Date: August 3, 2008
Charts provided by Bigcharts.com
Fundamental Data provided by Investors Business Daily
F.I.T. STOCKS
Finding High Quality Growth Stocks to Build Healthy Investment Habits.
Market Update
MARKET HEALTH:
MARKET CONFIRMS RALLY!
With one day left on the clock all 3 of the major indexes confirm the new rally with a follow through day. On Tuesday, July 29, DAY 11 of the new rally attempt all 3 of the major indexes confirmed a follow through day by blasting 2% higher than the previous day on strong volume. William O'Neil, of Investor Business Daily fame, studied stock market data for over 50 years and came up with significant rules for spotting new market rallies. His data on finding market bottoms, and new rally confirmations, is 70% accurate. He states that not all new rally confirmations lead to new bull markets, but no new bull market has ever started without a new rally confirmation follow through day.
What this means is that once a new rally has confirmed with a follow through day, there still is a 30% chance that it will fail. However, it is a signal for us to ease back into the markets by purchasing one or two high quality F.I.T. Stocks. Go light on entering your positions at first. To see how your stock reacts to the market conditions. Follow your sell rules implicitly, as this takes all emotion out of the equation and will get you out fast and with little damage to your account if the new rally does fail. If the new market rally begins to gain strength, one could add to their current position or select another high quality F.I.T. Stock to establish a position in, and once again immediately know where you will sell if things go wrong. Also, keep an active watch list and monitor what industries are leading this new rally run. This is what healthy investors do.
So what may be causing this new rally confirmation? First we must always remember that the markets think 6 months to a year ahead. Maybe the Big Institutions are feeling that the worst of times are over. We may never really know and this is why it is so important to monitor the action of the market and your stocks for a few minutes every night.
For a couple of months now we have discussed the inverse relationship Crude Oil has had on the Markets. When oil goes up the markets go down and vice versa. Well for the past 2 weeks we have seen a slide in Oil prices. During those two weeks the markets started to perform their new rally attempt. This past week Oil actually started to bounce again with renewed fears being stirred up in Iran. This will be an issue we have to watch closely and see how the markets react to the headlines coming out.
Our other big piece to the market puzzle was whether the financial industry could firm itself up with help from the government. Issues are currently trying to be worked out, and earnings have not been as bad as expected. It appears as though the Big Money Investors are starting to like what they see in the financial industry as last week a few of the big bank stocks had a nice run. Bank of America and Wachovia come to mind. Also, if you look at the Electronic Traded Fund XLF which is the Financial Select Sector SPDR, volume has really picked up on the buy side in the last 3 weeks.
Notice we are just reaching the top channel to a down trend which has acted as resistance. Let's see if XLF can breach this resistance on strong volume.
The key in the weeks ahead for this new rally to continue and gain strength will still be in the above headlines. Will there be a peaceful resolution in Iran? Will we continue to see a dwindling demand for oil? Is the Financial sector beginning to show signs of recovery? And what is the state of our economy? Last week it appears the Big Money was ready to believe that things may be turning around and boosted the markets with a follow through confirmation. Now we must continue to watch with a careful eye to see if the Big Institutions are really ready to start buying up equities once again. We will of course see this through price and volume movement. Hopefully it will be to the upside.
Let's look at the Charts!
NASDAQ
6 Month chart with daily price bars:
Here we can see the events that took place in the new rally confirmation. #1 shows the first day of the rally attempt. Prices closed higher than the previous days close. We begin our count from this day and look for a follow through confirmation between days 4-12. Prices on the follow through day must move 1.75% higher than the previous day's movement and on solid volume. #2 shows the follow through confirmation day. This occurred on day 11 and prices changed 2% on solid volume from the previous day's market action. Follow through confirmed.
THE DOW:
The DOW recently broke above a short term down trend that lasted 2 months. Prices than came back down and bounced off this resistance line which now is considered support. Now we must see if the DOW can break above its horizontal resistance at 11,700 and through the 50 day moving average.
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Top 10 Industries:
- Energy Other
- Mach. Gen Industry
- Medical Genetics NEW
- Oil and Gas Machinery/Equip.
- Oil and Gas US Explor
- Medical Biomed/bth NEW
- Leisure Tys/Gms/Hbby NEW
- Chemicals Fertilizers
- Oil Gas Field Services
- Electric Military Systems
Notice we have 3 NEW industries in our top 10. 2 medical groups have appeared and 1 from leisure. It appears as though new industry leaders are starting to formulate which is healthy for a new market rally.
Important Message:
Please remember as you build your portfolio, you are trying to find the best player for each position. Another words find the best stock in a leading industry. DO NOT buy two leading stocks in one industry. We are trying to build the dream team. One stock, one industry, then fill another position depending on your portfolio size and money management guidelines. When we list our F.I.T. Stocks selections, please make sure as you enter in your trades that you have not already filled that position or industry.
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F.I.T. Stock Break Outs
| Symbol |
Newsletter |
Breakout |
Base |
Buy |
Current |
% |
Exit |
Exit |
Profit/ |
| |
Date |
Date |
Pattern |
Point |
Price |
Change |
Date |
Price |
Loss |
| |
|
|
|
|
|
|
|
|
|
| MA |
3/23/2008 |
4/1/2008 |
C/H |
222.43 |
292.46 |
31% |
5/23/2008 |
$273.22 |
70.03 |
| RRC |
3/30/2008 |
4/2/2008 |
FB |
65.73 |
72.3 |
10% |
5/22/2008 |
$72.30 |
6.57 |
| RIG |
3/23/2008 |
4/4/2008 |
C/H |
145.13 |
159.64 |
10% |
5/21/2008 |
$159.64 |
14.51 |
| SID |
4/6/2008 |
4/8/2008 |
FB |
40.23 |
51.9 |
29% |
5/19/2008 |
$51.90 |
11.67 |
| MON |
4/6/2008 |
4/16/2008 |
DB |
123.93 |
114.89 |
-7% |
5/1/2008 |
$114.89 |
-9.04 |
| BCPC |
3/23/2008 |
4/16/2008 |
U |
24.33 |
22.66 |
-7% |
5/1/2008 |
$22.66 |
-1.67 |
| VMI |
4/13/2008 |
4/16/2008 |
U |
99.23 |
117 |
18% |
5/19/2008 |
$117.00 |
17.77 |
| GMXR |
4/6/2008 |
4/17/2008 |
U |
40.23 |
37.42 |
-7% |
4/29/2008 |
$37.42 |
-2.81 |
| DRS |
4/6/2008 |
4/16/2008 |
C/H |
59.43 |
78.56 |
32% |
5/8/2008 |
$73.84 |
19.13 |
| ARD |
4/20/2008 |
4/21/2008 |
U |
44.83 |
53.79 |
20% |
5/21/2008 |
$53.79 |
8.96 |
| FAST |
4/27/2008 |
5/2/2008 |
C/H |
51.43 |
47.83 |
-7% |
5/21/2008 |
$47.83 |
-3.6 |
| CPO |
5/4/2008 |
5/6/2008 |
C/H |
47.33 |
46.07 |
-3% |
5/23/2008 |
$46.07 |
-1.26 |
| SNHY |
5/4/2008 |
5/6/2008 |
C/H |
32.33 |
39.1 |
21% |
5/22/2008 |
$39.10 |
6.77 |
| SBS |
5/4/2008 |
5/5/2008 |
U |
54.63 |
50.81 |
-7% |
6/3/2008 |
$50.81 |
-3.82 |
| WGOV |
5/11/2008 |
5/15/2008 |
C/H |
37.19 |
46.64 |
25% |
|
|
9.45 |
| ABB |
5/4/2008 |
5/14/2008 |
U |
32.43 |
30 |
-7% |
6/11/2008 |
$30.00 |
-2.43 |
| GNA |
4/20/2008 |
5/5/2008 |
C/H |
16.58 |
19.3 |
16% |
6/30/2008 |
$19.30 |
2.72 |
| FLIR |
5/11/2008 |
5/19/2008 |
C/H |
35.73 |
42.9 |
20% |
7/1/2008 |
$42.90 |
7.17 |
| MUR |
5/18/2008 |
5/19/2008 |
U |
93.64 |
87.09 |
-7% |
7/9/2008 |
$87.09 |
-6.55 |
| TITN |
5/18/2008 |
5/19/2008 |
U |
24.65 |
32.29 |
31% |
6/25/2007 |
$32 |
7.64 |
| MPWR |
6/1/2008 |
6/5/2008 |
C/H |
26.03 |
24.21 |
-7% |
6/23/2008 |
$24.21 |
-1.82 |
| SDS ETF |
6/8/2008 |
6/9/2008 |
U |
60.1 |
67 |
11% |
6/27/2008 |
$67.00 |
6.9 |
| QID ETF |
6/22/2008 |
6/25/2008 |
U |
42.33 |
46.56 |
10% |
7/15/2008 |
$46.56 |
4.23 |
| SKF ETF |
6/8/2008 |
6/9/2008 |
U |
121.23 |
160.4 |
32% |
7/3/2008 |
$160.40 |
39.17 |
| KSU |
7/27/2008 |
7/29/2008 |
U |
50.83 |
53.3 |
5% |
|
|
2.47 |
| CVA |
7/27/2008 |
7/30/2008 |
C/H |
29.53 |
27.7 |
-6% |
|
|
-1.83 |
| APEI |
7/27/2008 |
8/1/2008 |
U |
47.13 |
46.08 |
-2% |
|
|
-1.05 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
19928 |
** MONITOR THE FOLLOWING F.I.T. STOCKS HIGHLIGHTED IN YELLOW CLOSELY FOR PRICE AND VOLUME MOVEMENT! Look for light volume on down days and heavy volume on up days. Remember if we head into another big correction, it is best to start turning to cash now. You should be out of all other F.I.T. Stocks at this time as we have either hit our profit targets or the stop loss.
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The F.I.T. STOCK PLAN
This week we have 2 NEW F.I.T stocks meeting are F.I.T. Stock Plan criteria. To make our list of High Quality Growth Stocks a company must show
F- Fundamentals that are Superior
I - Industry Leader or Strong Institutional Buying
T - Technical Charts exhibiting Strong Base Patterns
F.I.T. Stocks Ready to RUN!
* All Charts are One year time frames with weekly price bars *
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Stock: Websense
Symbol: WBSN
Fundamentals: 9.9 out of 10
Industry: Internet Software Industry Strength: 45
Technical Pattern: U TURN Avg. Volume: 592,100
Pivot or Buy Point: $21.33
Stop Loss: $19.84 or 7%
Profit 1: $23.46 or 10%
Profit 2: $25.59 or 20%
WBSN develops internet management and web security software to monitor report and manage internet usage of employees. Last quarter earnings were up 68% and sales increased 45%. WBSN has had some huge resistance at $21, but Friday just broke above this level on very strong volume. Within this big horizontal line of resistance, WBSN has fromed a U turn pattern, if WBSN can break above its previous high on the left side on strong volume let's look for a buy point of $21.33 to enter into this stock.
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Stock: Stanley Inc.
Symbol: SXE
Fundamentals: 9.8 out of 10
Industry: Commercial Services - Misc. Industry Strength: 40
Technical Pattern: Cup with Handle Avg. Volume: 164,300
Pivot or Buy Point: $35.63
Stop Loss: $33.14 or 7%
Profit 1: $39.19 or 10%
Profit 2: $42.75 or 20%
Stanley Inc. provides systems engineering/integration, business process outsourcing and logistics primarily for the government. Stanley has been forming a flat base, which is the handle, within a larger Cup with Handle pattern. Volume has been quite within the handle and has slightly sloped down in price which is exactly what you would like to see. Last week buy side volume picked up within the handle on the far right side of the chart. When Stanley breaks above the high of the handle we will be waiting with a $35.63 buy point.
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Watch List of stocks from previous F.I.T. Stocks Newsletters still holding up strong.
Stock: Quanta Services Inc.
Symbol: PWR
Fundamentals: 9.7 out of 10
Industry: Building Heavy Construction Industry Strength: 27
Technical Pattern: Cup with Handle Avg. Volume: 2,348,800
Pivot or Buy Point: $34.73
Stop Loss: $32.30 or 7%
Profit 1: $38.20 or 10%
Profit 2: $41.67 or 20%
Quanta Services provides specialized contracting and related services to the electric power, gas, cable TV, and telecom industries. Annual EPS is expected to rise 121%. Last quarter sales were up 48%. PWR has built a perfect Cup with Handle Pattern that started last November of 2007. The Cup part of the base shows 6 weeks of accumulation with last week being the heaviest. We are now into the 5th week of the Handle and if prices can break above the high of the handle on a good volume swell let's jump in at $34.73.
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Stock: International Business Machines
Symbol: IBM
Fundamentals: 9.6 out of 10
Industry: Computer Tech. Services Industry Strength: 30
Technical Pattern: U TURN Avg. Volume: 7,837,700
Pivot or Buy Point: $130.13
Stop Loss: $121.03 or 7%
Profit 1: $143.13 or 10%
Profit 2: $156.13 or 20%
BIG BLUE is back! IBM has been holding up remarkably strong during this market correction. Last October through February IBM formulated a nice Double Bottom Pattern. IBM broke through this pattern and 5 weeks later consolidated for 3 weeks building somewhat of a handle. This handle was penetrated through at the beginning of April soon after the last market rally confirmed of March 20, 2008. Since the beginning of January volume to the buy side has been phenomenal as big investors began accumulating this stock. IBM now rest within an 8 week U TURN base and buy side volume has kicked in once again by the Big Money as seen on the right side of the chart. IBM rest just 11 cents under its previous high and if it can continue this push upwards on good volume let's look to get involved at $130.13.
Please remember to stick with your Investment business plan, be disciplined, monitor price and volume daily and make money.
Happy and Healthy Investing,
Steve Martin
Founder
www.fitstocks.com