The stock market continues to hold up after some good recent gains. The best we should hope for here is that the stock market consolidates those gains before another push up. The Dow, NASDAQ and S&P are all holding above their 50 day moving averages.
The temptation at this stage is to buy more positions, however I hesitate here until we see the markets next move. My suggestion would be to stay with the new positions recently purchased and hopefully in the near future the stops can be raised such that less money is at risk or maybe even break even. The key point is always to protect the capital we have to invest and it would premature to take on more positions if capital is still at risk on existing positions. We are in earnings season where lots of companies are issuing their results, lets see how things develop since there will be big moves up and down in individual companies as these earnings are announced.
If we can get through this with the indexes still intact then the opportunity will come to start adding to existing positions as well as take on new positions. Be patient and lets see how thing play out at this critical juncture.
Saturday, July 31, 2010
Saturday, July 24, 2010
Market Held Lows – ALTR, CRUS, CRM
The stock market was very close to failing its recent breakout last week and I commented the next few days will tell all. Well since then the indexes have been building constructively and the low was not broken, trading has been looking more positive. The indexes are back above the 50 day moving average, see graph below courtesy of http://www.bigcharts.com/.
The market is constructive in the sense that the lows held and we are now making ‘higher lows’ or better said ‘higher troughs’. The only thing missing from the current situation is that we still have a lack of volume. We need to see a good sized up day on very heavy volume to show conviction.
Having said all this I think it reasonable to do some more buying. Those who bought two weeks ago risked 1% of their cash if they used a 10% sell stop on 10% of their available cash and as I mentioned last week have tightened up on that sell stop. These stocks haven’t gone high enough yet to start adding to those positions but since losses are now minimal if stopped out (or perhaps even zero) then we should consider trading and buy more stocks. Remember you have to follow this approach since capital preservation is always paramount. You are in a very good position when you consider how much money people have lost this last 2-3 months while you have been sitting with cash.
The following companies have all broke out on good volume and should be considered after you do your homework on potential purchases. Remember to use your sell stops and check that earnings are not imminent.
ALTR – $29.90
CRUS – $19.82
CRM – $99.77
Having said all this I think it reasonable to do some more buying. Those who bought two weeks ago risked 1% of their cash if they used a 10% sell stop on 10% of their available cash and as I mentioned last week have tightened up on that sell stop. These stocks haven’t gone high enough yet to start adding to those positions but since losses are now minimal if stopped out (or perhaps even zero) then we should consider trading and buy more stocks. Remember you have to follow this approach since capital preservation is always paramount. You are in a very good position when you consider how much money people have lost this last 2-3 months while you have been sitting with cash.
The following companies have all broke out on good volume and should be considered after you do your homework on potential purchases. Remember to use your sell stops and check that earnings are not imminent.
ALTR – $29.90
CRUS – $19.82
CRM – $99.77
Saturday, July 17, 2010
Market Suspect Again
We are in a very tough market climate with lots of volatility. Even though we have a follow through day the market is not behaving well. Look at the plot below of the Dow Jones over one year. Graph is courtesy of www.bigcharts.com
You can see the 50 day moving average (MA) moving up until recently with the index following nicely and staying above. Notice how the MA acts as support each time the index falls to the line before it moves up again. Now the MA is moving down as of May and it’s starting to act as resistance to any attempt for the index to move up. You can see how each time it meets the MA then fails which is typical of a down market. We are at that point again and unfortunately volume has picked up as it moves below the MA again. Early next week we will know if this is a failure.
In the meantime you have to stall the buying and tighten up on the stops you have in place. The stocks I last mentioned have done relatively well under the circumstances and you should now tighten up those stops. Remember if you spent 10% of your investable cash to probe the market and had 10% stops then you can potentially lose a maximum of 1%. Now if you tighten up your stops it will be even less. By the way one stock I mentioned MEND got taken over just after I mentioned it at a premium. I would suggest you take the profit on that one and sell.
You can see the 50 day moving average (MA) moving up until recently with the index following nicely and staying above. Notice how the MA acts as support each time the index falls to the line before it moves up again. Now the MA is moving down as of May and it’s starting to act as resistance to any attempt for the index to move up. You can see how each time it meets the MA then fails which is typical of a down market. We are at that point again and unfortunately volume has picked up as it moves below the MA again. Early next week we will know if this is a failure.
In the meantime you have to stall the buying and tighten up on the stops you have in place. The stocks I last mentioned have done relatively well under the circumstances and you should now tighten up those stops. Remember if you spent 10% of your investable cash to probe the market and had 10% stops then you can potentially lose a maximum of 1%. Now if you tighten up your stops it will be even less. By the way one stock I mentioned MEND got taken over just after I mentioned it at a premium. I would suggest you take the profit on that one and sell.
Saturday, July 10, 2010
Second Recent Follow Through Day AZO, PANL, MEND
Again we have a follow through day. Last Wednesday we saw increasing volume with a big jump in points on at least one of the indexes four days after a recent low was made. This wasn’t an outstanding follow day but meets the criteria so again we have to be in buy mode. Remember a follow through day leads to an uptrend about 75% of the time but can fail. The objective here is to statistically put odds in your favor.
Since nobody can guarantee a new uptrend has begun we must once again probe. I would suggest you take small positions in just one or two stocks that are breaking out to new highs on volume. If these stocks fall back you protect yourself with a 10% sell stop and wait for a stronger market. Remember if you take 10% of your investable cash and use a 10% sell stop then if you are sold out early you lose only 1% overall. If the stock starts moving up after purchase you would reduce that 10% sell stop to be even less. Once the probing investments become profitable you can take other new positions and start adding to existing positions.
Here are a few companies for you to consider and remember not to buy just before an earnings release in case of bad news.
AZO – $200.12
PANL – $19.80
MEND - $22.19
Since nobody can guarantee a new uptrend has begun we must once again probe. I would suggest you take small positions in just one or two stocks that are breaking out to new highs on volume. If these stocks fall back you protect yourself with a 10% sell stop and wait for a stronger market. Remember if you take 10% of your investable cash and use a 10% sell stop then if you are sold out early you lose only 1% overall. If the stock starts moving up after purchase you would reduce that 10% sell stop to be even less. Once the probing investments become profitable you can take other new positions and start adding to existing positions.
Here are a few companies for you to consider and remember not to buy just before an earnings release in case of bad news.
AZO – $200.12
PANL – $19.80
MEND - $22.19
Saturday, July 3, 2010
Many Stocks with Massive Drops
Since mid April I have only mentioned companies to buy once and that was on the recent follow through day that failed. It is not prudent to buy stocks when the stock market is in a down trend since 90% of all stocks will fall during this period. I see great companies with fantastic earnings start falling in a down market so do not try and swim against the tide, be patient and wait for the market to turn. You want the wind at your back and not at your face.
It is very hard not to buy a company that you think is a great investment, even in a down market. Do not be tempted to buy, it is much better to hold off and keep maintaining your list of companies that are fighting against the downtrend and holding close to their recent highs. These are the companies that will take off first when the market turns back up.
If you still have a temptation to buy a great company in a down market, then just look at what happened to these great companies in the down market we are in right now which is not yet over. Companies such as HAWK, FORM, COCO, CAGC, AKS, APC, CF, PCF, MON, NVDA and PWRD to name just a very small sample have all been decimated.
If the market turns back up do not buy any of these companies since they all fell big time. Like I said we want to buy the stronger companies that resisted the fall.
It is very hard not to buy a company that you think is a great investment, even in a down market. Do not be tempted to buy, it is much better to hold off and keep maintaining your list of companies that are fighting against the downtrend and holding close to their recent highs. These are the companies that will take off first when the market turns back up.
If you still have a temptation to buy a great company in a down market, then just look at what happened to these great companies in the down market we are in right now which is not yet over. Companies such as HAWK, FORM, COCO, CAGC, AKS, APC, CF, PCF, MON, NVDA and PWRD to name just a very small sample have all been decimated.
If the market turns back up do not buy any of these companies since they all fell big time. Like I said we want to buy the stronger companies that resisted the fall.
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