How the Nasdaq can gain 25% from here…

Timothy J. Truebenbach is the President of True Capital Management and
general partner of True Capital Partners LP, a hedge fund. He uses a
disciplined model that trades on the intermediate-term time frame. For a
free trial to Tim’s Nightly Stock Analysis Report

href=”https://tradingmarkets.comsubscriptions/details.cfm?item=5915&subcat=it”>click here or call 888-484-8220 ext. 1.

 

Upward reversals are what Bull rallies are made of.  Today’s action
was a perfect example of institutional support stepping in.  The NASDAQ
(
COMP |
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Chart |
News |
PowerRating)
is approaching 2,200 and its third attempt at this all-important level. 

Many of the strong stocks in the market joined the
reversal. For the past few days, I have been telling people that Apple
Computer
(
AAPL |
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PowerRating) is overbought. I advised folks to sell into the condition
only if they would like to take short-term profits and quite possibly
run the risk of being unable to get the shares back. 

 

 

In true Bull rallies, it can
be very difficult to judge overbought conditions because often times they stay
overbought.  For the past year and a half, the market has rallied on oversold
conditions and declined into overbought conditions.  I am not saying this is
necessarily over, so taking partial profits may still apply, but it is also
prudent to hold at least part of the position for the longer-term, larger
gain.  Due to technical and historical factors, I strongly believe the NASDAQ
can achieve a large gain in excess of 25% if it can get through 2,200.

 

Another name that reversed
along with institutional help, and also may be signaling some strength in
retail is Carter’s
(
CRI |
Quote |
Chart |
News |
PowerRating). 

 

There have been a number of
new names completing base patterns in recent weeks.  Some of these stocks are
well off all-time highs but provide turnaround plays.  Ameritrade
(
AMTD |
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News |
PowerRating)
hails from a strong group of financial brokerage stocks and is an example. 

 

 

The best things an investor
in a market that is getting better and better can do are focus in on a
strategy and follow the plan.  Once the strategy is in place, look for ideas,
buy them and stay focused. 

 

One thing I learned through
the 1990’s is not to chase after every single set-up that comes across the
ticker.  This will make you short-change yourself in the long run and hand
your broker more in commissions than are necessary! 

 

This can be further
illustrated through a friend of mine who is a commercial insurance
underwriter.  Our conversation began as I asked how the business worked.  She
receives a file which includes a number of factors that she looks at.  The
next step is to weigh those factors against the criteria her company has set
based on what their research has proven makes money.  After this step, it is
black and white as to whether or not the file emerges from underwriting with
an “Approved” stamped across it versus a “Denied”.  Since the firm she works
with is in a niche business, they have no problem allowing many files to flow
through to competitors that they deny or did not receive.  Good money is
always made confidently on the files that they underwrite and approve. 

 

Filtering stocks should be
the same way.  It is important to establish an investing plan (a strategy)
through which to filter stocks.  If you find a name that fits your profile
then take it on and buy the shares.  If it does not fit your criteria or you
have not screened it with your proven guidelines, then simply throw it out and
do not allow it to sucker you in.  Most investors agree with this, but then
can be enticed into a stock because all of their friends are talking about it
or as they are trading it flashes across their ‘New High’ list, or some other
form of enticement.  In a rising market, as we are currently in, it is
important to stick with your positions and not succumb to emotional trades. 

For now, the market remains
in a confirmed uptrend which seems to be building each day.  If you and I can
be armed with as much knowledge on how to maximize our profits going in we
should all do very well over the next few months with all things being equal. 
Enjoy your weekend!

 

Comments at
TrueCapitalmanagement.com

 

Tim Truebenbach