Last weeks sharp sell off did not have any follow through to the downside and already we are making new highs again. All you can do at this stage is continue your investing (or holding if fully invested) and hold your breadth. Hopefully last weeks big down day or tightening of your sell stops have not caused you to close out of too many positions.
Now for some fun.
Here are a number of reasons NOT TO BUY stocks …..
1. We could enter a double dip recession.
2. This recovery is considered a no jobs recovery.
3. We have massive deficits.
4. Taxes are climbing and will kill growth.
5. The economy is improving on borrowed money which is artificial.
6. Still lots of people out of work.
Here are a number of reasons to BUY stocks …..
1. The recovery is strengthening.
2. Interest rates are low and may remain low.
3. From such a deep recession things can only improve.
4. GDP is positive and growing again.
5. Employment is improving even if slow.
6. Corporate profits are improving.
OK so if that doesn’t make your head spin then nothing will. There will ALWAYS be the optimists and there will ALWAYS be the “doom and gloomers”. Since there are thousands of variables to assessing the economy and since there will always be the optimists and pessimists then I say ignore it all for your own good health. As I have said many times just look at price and volume. If stocks are climbing on high volume then somebody with influence and buying power knows something. All we can do is follow their coat tails. If we see selling on heavy volume then stay away – it’s that simple. Listen to the news or both sides of the debate and you will forever be stock trading. You don’t want to trade you want to invest. News creates unnecessary volume for the stock market and commissions for the stock brokers. Follow your stock charts with price and volume not the noise.
By the way those “doom and gloomers” have just lost one year of good market gains. Yes one day they will be right and of course they will say “told you so”. I say take advantage of any stock market rises and be sure to have your money management and risk protection in place, as we have discussed in the past. I don’t know what the future holds and neither do the optimists or the “doom and gloomers”. Do not listen to the news, or the optimists or the “doom and gloomers”, bottom line is nobody knows!!
Here are a few companies that have recently broke out on high volume. They are NOT “hot stocks”, they are just stocks for your review. Add them to your watch list and study their reaction to the recent jump up on volume. If they fall back on high volume then remove them from your watch list. I consider watching price and volume as probably the only real technical analysis you need. As an investment strategy this will beat most. If the stocks stabilize in a quiet zone with very little selling then it’s time to buy using sell stops of 10% on just an initial small purchase of that company. Remember don’t buy if earnings are imminent (be careful we are in earnings season now, check your stocks).
MDRX - $21.61
OCR – $29.99
PRGO – $60.58
PRX - $27.86
Friday, April 23, 2010
Saturday, April 17, 2010
A Distribution Day
Friday the stock market sent us a reminder that it doesn’t just go up. The Dow lost 125 points just over 1% on heavy volume and the other major indexes lost similar amounts, this can definitely be called a distribution day as trading was heavy. The sell off was triggered by the news that the SEC is accusing Goldman Sachs of fraud which caused the stock to fall over 23 points or 12%. From a monetary point of view Goldman can afford this and it would not have too big an impact on results going forward however the bigger issue would be their tarnished reputation.
The stock market sold off quite broadly with the financial sector being the focus. Of course the stock market has been looking for an excuse to trade down since it has gone up so much and so fast, the stock quotes looked quite scary during the day. As the indexes climb that wall of worry stock holders become more and more nervous. We know a correction is due but we never know when as the indexes become stretched way above their moving averages. See the graph below of the Dow courtesy of http://www.bigcharts.com/.
What we don’t know and what nobody knows is whether we at the start of a big sell off or is this going to be just a small correction in a very good market. This may continue a few days or it may bounce straight back. The investor must watch the nature of the bounce back to determine if the uptrend will continue. If the Dow moves back up on very light volume and then takes another big tumble on heavy volume then it is time to step aside for a while not initiating any new company positions since the trend may be changing. However if we see no more distribution days and the market resumes its march up then we can continue taking new stock positions. Don’t let the “doom and gloomers” tell you this is the end and don’t let the optimists tell you it’s a buying opportunity, nobody can know.
For the time being do not buy a position in any new companies and manage the companies you own until the picture clears. If the stocks you own continue up then by all means continue to add to those positions. Look at your holdings and decide if it is time to tighten up on your stop losses. Tightening up on your stop losses will allow you to lock in some profits however be aware that if you tighten up too much then you run the risk of being stopped out of your position in what could easily be a minor correction. One strategy is to use two split stop losses on one company at different points to sell some at one point and more later. I would suggest you watch your positions closely and if they break the first level of support then sell a portion of the holding. If they break a second level of support on volume then sell even more. If your stock breaks a couple of levels of support on volume and falls below the 50 day moving average then sell out of that position completely. (I talk about support in my early blogs).
Remember at this stage watch your individual positions for possible sales. You do not need to take your cue from the major indexes to sell, you should treat each of your stock holdings individually. Trading is not what you wish to do the preference is to hold your positions but only if they behave well. On line traders had a field day today as they played this stock market in both directions, we do not do that.
No new companies are mentioned today until we get more visibility. By the way it has been suggested that the stocks I mention are stock tips, stock picks or hot stocks. This is definitely not the case since they are simply stocks that break out on volume. Using a well defined money management strategy you can make a lot of money even if half the stocks mentioned go down. In fact you only need a couple of good winners as you invest more and more into those few stocks and take very small losses on the ones that fall. When I mention a stock it is to go on your watch list for possible consideration and review by you. Personally I may never buy that stock myself.
The stock market sold off quite broadly with the financial sector being the focus. Of course the stock market has been looking for an excuse to trade down since it has gone up so much and so fast, the stock quotes looked quite scary during the day. As the indexes climb that wall of worry stock holders become more and more nervous. We know a correction is due but we never know when as the indexes become stretched way above their moving averages. See the graph below of the Dow courtesy of http://www.bigcharts.com/.
What we don’t know and what nobody knows is whether we at the start of a big sell off or is this going to be just a small correction in a very good market. This may continue a few days or it may bounce straight back. The investor must watch the nature of the bounce back to determine if the uptrend will continue. If the Dow moves back up on very light volume and then takes another big tumble on heavy volume then it is time to step aside for a while not initiating any new company positions since the trend may be changing. However if we see no more distribution days and the market resumes its march up then we can continue taking new stock positions. Don’t let the “doom and gloomers” tell you this is the end and don’t let the optimists tell you it’s a buying opportunity, nobody can know.
For the time being do not buy a position in any new companies and manage the companies you own until the picture clears. If the stocks you own continue up then by all means continue to add to those positions. Look at your holdings and decide if it is time to tighten up on your stop losses. Tightening up on your stop losses will allow you to lock in some profits however be aware that if you tighten up too much then you run the risk of being stopped out of your position in what could easily be a minor correction. One strategy is to use two split stop losses on one company at different points to sell some at one point and more later. I would suggest you watch your positions closely and if they break the first level of support then sell a portion of the holding. If they break a second level of support on volume then sell even more. If your stock breaks a couple of levels of support on volume and falls below the 50 day moving average then sell out of that position completely. (I talk about support in my early blogs).
Remember at this stage watch your individual positions for possible sales. You do not need to take your cue from the major indexes to sell, you should treat each of your stock holdings individually. Trading is not what you wish to do the preference is to hold your positions but only if they behave well. On line traders had a field day today as they played this stock market in both directions, we do not do that.
No new companies are mentioned today until we get more visibility. By the way it has been suggested that the stocks I mention are stock tips, stock picks or hot stocks. This is definitely not the case since they are simply stocks that break out on volume. Using a well defined money management strategy you can make a lot of money even if half the stocks mentioned go down. In fact you only need a couple of good winners as you invest more and more into those few stocks and take very small losses on the ones that fall. When I mention a stock it is to go on your watch list for possible consideration and review by you. Personally I may never buy that stock myself.
Friday, April 9, 2010
Fully Invested? – NTAP NKE PTI AMZN
The stock market continues to be strong and in a stock market such as this when the investor is buying positions in new companies every week there comes a time when the investor will say enough or even be fully invested. Basically using my analogy you may consider you have planted plenty of seeds in the garden and many of them are now growing quite nicely.
Let’s assume through your trading you consider yourself to have enough stock positions and many of the companies have grown quite nicely, the task is now to manage the companies you own. In fact you no longer need to watch the stock indices but just watch the companies you own very carefully. The task now is to trade your funds from the weaker companies into the stronger companies.
If you have companies that are moving up on a weekly basis there is nothing wrong with selling off or reducing the holding in your weakest companies that may not be moving much and using those funds to add to your stronger positions. Even in the stronger companies a time will come when they also stop rising and maybe even start falling. In this case it will be time to trade off parts of that position and move those funds into a new rising star.
Basically you will manage your collection of companies by always moving funds from the companies that are stagnant or falling and moving the funds into companies that are rising, trading this way is quite acceptable you simply trade part of one company for part of another. Using this methodology you will always be putting your money where it will work hardest. It would not be unusual to find yourself investing more money into one of your stronger stocks only to see you taking money back out of it later as it weakens. Who knows, if the company regains its growth you simply start putting funds back into it again.
I have just described a constant flow of money from your weaker holdings to your stronger holdings. This is a continuous process as companies come in and out of favor. Stock market timing is a fallacy you cannot know when to buy and sell. You cannot buy at the troughs and sell at the peaks. All you can do is follow the uptrend by adding and sell off as the trend turns down. Today with on line stock trading this is so easy and inexpensive to do.
Here are a few companies that have recently broke out on high volume. Add them to your watch list and study the reaction to the recent jump up. If they fall back on high volume then remove them from your watch list. I consider watching price and volume as probably the only real technical analysis you need. As an investment strategy this will beat most. If they stabilize in a quiet zone with very little selling then it’s time to buy using sell stops of 10% on just an initial small purchase of that company. Remember don’t buy if earnings are imminent.
NTAP - $34.84
NKE - $73.99
PTI - $25.02
AMZN - $140.96
Let’s assume through your trading you consider yourself to have enough stock positions and many of the companies have grown quite nicely, the task is now to manage the companies you own. In fact you no longer need to watch the stock indices but just watch the companies you own very carefully. The task now is to trade your funds from the weaker companies into the stronger companies.
If you have companies that are moving up on a weekly basis there is nothing wrong with selling off or reducing the holding in your weakest companies that may not be moving much and using those funds to add to your stronger positions. Even in the stronger companies a time will come when they also stop rising and maybe even start falling. In this case it will be time to trade off parts of that position and move those funds into a new rising star.
Basically you will manage your collection of companies by always moving funds from the companies that are stagnant or falling and moving the funds into companies that are rising, trading this way is quite acceptable you simply trade part of one company for part of another. Using this methodology you will always be putting your money where it will work hardest. It would not be unusual to find yourself investing more money into one of your stronger stocks only to see you taking money back out of it later as it weakens. Who knows, if the company regains its growth you simply start putting funds back into it again.
I have just described a constant flow of money from your weaker holdings to your stronger holdings. This is a continuous process as companies come in and out of favor. Stock market timing is a fallacy you cannot know when to buy and sell. You cannot buy at the troughs and sell at the peaks. All you can do is follow the uptrend by adding and sell off as the trend turns down. Today with on line stock trading this is so easy and inexpensive to do.
Here are a few companies that have recently broke out on high volume. Add them to your watch list and study the reaction to the recent jump up. If they fall back on high volume then remove them from your watch list. I consider watching price and volume as probably the only real technical analysis you need. As an investment strategy this will beat most. If they stabilize in a quiet zone with very little selling then it’s time to buy using sell stops of 10% on just an initial small purchase of that company. Remember don’t buy if earnings are imminent.
NTAP - $34.84
NKE - $73.99
PTI - $25.02
AMZN - $140.96
Saturday, April 3, 2010
Keep Adding – AIPC BGS CATM PCLN
A rising market is an opportunity to accumulate lots of companies at very low risk. As long as the companies you buy keep moving up (and provide a profit cushion) you can add more and more companies. As each company moves up and allows you to lock in that break even sell stop then you can keep buying other opportunities as well as adding to companies you already own. It is very important to diversify and buy lots of companies. We cannot know which will be the real winners so if you buy a number of companies on the way up you will surely hit one or two real winners.
The real winners will stand firm when the market pulls back allowing you to stay with those companies. When the market starts moving up again you are still in those stronger companies and can continue adding to them. Of course the hope is that your strong companies become long term investments, we can only hope. When doubt creeps in as these companies pull back a little be sure to start selling off portions to lock a profit. If they stabilize and move back up again you can resume buying.
Here are a few companies that have recently broke out on high volume. Add them to your watch list and study the reaction to the recent jump up. If they fall back on high volume then remove them from your watch list. If they stabilize in a quiet zone with very little selling then it’s time to buy using sell stops of 10% on just an initial small purchase of that company. Remember don’t buy if earnings are imminent.
AIPC - $39.09
BGS - $10.35
CATM - $12.53
PCLN - $257.00
The real winners will stand firm when the market pulls back allowing you to stay with those companies. When the market starts moving up again you are still in those stronger companies and can continue adding to them. Of course the hope is that your strong companies become long term investments, we can only hope. When doubt creeps in as these companies pull back a little be sure to start selling off portions to lock a profit. If they stabilize and move back up again you can resume buying.
Here are a few companies that have recently broke out on high volume. Add them to your watch list and study the reaction to the recent jump up. If they fall back on high volume then remove them from your watch list. If they stabilize in a quiet zone with very little selling then it’s time to buy using sell stops of 10% on just an initial small purchase of that company. Remember don’t buy if earnings are imminent.
AIPC - $39.09
BGS - $10.35
CATM - $12.53
PCLN - $257.00
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