stock you were once hot on starts flashing red flags, then stay away. I’ve learnt that they aren’t worth the risk.

If this rally is the real deal, you’re gonna see plenty of good stocks breaking out when the market takes off. It doesn’t make sense to take on unnecessary risk now. There will be plenty of fish in the sea!

Conclusion

Keep your watch list up-to-date and wait for the follow through day. Once that happens, only buy stocks from your list that break out on strong volume (i.e. at least 50% above average daily volume).


Posted on September 19, 2008 - by andrew

Market Recap - September 18th, 2008

The markets made huge gains yesterday after a volatile start:

Stocks started off positive, then went negative….all on mixed volume. The exciting action happened around late in the session when good news about the credit crisis came out causing:

  1. Surge in volume
  2. HUGE gains in a short amount of time

This occurrence was very different compare to other sessions we’ve seen:

  1. That surge in volume caused the volume for the day to exceed the already high volume we’ve seen in the last few sessions.
  2. The way the markets reversed into huge +4% gains in such a short time was very impressive.
  3. Many leading stocks that were negative and had quiet volume most of the day ended up with big gains on above average volume.

Wait!!! We aren’t out of the Correction yet…

Yesterday was just an encouraging sign. It only marked Day 1 of a rally attempt. Many might be salivating seeing some stocks on their watch lists make solid gains yesterday. According to Investors Business Daily, you have to keep cool and wait for a confirmation day of the rally before you start buying. Don’t worry, there will be plenty of stocks breaking out if the rally is for real.


Posted on September 17, 2008 - by andrew

Bullish chart - CNQR building strong cup pattern

Bullish chart - CNQR building strong cup pattern

() has been a bright spot during the market’s recent correction. It’s a member of the Computer Software-Enterprise group and has superior marks in Investor Business Daily’s Smart Select Ratings. is one of the growth stocks on my watch list that I’m really, really excited about!!!

Fundamental analysis for

Most of my research on was done by reading IBD and using the Smart Select Ratings that come with my IBD subscription. I highly recommend Smart Select Ratings if you want to save time while picking stocks.

Here’s a quick summary of ’s fundamentals:

  1. Group is ranked #35 - sticking to groups in the top 50 of IBD’s Industry Groups Rankings gives you the greatest chance of success.
  2. Top-ranked stock in its group - the top 5 stocks in a group are usually the strongest
  3. Stellar IBD Smart Select Ratings
  4. Up/down volume is 2.1 - anything above 1 is bullish

has very attractive fundamentals. However, today’s Base Reader article in IBD said that Concur’s earnings were expected to slow down slightly in the next quarter. To me, that’s a risk worth taking given the strength of ’s other fundamentals.

Technical analysis for

All of my technical analysis for was done using IBD’s Weekly and Daily Charts. By viewing its weekly chart, looks to be in the 6th week of a . is showing a small -18% decline in its base. Here’s a screen shot courtesy of StockCharts.com:

CNQR building cup base with few flaws

  1. Huge run-up in August (Point 1) on huge volume (Point 2) - this is a sign of strong demand by big investors
  2. Soft decline much (Point 3) on very light volume (Point 4) - shows support by institutional investors
  3. Building accumulation (Point 5) on higher volume (Point 6) - shows that investors are buying shares
  4. Buy point is $49.09, or 10 cents above the high on the left side of the cup

’s chart looks great to me. It’s been rare in this correction to see a chart that does not have heavy distribution in it. This low distribution is the most attractive part about ’s .

Conclusion

I am extremely bullish on . Unless it sells off in heavy volume, I will definitely buy when:

  1. it breaks out above its $49.09 buy point on heavy volume (+50% higher than average daily volume).
  2. a new rally begins.

For right now, just be on the look out just in case shows any red flags.

More Reading

If you’re interested in learning more about how to find winning stocks and increase your chances of success, I strongly recommend subscribing to Investors Business Daily. I read IBD everyday so I know what’s going on in the market and which stocks are doing good or bad. Subscribe to Investor’s Business Daily Digital Edition – Get 4 Bonus Weeks!


Posted on September 17, 2008 - by andrew

Market Recap - September 16th, 2008

The markets made a positive reversal and ended up with big gains on heavy volume:

Yesterday’s action was encouraging. Stocks were down most of the day until late afternoon when volume kicked in. Several leading stocks on my watch list made gains on above-average volume:

Keep an eye on these stocks. I especially like because:

  1. it had a big run-up prior to its base
  2. its base doesn’t have any distribution weeks on above average volume.

Conclusion: We are not out of the woods yet. I am treating this as just another day. We need to see a confirmation day before I believe that a new rally has begun.

Yesterday counts as Day 1 of a rally attempt. According to Investors Business Daily and How To Make Money In Stocks, a confirmation day will happen:

  1. On or after Day 4 of a rally attempt
  2. When at least 1 of the major indexes gains +2% on higher volume.

Until then, stay in cash, keep your watch lists updated and wait for the rally to start before buying stocks again.


Posted on September 16, 2008 - by andrew

Market Recap - September 15th, 2008

The markets had one of the ugliest days in recent history…..on heavy volume too:

There isn’t much else to say except that things are really bad. I’m sounding like a broken record, but its important to remember:

  • DON’T BUY STOCKS !!!!!!!!!!!!
  • Keep an eye out for buy candidates to add to your watch list
    • stocks building sound bases
    • stocks showing resilience
    • stocks strength
  • Watch for a rally attempt and follow through

Posted on September 12, 2008 - by andrew

Market Recap - September 11th, 2008

The markets scored large gains on slightly higher volume:

 

Here’s a summary of the day’s action:

  • ’s rally attempt is still alive (Day 4). Watch for a confirmation day (+2% gain in heavier volume)
  • Several low-ranked IBD Industry groups performed well. Investors Business Daily recommends only buying growth stocks in the top-50 groups. Be patient and build your watch lists from groups that have the highest rank possible.

 

Conclusion: If you’ve been diligent and picking the best stocks for your watch list, you should see a few of them approaching buy points. Here are two stocks I have my eye on right now:

  • United Therapeutics (UTHR) is about -4% below a $117.92 buy point in a .
  • () is about -8% below a $49.09 buy point from a recent trip to its 50 day moving average.

 

Wait for the confirmation day to happen on the . After that happens, buy slowly! I’m not a big fan of using the as a gauge of the overall markets. So I personally would be skeptical of the rally until:

  1. the S&P 500 or the start showing strength
  2. leading stocks start breaking out on heavy volume

If you do decide to buy, as always, make sure your stocks are passing their buy points on strong volume (+50% above average).


Posted on September 11, 2008 - by andrew

Market Recap - September 10th, 2008

The markets booked modest gains, but on light volume. Gains on quiet volume is typical of a weak market like the one we’re in rigth now:

Conclusion: Nothing has changed, the market is still in a correction. The good thing is that stocks didn’t go down today. The only advice I have is:

  • Watch out for growth stocks that score gains in higher volume and add them to your watch list. 
  • Be patient for a follow-through day

Posted on September 9, 2008 - by andrew

Market Recap - September 9th, 2008

The markets suffered huge losses in mixed volume today:

 

Volume finished lower on the and slightly higher on the . Today’s action confirms the market’s bearish mood:

  • Large losses are ugly regardless of volume - The was the only index to officially suffer a distribution day, but today’s huge losses were still a bad sign.
  • Drop in oil prices didn’t help - The markets typically go higher when oil goes lower, but this correction has been different.
  • Large losses during rally attempt - it was be bearish to see the markets lose a chunk of yesterday’s big gains
  • Negative intra-day reversal - the markets opened higher today (up nearly +1% at one point) but closed much lower. Strong markets do the opposite.

 

One silver lining is that several of the worst hit sectors today were former leaders, which could be a sign of :

  1. Fertilizers
  2. Energy-Other (including Solar and Coal)
  3. Oil exploration

 

Conclusion: The market remains in a correction. Here’s what you should be doing until the market rallies:

  1. Avoid buying stocks until a new market rally is confirmed.
  2. Keep a watch list of growth stocks that show resilience and/or building sound base patterns.
  3. Watch for growth stocks belonging to new leading sectors as old market leaders make way for new ones.

Posted on September 9, 2008 - by andrew

Stock Chart Update: Apple Inc, BMI, CSX, STJ, MPWR

If you’ve been following the market’s behavior over the last month, you already know that July’s rally stalled and is now a correction. I wanted to give a quick update on the stocks I analyzed recently:

Inc. ()

has not changed much since my first post. At the time, it was shaping a . It eventually stared to form a handle with a buy point of $180.45 (Point 1). It has since fell about -17% below that buy point (Point 2). I would wait until reaches the old buy point of $180.45 before considering buying it.

Apple Inc (AAPL) 09/09/08

Badger Meter Inc ()

As stated in my previous post, Be cautious with Badger Meter Inc (BMI), had two red flags that warned investors to avoid buying it:

  1. Only averages 142,000 shares a day - thin stock, below the minimum 300-400K shares daily volume.
  2. Negative reversal on huge volume - had a big gain, then three big distribution days the week of July 25, 2008

The week after my post, had a rebound on strong volume that might have suckered some investors back into buying shares (Point 1). But you can see over the next four weeks, sliced through its 10 week moving average (Point 2), then crashed all the way to its 40 week moving average (Point 3).

Badger Meter Inc (BMI) 09/09/08

Corp ()

Transportation-Rail stocks were doing well at the time I wrote my original post, CSX Corp. (CSX) forming a Cup Base Pattern. But as the rally stalled so did and the rest of the rails. went on to form a cup-with-handle base that ended up failing. sunk to its 40 week moving average on heavy volume last week. Watch to see if it can build the right-side of this current base with healthy volume.

St. Jude Medical Inc. ()

St. Jude was forming a three-weeks-tight pattern as biotech stocks seemed to be amongst the leading sectors when the rally began. But ended up moving sideways and formed a flat base (Point 1). The bright side is that volume has been low, which means big investors aren’t dumping shares. Keep on your radar when a new rally begins.

St. Jude Medical Inc. (STJ) 09/09/08

()

When I wrote my original post, broke out of its on strong volume. The rally was still going strong at this point and I decided to buy some shares in (see my trading journal). But within a few days, quickly triggered my -8% loss rule and I sold my entire position.  has since sunk down to its 40 week moving average.


Posted on September 8, 2008 - by andrew

Market Recap - September 8th, 2008

The markets bagged gains on much higher volume today:

On the surface, this might look like a great day. Here’s why you should be skeptical:

  1. We’re in a correction after last week’s big declines in heavy volume - today’s action is too soon to mark the beginning of a new rally.
  2. ’s action today was weak - it was up as much as +1.5% at the open, turned negative as the day went on, and closed with a modest gain compared to other indexes
  3. Leading growth stocks still stuck - Few leading stocks are in any position to break out of decent bases

Conclusion: Keep an eye out for buy candidates and new leading sectors while the market attempts a new rally.


Posted on August 26, 2008 - by andrew

Apple forming a new base

() was a market leader for much of 2007 and fell into a correction along with the rest of the market this year. However, has been forming a new base over the last few months and is just -10% below its new buy point.

was a favorite of mine during 2007 as I was able to bag profits of 30-40% on two separate occasions (see trading journal). I liked how was a big cap growth stock that had a high number of shares traded daily. This made it easier to buy as it broke past its buy points on heavier volume. Small cap growth stocks that are more thinly traded tend to gap up which makes it harder to buy closer to the buy point. When this happens, you end up paying too much and run the risk of getting shaken out if the stock reverses later on.

has had strong fundamentals for the past few years because of its successful product lines (i.e. Mac, iPod, iPhone ). If a growth stock has a strong chart and a great growth story like ’s, I tend to be more confident and less likely to sell during minor corrections.

is currently the 2nd ranked stock in the Computer-Manufacturers group, which is ranked #21 in Investors Business Daily’s Industry Group Rankings. This group has shown good momentum in recent weeks as it was ranked #33 last week and #94 six weeks ago. When groups move up the rankings like this, its usually a bullish sign that shows in the market. I try to look for stocks from these groups during the beginning of a new market rally.

Here is a weekly chart of (courtesy of StockCharts.com):

Apple chart (08/26/2008)

peaked at $202.96 (Point 1) in late December and began to correct into a deep base. The base bottomed out around $115.44, which equates to a  -43% correction. In How To Make Money In Stocks, IBD’s founder William O’neil recommends avoiding stocks that correct more than -34%. However, growth stocks are an exception to the rule as it is common for some leaders to correct as much as 2.5 times the major market indexes. Given the fact that the corrected roughly -21% this year, ’s status as a market leader and its reasonable -43% decline is reasonable.

’s correction eventually shaped into a (Point 2) over the next five months.  It started to form a handle (Point 3) with a buy point of about $192.34, or 10 cents above the handle’s high.

After a few weeks of consolidating, the handle started to look more like another base (Point 4) within the larger consolidation that started in December. This new base has been forming for the last three months. The buy point for this new base would be the same as the old handle’s buy point, or $192.34.

’s current base has had a couple of weeks of distribution on heavier volume compared to zero weeks of gains on heavier volume. This is generally not a good sign as you would like to see gains on heavier volume as the base forms its right side. However, there’s still time for to make gains as it sits about 10% below its buy point. The market’s rally has also stalled a bit, which is reason to be cautious for now and wait for bullish action by the major indexes.

I think is still a good candidate for your buy lists. Investors should wait for two things to happen before buying shares in :

  1. The major indexes to show resilience and bullish action.
  2. A break out past the $192.34 buy point on heavier volume (i.e. +50% above its daily average volume).

**UPDATE**: Here’s a follow-up on Apple’s chart


Posted on August 25, 2008 - by andrew

Sold 70 OSI Pharmaceuticals (OSIP) @ $48.82

Sold all of my for the following reasons:

  1. Lost -8%. I have a -8% loss rule. I had to stick to it.