Here’s Friday’s Names…
As we said in
the column two nights ago, stocks building bases are in abundance,
however those meeting our fundamental criteria are lacking. It is important that we continue
to stick with the intermediate-term discipline and because many stocks
do not meet our fundamental criteria, we must still remain patient.
Looking at the TradingMarkets’ new
high list (based on
yesterday’s market action), we only had 4 new highs with high RS and ER ratings
and on the new lows list we had 5, further confirming
that not many quality names are setting up, and that the markets still do not have any
clear leaders.
It is interesting to note that one
such potential leader Advance PCS
(
ADVP |
Quote |
Chart |
News |
PowerRating) (which was also mentioned in Gary
Kaltbaum’s column today) broke out of its base easily on
10/15/01 but failed to follow through. What is also interesting is ADVP had a 5 year
annual earnings growth rate of 47% with earnings for the quarter ending
6/30/2001 rising 155%. So why did it fail to follow through?
Well for one, although we have had
follow-through days the recent weeks, the markets still remain news/event
driven and are very volatile. Secondly, if we take a closer look at the
quarterly earnings for ADVP we can see that for the quarter ending December 2000,
we had negative earnings growth and the quarter ending March 2001 had earnings
growing at a meager 5%. These numbers alone may not have kept us away from the
stocks. However, also consider the high level of debt and the high institutional
holding, by combining the latter with the former this information would have
potentially kept us away from the stock.
What is also discerning to us is the
two distribution days made in the last week and a half (even though the first
distribution day occurred after a holiday). This also has us cautiously eyeing
the markets. So what should we do?
Rather than trying to fit a stock into
our criteria we will continue to watch those stocks that meet our fundamental
and technical criteria such as Krispy Kreme Doughnuts
(
KKD |
Quote |
Chart |
News |
PowerRating) which
continues consolidate on the right side of its base.
And Pharmaceutical Resources
(
PRX |
Quote |
Chart |
News |
PowerRating)
which continues to build its base.
Stocks Breaking
out on High Volume with a Relative Strength of 80 or Better:
| Company Name |
Symbol | Relative Strength |
Price | Average Volume |
Today’s Volume |
| NONE |
Stocks Building
A Base With A Minimum Relative Strength of 80.
| Company Name |
Symbol | Relative Strength |
Price | Average Volume |
Today’s Volume |
| Krispy Kreme Doughnuts |
( KKD | Quote | Chart | News | PowerRating) |
93 | 36.11 | 901,800 | 343,400 |
Stocks forming a
Handle
| Company Name |
Symbol | Relative Strength |
Price | Average Volume |
Today’s Volume |
| Pharmaceutical Resources |
( PRX | Quote | Chart | News | PowerRating) |
99 | 36.85 | 578,300 | 401,200 |
| Taro Pharmaceutical |
( TARO | Quote | Chart | News | PowerRating) |
98 | 38.27 | 712,100 | 1,071,300 |
Sectors leading the charge up in the
session were the Biotechnology Index
(
$BTK.X |
Quote |
Chart |
News |
PowerRating) which gained 1.9%.
The Interactive Week Internet Index
(
$IIX.X |
Quote |
Chart |
News |
PowerRating)
closed higher 1.7%.
And the Transportation Index
(
$TRX.X |
Quote |
Chart |
News |
PowerRating)
eked fractionally higher 0.4%.
Lagging in the session, the Airline
Index
(
$XAL.X |
Quote |
Chart |
News |
PowerRating) which slid 4.1%
The Gold and Silver Index
(
$XAU.X |
Quote |
Chart |
News |
PowerRating)
lost 3.7%.
And the Oil Services Index
(
$OSX.X |
Quote |
Chart |
News |
PowerRating)
fell 3.5% while the Oil Index
(
$XOI.X |
Quote |
Chart |
News |
PowerRating) closed off 3.3%.
Remember that all securities are
risky. In any trade, you should always reduce your risk by adjusting position
size and placing open protective stops where you will sell your long or
cover your short in case the market turns against you. For an introduction to
combining price stops with position sizing, see our lesson, Risky
Business.
Special thanks to
Raul Pallares of TradingMarkets for his input and expertise in creating this Nightly Report.