Monday’s Intermediate-Term Report
Holy Mackeral…no,
actually Holy Bull!! Since our report last week the Naz’ put in a 5 for 5
performance. Over five percent to fresh
multi-year highs in 5 sessions, on what can only be called a buying binge
reeking of institutional enthusiasm. While this helped out many of our leading
growth stocks earlier this week, and the closing numbers look better-than-ever!!
(actually only the last 30 months or so)–let’s hope the feverish condition have
not cast their spell on our readership–as we try to stay healthy, and always
one step ahead of the crowd, within the market’s ten month bull.
If you bothered to listen to listen
to the market before this past trading week, or yours truly for that
matter–reacting to the quality triggers while the getting was still good, it
should have been a bovine delight. Unfortunately, in my humblest of opinions, if
the bovine bug is just catching your attention–you might want to keep those
horns down for awhile, and concentrate on any existing positions–because the
market is sorely in need of a percentage pullback. The environment is now far
less-healthy within our ten month bull run (in one man’s opinion) as a whole lot
of fresh, anxious money was dumped into the market this week, after nearly three
to four weeks of pure upside action…and that my friends is not healthy for the
short-term prospects of our 10-month bull friend. That wonderful bovine feast
that we devoured during the last four to six weeks, is now tasting suspiciously
fishy.
Seasonality factors, shorts covering
their little grizzly tails, and of course–disciplined, consistent traders like
ourselves feasting on a healthy market environment, all contributed to the surge
in volume and price during the past week. But, hopefully we also know when to
take some off the table–while the ‘ducks are quacking’, and and not when the
‘lemmings are jumping’, in the so-called ‘profit-taking’ process. Seriously–I
like to keep as far removed from that crowd whenever possible. With the indices
now so far extended (price and time) from any sound, short-term base–it’s a
perfect time to ‘keep it real.’ Don’t let ’em tell you any differently. The
broader market as represented by the S&P cash has been high tailing it for over
three straight weeks, without a single pullback, on a closing basis, of even a
full percentage point—and that my friends, points to another kind of
high-probability environment–the ebbing cycle. Don’t let me ‘steer’ you wrong,
I just hope to steer you clear any possible trampling by those folks now trying
on the party horns for the first time in an awful long while–and then as they
attempt in mass to ‘hide the hide’…and so the cycle goes, as it always does.
Thank you Wall Street, and all of your comrades in arms, because that’s as good
as it gets.
Within the market’s confirmed rally,
and apparently a very popular one at that, we are anticipating that as the New
Year hangover starts to kick in–investors might just decide to remedy this
week’s fever by using some good old fashioned medicine–a helping or two of
profit-taking. We can all count for ourselves the percentage increases and the
number of days that we have run up most recently in this, the latest leg of the
bull market (truth be told, you might need a few extra digits to get through the
entire process). What we, or should I say, what I am looking for is a
constructive percentage pullback–which can hopefully, rid the market of some of
its most recent cheerleaders. What will it take??? Initial technical targets
that I’m keying on in the Naz’ fall somewhere between 3% to 5% from its recent
highs. A move of this ‘magnitude’ (god forbid), if done in a constructive manner
would put an ebb cycle low in, somewhere between 2006 and 2050. This zone
contains both the 38 and 50% Fibonacci retracements from the ‘post Saddam’ pivot
lows established on 12/16, the 20-Day EMA, as well as still being slightly above
the 2.5-month lateral breakout levels.
What other factors are contributing
to my stance of caution, besides the media and the newest investing sensations
that will change the way we live (nanotechnology and the Aitkens–both being ‘the
next big thing‘ (oh, the irony), which no doubt is very exciting, as well as
fun to look at intraday)??? It might have something to do with very real,
quantifiable ramifications–if we continue to push too aggressively. I’m
referring to the growth stock price action that began to invite itself into our
domain as an unwanted guest, somewhere around midweek. Our high-probability
growth stocks started acting a bit more erratic, and faltering around their
breakout pivots–hey can you blame ’em at this juncture? It’s been quite a run
for our style of trading, but with all of the fore mentioned elements in
place–and the fact that this latest leg up in the broader indices has left us
with a compressed list of quality candidates, our focus should be more
concentrated on preserving gains. We now have a situation, more or less, where
the breakouts that worked–will need some time to digest their gains. The ones
that have yet to breakout, although some are still looking good on a technical
basis–will be more prone to failure, based on what we started to see in the
last couple of days of market action. Remember, a healthy percentage pullback of
less than 10% in the broader averages would probably leave a whole lot of our
growth stocks looking like they were in need of ambulatory care. An actual 10%
correction comes in almost exactly at 1900, and is not something that this
‘cautious bull’ is concerned with at this time–but as O’Neil also states,
quality growth issues can pullback as much as 35% during a broader market
pullback. This is still defined as corrective and healthy in nature, but if you
decide to hold during this period–in this man’s humblest of opinions, that’s
‘your bag’, and not mine. So while some stocks might continue to
breakout–if the broader indices are unable to ‘give back’ to the investing
community–in the form of some healthy corrective action–those that might ‘make
the move’ will be played much less aggressively, or quite possibly, not at all
by yours truly–‘mr. cautious bull.’
It is our own personal risk
tolerance levels within the market waves that ultimately dictate how well we
fare during both the great investing climates, as well as those that will be
considered less-than-perfect ‘sailing conditions. While the markets are sailing
high, we also realize that between the peaks, troughs do exist, and it’s always
in our best interest to stay prepared for whatever comes our way. We have to
remember, that when the next round of classic triggers does emerge out of our
leading growth stock candidates–they will be doing just that…leading. While
the indices are ‘precariously’ testing levels of support, many of the
stocks we watch, will actually be breaking out to fresh highs, from solid weekly
basing patterns. All that we can do to take advantage of the high-probability
trade is continue to keep ready, and dare to prepare for the next quality
breakout within the market’s ongoing ‘confirmed rally.’
Swing Trade Setups: Potential
position plays that are expected to last 2 to 7 trading days, using key
technical levels for entry. These stocks do not necessarily meet all of our
stringent Intermediate Term requirements, but are demonstrating many of the same
strong criteria. Due diligence on the individual traders part is an absolute
requirement!!! Proper money management rules are emphasized in scaling out of
profitable positions, as is, the setting of prudent stop losses, on the
establishment of any positions taken. The list is not maintained on a weekly
basis as trades are considered, at time of entry, short term in nature.
Company Name |
Symbol | 12 Month RS |
Price | Pivot +.10 |
Technical Perspective |
Tetra Tech | ( TTEK | Quote | Chart | News | PowerRating) |
67 | 24.16 | 26.07 | 7-week high level base |
Ultratech | ( UTEK | Quote | Chart | News | PowerRating) |
86 | 31.91 | 33.20 | 2-Month Cup w/ handle trigger |
Emulex | ( ELX | Quote | Chart | News | PowerRating) |
29 | 28.13 | 30.04 | 4-Month lateral consolidation |
Cognex | ( CGNX | Quote | Chart | News | PowerRating) |
54 | 30.71 | 31.60 – 31.89 | 4-Month lateral consolidation |
IT Watch List Action:
As always, the search goes on for top stocks meeting our fundamental and
technical criteria, but issues may still show ‘flaws.’ The most common ‘flaw’
being ROE, according to strict IBD-style investing . Always do your own
homework before entering a trade .Stocks forming bases or handles are monitored, and put on
our watchlist, and then moved to our position list of recent breakouts, on price
triggers above resistance pivots.
Stocks Building A Base
Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
ADTRAN | ( ADTN | Quote | Chart | News | PowerRating) |
62 | 34.87 | 4-Month lateral consolidation | 1,591 | 37.83 |
Comtech Telecom | ( CMTL | Quote | Chart | News | PowerRating) |
93 | 33.17 | 2.5-Month lateral consolidation | 380 | 35.10 |
Celgene | ( CELG | Quote | Chart | News | PowerRating) |
71 | 46.61 | 4-Month Inverse Head & Shoulder | 1,431 | 48.98 |
Eresearch Tech | ( ERES | Quote | Chart | News | PowerRating) |
94 | 30.70 | 4-Month lateral base | 1,581 | 33.83 |
Stocks Forming A Handle
Company Name |
Symbol | 12 Month RS |
Price | Technical condition |
Average Volume in 000’s |
Pivot |
Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
80 | 28.75 | 3-Month consolidation w/ ‘handle’ entry | 971 | 30.16 |
Sina | ( SINA | Quote | Chart | News | PowerRating) |
94 | 40.65 | 11-Week cup w/ ‘handle’ entry | 7,074 | 42.04 |
Recent Breakouts From “Base & Handle”
Lists
We monitor the action of Recent Breakouts as an
indicator of the market health for IT traders. When breakouts are acting well,
this is a good sign for the likelihood of further sustainable breakouts. When
breakouts are failing, IT traders should be even more cautious. Due to
additional ‘fresh’ candidates making the grade–stocks on the breakout list will
be dropped after six months, regardless of price at that time.
Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day in 000’s |
Pivot | 52-Week High |
Nextel | ( NXTL | Quote | Chart | News | PowerRating) |
82 | 28.30 | 11,981 | 15.85 | 29.37 |
Gtech Holdings |
( GTK | Quote | Chart | News | PowerRating) |
66 | 51.78 | 470 | 37.05 or 40.80 |
51.78 |
Centex | ( CTX | Quote | Chart | News | PowerRating) |
71 | 101.70 | 1,356 | 59.80 & 79.52 |
113.08 |
Countrywide Financial | ( CFC | Quote | Chart | News | PowerRating) |
63 | 72.04 | 2,345 | 59.16 | 81.81 |
Whole Foods Market | ( WFMI | Quote | Chart | News | PowerRating) |
49 | 67.60 | 728 | 56.34 | 68.71 |
Marvel Enterprises | ( MVL | Quote | Chart | News | PowerRating) |
80 | 28.75 | 942 | 26.05 | 31.95 |
Sharper Image | ( SHRP | Quote | Chart | News | PowerRating) |
72 | 33 | 347 | 27.85 | 34.10 |
Garmin | ( GRMN | Quote | Chart | News | PowerRating) |
74 | 57.30 | 695 | 46.85 | 59.47 |
Zebra Technologies | ( ZBRA | Quote | Chart | News | PowerRating) |
65 | 66.40 | 450 | 56.18 | 67.87 |
St. Jude Medical | ( STJ | Quote | Chart | News | PowerRating) |
54 | 63.34 | 1,292 | 58.89 | 64 |
San Juan Basin | ( SJT | Quote | Chart | News | PowerRating) |
66 | 22.55 | 174 | 19.18 and 20.12 | 22.55 |
Aaipharma | ( AAII | Quote | Chart | News | PowerRating) |
86 | 26.35 | 577 | 20.15 | 27.05 |
Biolase Technology | ( BLTI | Quote | Chart | News | PowerRating) |
89 | 18.74 | 791 | 16.13 | 20.62 |
Petrokazakstan | ( PKZ | Quote | Chart | News | PowerRating) |
85 | 24.47 | 449 | 23.31 | 25.44 |
Cognizant Technology | ( CTSH | Quote | Chart | News | PowerRating) |
86 | 51 | 1,060 | 49.69 | 53.95 |
NII Holdings | ( NIHD | Quote | Chart | News | PowerRating) |
96 | 96.51 | 403 | 80.70 | 97.36 |
Magma Designs | ( LAVA | Quote | Chart | News | PowerRating) |
87 | 25.27 | 707 | 24.03 | 25.86 |
Chicago Bridge & Iron | ( CBI | Quote | Chart | News | PowerRating) |
67 | 29.61 | 185 | 28.60 | 30 |
Breakouts that may
require extra diligence. Those issues that are near pivot entries or 15%
or more, from established highs.
This list accounts for those issues that have performed strongly, but may
require position management due to deteriorating technical condition before
pivot price is reached. If an issue pull backs 36% or more from highs, the stock
will be removed from our lT lists, so we can make room for more compelling trade
candidates.
Company Name |
Symbol | 12 Month RS |
Price | Average Volume-50 Day |
Pivot | 52-Week High |
Knight Trading | ( NITE | Quote | Chart | News | PowerRating) |
90 | 15.41 | 1,634 | 15.35 | 15.81 |
Altiris | ( ATRS | Quote | Chart | News | PowerRating) |
87 | 35.39 | 310 | 36.15 | 38.40 |
Mobile Telesys | ( MBT | Quote | Chart | News | PowerRating) |
78 | 87.99 | 249 | 87.60 | 91 |
Quality Systems | ( QSII | Quote | Chart | News | PowerRating) |
82 | 50.47 | 64 | 49.85 | 51.41 |