Why NOW Is The Time To Do Your Homework
We’re at war in
and this whole SARS thing seems to be bouncing around the globe and
offering more fear; yet the stock market is standing on very firm footing. Yesterday’s massive rally on heavier volume was just what the doctor
ordered. We spent about five days
pulling back and saw the market recoup those losses in just one day of
trading!
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With the market firing on all cylinders, it is primetime
to seek out solid growth candidates that are setting up to break out. Pacific Sunwear
(
PSUN |
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PowerRating) is one of the most recent names to blast through
resistance at 21.22.Â
 
Stericycle
(
SRCL |
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PowerRating) has been attempting a slow breakout
through 40. The company has
experienced solid earnings growth and comes from a less popular, but
successful group: Pollution Control.
 
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In searching for setups, it’s not a bad idea to
consider companies that are just starting to turn a profit and have
consolidated their chart patterns. Yahoo!
broke out of a similar situation in 1998 and Ask Jeeves
(
ASKJ |
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PowerRating) appears to be
doing that right now. ASKJ just
posted its first profitable quarter.
 
Curative Health Service
(
CURE |
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News |
PowerRating) has been pushing towards
its pivot point of 19.81 on heavy volume. Some would even say that judging by the stock’s volume, it has
already broken out. The company
boasts triple digit sales and earnings growth.
The only problem I found with it is the lack of group strength for
Wholesale Drug Supplies.Thinly
traded Chronimed
(
CHMD |
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PowerRating) comes from the same group, but there is not much
quality here other than these two names.
 
Stocks breaking out and succeeding are the ultimate
confirmation of a successful market. To
me, success is indicated by 20% gains following a breakout.
Hi Tech
(
HITK |
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PowerRating) is a recent example as the stock stands over 30% above
its pivot of 19.38 in only seven days.
Now is the time to do your homework. The market is good until contrary evidence appears. We have been rallying on heavy trade and pulling back on lighter volume
while we’re at war. Mass
opinion remains skeptical, and that is what Bull Markets emerge from. Stocks like HITK and
J2 Global
(
JCOM |
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Chart |
News |
PowerRating) that power higher without you,
should be encouraging. I know
that in good markets, these names will pause, form new bases and break out
again. They will offer new buying
opportunities along the way. The
final comment I will leave you with is that this is also a time to force the
market to continually prove itself to us. As we buy sound companies emerging from solid bases, be ready to cut
losses if the stock declines. Preserving
capital early on when we’re wrong is something not to forget.Â
Have a great weekend, and keep our troops and the Iraqi
civilians in your prayers as the “Battle of Baghdad†approaches.
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