Watch Early Leaders
The indices continue to act well. Weak opens lead to strong closes.
Pullbacks have been occurring in lighter volume, while heavier buying has fueled
rallies.
After doing a thorough search for potential leadership over the weekend, I
have to admit that the pickings are slim. There still do not appear to be an
overwhelming number of stocks that I am excited to go out and buy. Some of the
most common flaws I have been finding in companies have actually been on the
fundamental side. Stocks such as Ansoft
(
ANST |
Quote |
Chart |
News |
PowerRating) have formed nice-looking charts,
but are missing a quarter of growing earnings, or ROE is less than the number I
would like to see — of 17% or higher.
Another example of a stock with a couple of flaws would be
Landry’s
Restaurants
(
LNY |
Quote |
Chart |
News |
PowerRating). This group has been showing strength, but again, this company
has not been producing returns on the capital given to it by its shareholders by
a wide-enough margin, as it only stands at 5% for the ROE. Additionally, you will
notice the V-shaped base it has produced below…another negative as these have
been failing lately, (just take a look at
(
TARO |
Quote |
Chart |
News |
PowerRating)).
Idec Pharmaceuticals
(
IDPH |
Quote |
Chart |
News |
PowerRating) continues up the right side of its base.
Yesterday’s 4% climb helped, but it would be nice to see volume spike up above
average as the buying occurs.
All in all, the market acts well, but leadership worth trading has not yet
emerged in full.Â
Only two stocks I have mentioned
in this column that have fit
all the necessary criteria and have managed steady gains: Pec
Solutions
(
PECS |
Quote |
Chart |
News |
PowerRating) and Krispy Kreme
Doughnuts
(
KKD |
Quote |
Chart |
News |
PowerRating). Keep an
eye on these early leaders to see if they can continue to act well, especially
in the face of a market pullback of any kind.
In the meanwhile, enjoy the Thanksgiving
holiday and don’t eat too much!