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The Bear Blinked, TZOO and Rockets–WW-GMI: +2

@ 9:20 pm

Things held today and the GMI rose to +2 (click on chart to enlarge).  Index51105 The Daily SPY index turned positive again.  There were only 35 stocks that hit a new high 10 days ago and closed higher today than they closed 10 days ago when they hit their new highs.  However, these 35 successful new highs represent 71% of the 49 stocks that hit new highs 10 days ago.  The fact that 71% of the new highs increased in value suggests strength in new highs.  The median increase of these 35 successful new highs over the past 10 days was +3.18% (meaning 1/2 of the 35 stocks increased more than 3.18%) and the increases ranged from +.14% to +22.19%.  The biggest gainer was our old friend, NSI (see post on 5/09/05), which hit a new high again today. Other successful 10 day new high large gainers are:  TZIX, GLW, ENWV, ITRI, LIFC, all of which gained at least 10% in the past 10 days.

The moral of the story is if we bought a stock breaking to new highs 10 days ago, we had a 71% chance of making a profit through today. With careful attention to these companies’ profiles and chart patterns, maybe we could even have selected one of the stocks that climbed double digits! (in 10 days)

A lot of the growth stocks I have been following acted well today.  GOOG, IVGN, NSI and CRYP all hit new highs today (I own some of these).  And even some of the boring large cap stocks like UPS, FNM, UTX, INTC, PG, AXP, C, PFE and QCOM seem to be turning. Interest511 This may be why the SPY has been relatively strong.  And the short term interest rate index we have been following has stopped rising. The Fed may be hibernating, and this upturn could be for real.

I have been telling you that when a change in trend occurs the indicators will often go back and forth until the turn has stabilized.  So, the GMI could turn down again.  In this type of market it is a good idea to stay mainly in cash and just nibble at a few stocks or the ETF’s that track market indexes (SPY,QQQQ,DIA).  Then, if the market declines, we can get out with minimal losses. If the rise is real we will have time to jump on board.

One of my stocks declined today and then bounced back with the market.  I was stopped out during the decline (my stop loss price was triggered and I was automatically sold out).  When the market and the stock came back, I bought my stock back at the end of the day and put a new stop loss order in below today’s low price.  Remember yesterday I said that the hobo must jump back on the train if it resumes in the direction he wanted to travel?  So, without emotion, I merely jumped back on the stock.  If I am wrong I will be stopped out again.  I have profited many times by buying back a stock that I have been scared out of.  The temporary decline often sets up a new rise. If you cannot accept a lot of small losses, you should not play this game.

Last night I talked to you about the rocket, TASR, which I successfully traded when it was rising to new highs.  Another rocket of the past year is TZOO. Tzoo I hope no one is buying this "bargain." From April through November 2004, TZOO climbed from $8 to $105.  That is a 13x increase in about 7 months.  I counted 14 weeks in which the stock made a new high during this period. The first time TZOO doubled took 3 weeks.  It took 13 weeks to double again, and then 10 weeks to double again.  Now maybe you  can see why I say that to find a stock that will double in a short time, find one that has already doubled in a short time. (see strategy post, 4/30/05)

So many people want to buy rockets but are afraid to buy a stock that is doubling and hitting new highs.  But that is how you find rockets!  Want to know some stocks that have doubled in the past 15 weeks?  Using the TC2005 program, I scanned my entire universe of almost 4,000 stocks in about 10 seconds and found the following 6 stocks:  ABLE, NSI, BOOM, DSTI, GEOI and FORD.  All of these stocks at least doubled in the past 15 weeks and are near their all-time highs.

These are not recommendations for purchase.  They are recommendations for further research and monitoring.  Do your own homework and if you buy stocks like these you should make small pilot buys and protect yourself with immediate sell stops. Remember, this market is not out of the woods yet and the bear is still stalking it. It is much more profitable to purchase rockets when the market trend is on our side. Let’s be patient.

Send me your feedback at silentknight@wishingwealthblog.com.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

Taser, Google and The Bear–WW-GMI: +1

@ 7:09 pm

The WW-GMI took a hit today.  I noted that when a trend change occurs it can often fail to hold. Index0510 So what happened today?  First there were only 90 new highs and 71 new lows in our universe of 4,000 stocks.  Second, the Daily SPY index fell into limbo–it is too close to call.  The Daily QQQQ index is very close to limbo. If it closes down tomorrow it will no longer be positive and we will be back to a GMI of zero.  The IBD mutual fund index is greater than its 200 day average and was approaching its 50 day average, but probably fell  back today.  So where are we?

The weekly QQQQ index is still not positive and remains in a downtrend. I had thought the short term trend was turning up.  But I think that upturn is over or very close to it.  This is a time to be on vacation from the market and in cash.   Otherwise, we risk being whipsawed by the cross-currents of this meandering market.  I thought we were experiencing a short term rally–short term because it was showing up in the daily indexes but not the weekly index.  When the weekly index turns positive we will be in a longer term uptrend. 

A few stocks I own or have been watching held up today:  CRYP, GOOG, IVGN.  Others declined:  SWN, TOL,  SHLD, ORCT, NSI. I have close sell stops on all of my holdings.————————————————-

A reader told me he was interested in TASR.  Tasr I looked at the chart and asked him why he would be interested in a rocket that had peaked and was falling to the earth.  I asked him why didn’t he buy it from April 03 to April 04 when it was a rocket. Notice that for a year this stock repeatedly hit an all time high week after week.  Are you afraid to buy a pattern like this– when the stock went from a split adjusted 0.31 to $32?  If I were you I’d cut out this chart and compare it to every stock you consider buying.  Why not buy a rocket–isn’t that the dream of everyone who enters the great casino?  Did you know that the pros distribute stock to the public on the way down?  Note the huge red spike in volume at the top when someone unloaded a lot of shares. (A red line means that that bar/period, the stock closed less than the prior bar/period.) The little person always is shopping for a bargain.  So a stock trading at $10 must be a bargain  if it is down from $32. Right? I don’t want bargains.  I want to buy stocks that are at their all-time high and which the media say are too expensive.  They ridiculed AOL all the way up in the bubble days.

Do any stocks currently come to mind as a potential overpriced rocket?  I’ll give you a four letter hint–GOOG. Goog See any similarities with the TASR chart?  You know, when a company makes a product that is so universally used that it becomes a verb (Xerox, Fed-X) the stock does pretty well, at least in its early years.  I don’t know how many times each day that I hear someone say they are going to Google something.  I don’t know if it is the right time to buy GOOG, but I do own some.  I bet someday we will all say that we wish we bought some GOOG in the good old days when it only cost  $200 per share–or $X pre-split. However, if we do enter a bear market, rest assured it will eventually get to GOOG.  The bear demolishes everything before it is through.

On that note, let me wish you an "unbearable" day tomorrow.  Maybe the market will surprise me and begin a rise.

Send me your feedback at silentknight@wishingwealthblog.com.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.

Market Bulding Strength–WW-GMI: +3

@ 8:34 pm

The market continued to strengthen today and the Daily QQQQ index turned positive.  Please note that this indicator can go back and forth before the trend is solidified.  I am very pleased by the market’s action.  Many of the growth stocks I follow broke out today.  I have sold all of my puts and  have taken some long positions.  Index509 There were 115 new highs today and only 49 new lows.  The Daily SPY index continues to be positive.  There are 31 stocks that hit a new high 10 days ago and closed higher today than 10 days ago.  This is the highest the successful new high index has been since April 12.  The GMI is now +3 and tells me that I have a rally that I can trade.  It remains to be seen whether this uptrend will last months or just weeks, or days. 

The bottom line is that the odds have shifted towards owning stocks.  And many of the stocks I am watching have moved up.  Among the stocks I like are: IVGN, SHLD, MHS, CVD, MW, SWN, HANS, TOL, ORCT.  These are not recommendations, although I do own some of them.  These stocks are all trading near their highs and such stocks can reverse direction quickly.  I always place a sell stop order immediately after my purchase goes through.  That way I can sleep nights.  I also make small initial buys and wait to see if the stock moves up as I expected.  I never average down (buy more as the stock falls) and I do not average up too quickly. I am not looking for a stocks that will climb for a day or two.  I am hoping to ride a stock up for weeks or months.  I am buying stocks that are behaving well and that seem to be earning money.

Another tactic that I use is to buy an ETF (exchange traded fund) that reflects a market index.  There are many benefits of ETF’s, compared to mutual funds.  Perhaps the biggest is that ETF’s can be traded like stocks in the middle of the day.  A mutual fund can only be bought or sold at the end of the day after the market is closed and the fund’s assets are tallied.  Thus, with an ETF, you can get in or out quickly if the market should become volatile or violent.  The fees of an ETF are cheap and if you use a deep discount broker the transaction costs are small.

So, if I think the S&P 500 is turning, I can buy the SPY which reflects this index.  The nice thing about buying the SPY is if the S&P 500 goes up SPY will go up. How many times have you seen the market go up and your stock doesn’t move or falls!  At least I know that will not happen with the SPY. 

One big mistake to avoid is to buy for technical reasons and then when the stock fails to rise or declines, to hang onto it for fundamental reasons– because good earnings are expected to come out or there is a really great product or the market is strong.  If I buy because of good price action I must sell because of bad price action–no excuses or rationalizations.  I have violated this rule many times, and paid the penalty.

Sometimes my biggest winners have been stocks that keep coming to my attention over and over.  One such stock is NSI (click on chart to enlarge), a diet and fitness firm.  Nsi NSI has gone from a low of $1.09 last August to a close today of $11.20.  The monthly volume is at an all time high since it came public in 2001.  Its revenue is increasing at a fast rate and there sure are a lot of obese baby-boomers who are looking for the fountain of thinness.  I don’t like to buy cheap stocks like this but I sure am going to watch it.  There is a planned stock offering and this could be affecting the stock’s price. (I remember reading that it is legal for underwriters to stabilize a stock during an offering–sounds like manipulation to me.)———————————————————————

Every morning I want to know if the stock futures are indicating a strong or weak market opening.  I found a web site called, morning call, that tells me if the futures are trading above or below fair value.  Above fair value indicates buying pressure that could lead to an up open, below fair value, to a down open.  Hope you enjoy this site as much as I do.

Send me your feedback at silentknight@wishingwealthblog.com.

Please remember that the stock market is a risky place, especially now.  I am not providing recommendations for you to follow.  My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs.  While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog.  Please consult with your financial adviser and a mental health practitioner before you enter the stock market,  and please do not take unaffordable risks in the current market environment.  See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.