On page B16, there is a quote from Dr. Eric W., of Maryland. I am pleased to acknowledge William O’Neil and his newspaper for contributing to my trading success over the past 25 years. It was only after I began to read IBD that I consistently made money trading.
Month: April 2009
Buying Rocket Stocks; My market indicators are very strong.
I just completed the best 2 week period in a year. I own a lot of the stocks listed to the right, which are having terrific runs. The GMI registered 5 for the first time since August, 2008, before the start of the major market decline. My Successful 10 day New High Index turned positive. There were finally enough stocks that hit a new high 10 days ago that have closed higher than they did 10 days ago.
Stocks on the 52 week new high lists that are also at or near all time highs is where I find potential rockets. Nicolas Darvas made a fortune trading such stocks. IBD100 stocks near all time highs include: GMCR, NFLX, MNRO, QSII, VLGEA, AZO, SNDA, NTES, ALGT. TNDM. TSYS, HGG and ORLY are also very strong, but are not yet on my IBD100 lists.
While most of the world looks for bargain stocks at new lows, I seek rockets heading to the moon. The greatest winning stocks are those heading up to ever higher levels. Think of how many times that YHOO or CSCO or MSFT hit all time new highs as they multiplied their prices many times during their great bull runs. If you want to hop a rocket to the moon, it better be pointing up and gaining altitude.
The dirty little secret about the up-tick rule: rigging the market
The uptick rule is designed to prevent short sellers from jumping nonstop on a declining stock and driving it to oblivion. It was implemented in 1938 in the aftermath of the the depression and the huge market declines. Every bear market needs a scapegoat and the public loves to blame the villainous short-sellers for everything that goes wrong.
Short sellers borrow stock from their broker and sell it at the current price, hoping to buy it back at a lower price and returning the borrowed shares to the broker. Anyone with a margin account signs an agreement to allow the broker to lend out the shares in the account. In truth, you never know your shares are gone because the short seller has to pay you any dividends that are paid while he has borrowed your shares.