Classic Bull Traits Appearing
We can’t
ask for much more out of the major indices. Yesterday’s pullback
came on lighter trade, just as we wanted it. As I write this column today, the
averages are all positive on heavier trade than yesterday. Additionally, the
market opened weak and finished strong…a classic bull-market trait.
The only thing missing right now are
solid breakouts that are pushing higher. Sure, a few stocks have broken out, but
many of them have been void of one or more of the things I would like to see in
a buy candidate. ROE seems to be the most common missing factor.
Amsurg
(
AMSG |
Quote |
Chart |
News |
PowerRating) was one of the first names to break through its pivot of 30.45. This
is a fairly solid company, but ROE comes in at 11%, short of the minimum
criteria of 17%.
Weight
Watchers Int’l
(
WTW |
Quote |
Chart |
News |
PowerRating) went public in November of 2001 and has
acted well, even through the recent market declines. Yesterday, the stock broke
through resistance at 44.50 and then released great earnings. ROE on this one is
non-existent and the breakout is showing signs of fatigue as the stock is down on
the day right now, with volume coming in very heavy.
Sierra Health
(
SIE |
Quote |
Chart |
News |
PowerRating) formed a cup with high-handle that began on June 28 and tried to break
out through the pivot of 23.85 yesterday. The stock reversed intraday to close
negative on heavy volume. This paints a grim technical picture moving forward,
but the fundamentals all fell into place as this company has experienced four great
quarters of EPS growth: 23%, 36%, 92% & 162% ,with an ROE of 19%.
Nonetheless, for whatever reason, the market was not ready to support this stock
moving higher.
Charles River
(
CRL |
Quote |
Chart |
News |
PowerRating) made a feeble attempt to push through its pivot of 38.20, but lacked
the volume to back the move up. Additionally, the handle it has formed is
wedging higher and has not allowed a shakeout of weaker holders.
Doral
Financial
(
DORL |
Quote |
Chart |
News |
PowerRating) has successfully pushed through its pivot point
of 40.24 and has the proper fundamentals to back the move. This name is one to
watch as to the current state of breakouts.
Whether or not the current rally is
for real remains to be seen. If it is, the next step will be to watch for growth
stocks with excellent fundamentals moving through resistance and pushing higher.
In the meanwhile, if you are taking stakes in some of the recent moves, be sure
to utilize a disciplined stop for trades that go against you. This is important
in keeping capital intact. Some of the bull markets I have participated in have
started off a little shaky, only to come on strong following a few tough trades.
It’s crucial to not get hurt with an opinion and a big loss in the beginning.
I will be watching the leading groups
that are setting up for further opportunities. Today, the Retail-Apparel/Shoe
group is acting well, with the strong retail sales report. Mothers
Work
(
MWRK |
Quote |
Chart |
News |
PowerRating) is one of the leaders in this group and is working
through its base.
Several stocks from the
Commercial Services sector are setting up. It is always positive to see a group
effort. Apollo Group
(
APOL |
Quote |
Chart |
News |
PowerRating) is a name
that has solid fundamentals and paints a strong technical picture.
Cosmetics and Personal Care have
produced a few stocks that have come across my radar. One of the names that held
fairly firm during the market decline was Chattem
(
CHTT |
Quote |
Chart |
News |
PowerRating). The stock is close to breaking through its pivot of 36.78, but has
yet to do so as I write this. Technically speaking, the stock is a cup with a
tiny handle or no handle.
For now, it will be important to
observe and keep stops in mind if you decide to take action. It should be very
interesting to see what unfolds over the next several days.
Until Thursday,