Some Bullish Signs
With a couple of nice moves
up in the markets people always seem to move to the bullish camp. This
is all fine and dandy,
but until we are confirmed by models which contain breadth and volume
indicators, don’t be to quick to jump. Yes, I have come across many
viable candidates which meet our fundamental criteria,
but
many stocks don’t meet our technical pattern criteria.
The markets had a some
bullish developments Wednesday.
First,
the Semiconductor Index ($SOX.X)
closed above its 200 day moving average,
which is very bullish technically because it could signal a possible
bottom is near. This is good news as it effects the global markets.
The dollar is strong—ideally
it will depress commodity prices, unfortunately there is quite a lead
time before such effects take place. Patience is warranted and we have
a lot of that.
I was speaking with Larry
Connors, CEO of Tradingmarkets.com on money management a couple of
days ago and I told him, what really hit me in his first book "Investment
Secrets of a Hedge Fund Manager" was the emphasis on
proper money management to be successful. I do as I preach in my
commentary–when
I trade I am adjusting my position size and always trade with an open
protective stop.
Not much to write about. I
only came up with a couple of viable candidates for possible swing
trades and turnaround plays.
The Apollo Group (APOL)
is in the midst of a 6 week high level trading range. The 5 year
growth rate is 34% and the company is showing some acceleration in its
earnings and revenues.
Province Healthcare (PRHC)
is edging higher on the right side of its seven-plus
month basing pattern. The bottom is a tad V shaped but continue to
monitor the technicals.
The Semiconductor HOLDRs
(SMH)
led the way in the green after some positive comments from Merrill
Lynch on the sector. SMH closed up 5.5%. Price closed above the 50 day
moving average which is very positive technically for the fund.
Also gaining in the session
was the Internet Infrastructure HOLDRs
(IIH)
as it gained 3.8%
The Internet Architecture HOLDRs
(IAH)
moved up 3.6%. Looking at the fund, a strong close on high volume
above the 50 day moving average would be very bullish.
ETFs lagging in the session
were the Oil Services HOLDRs
(OIH)
which fell 2.8%.
The Ishares DJ US Energy
Sector Index Fund (IYE)
slid 1.2%.
Also losing ground was the
Ishares DJ US Consumer Sector Index Fund (IYK)
which closed lower 0.7%.
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 Loren’s lesson, Risky
Business.
Greg