First-And-Ten!

July 13, 2000
Greg Kuhn

First Down!

All right! Another set of downs to work
with.

The Nasdaq Composite finally busted
out if its range — on volume to boot. Just what you want to see from a market
advance with potential staying power. Wednesday’s 3.6% surge came on slightly
higher volume than Tuesday. In fact, the past five up days (excluding last
Monday’s holiday-shortened session) have occurred on higher volume than the
previous day.

I’d say that’s a market advance under
some decent accumulation.

Moreover, all of the major indices
have advanced well over the past week, with the equally-balanced Value Line
Index breaking into new high ground Monday and following through into Wednesday.

Why is this important? The Value Line
Index is the only equally-weighted major index, meaning that a $20 stock rising
$2 has the same effect on the index as does a $100 rising $2, as does a
smaller-cap issue advancing the same amount as a big-cap issue within the index.
The Value Line’s rise to new highs indicates exceptional breadth at this point —
something the market has been without for two years now. So does the steady rise
in the NYSE daily advance/decline line over the past seven weeks.

And Wednesday’s healthy advance was
not without some new breakout attempts.

Each of these stocks carry an O’Neil
RS rank of 98 (the highest is 99) and EPS ranking in the high 90s. They’re
prior leaders attempting to flex some muscle once again. A bullish development.

Although some great-looking stocks
appeared to crumble for no good apparent reason, there have been slightly
more stocks that have worked out to this point than not.

That’s what we’ve been waiting to see.
Which way would the scale tip? Would those issues working on successful
breakouts hold up, or falter with the other failures?

Seeing some of your nice little
profits dwindle to nothing may have had you thinking, “The heck with it,
I’m going to make some adjustments to the rules and take some quick
profits.” That’s fine. But don’t go crying the blues when one of these nice
little profits turns out to be a big-winning stock and you’re not along for the
ride. Following the rules I laid out in the Trading Course I did with Kevin
Marder should be viewed as a religion. They’re there to help you position
yourself for the meaningful advances, not the day-to-day stuff.

Pick your time frame, have your rules
and stick to the game plan. That’s how the persistently stoic-looking, Hall of
Fame NFL coaches became Hall of Fame coaches.

If there’s one thing I always remember
my father telling me as a kid it’s this: Right about the time I was ready to
pack it in on whatever was frustrating me, he would ask, “Have you ever
heard of George Washington?” My reply, “Sure.” He’d follow up,
“He never quit.” He’d ask again, “Have you ever heard of Abraham
Lincoln?” My reply, “Yes dad, would you get to your point!” He’d
follow up, “He never quit.” Finally, “Have you ever heard
of Oliver Tweedlidee?” My reply, “Nooooo.” Good ‘ole dad, “He gave up!”

So it’s been tricky: baptism by fire
to those new to the methods I use in trading the intermediate term. Some stocks
broke out from sound basing patterns, looked great following through to higher
highs, only to collapse days later. I’m not sure what that was all about, but
this column is not about getting to the truth or being right. It’s about making
money.

By the way, cut out and save that
chart of Varian
(
VARI |
Quote |
Chart |
News |
PowerRating). You’ll never see a better textbook
cup-with-handle setup. Price-and-volume action, the precise tightness in price,
length, depth….the whole nine yards. Accelerating, year-over-year quarterly
earnings growth to boot. Right group too — O’Neil Electronic-Scientific
Instrumentation industry sub-group ranked No. 2 out of 197.

First-And-Ten!

BUY THE FEAR, SELL THE GREED

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