Date: August 5, 2007
F.I.T. STOCKS
Finding High Quality Growth Stocks that Build Healthy Investment Habits.
Market Update
MARKET HEALTH: We are in a CORRECTION!
What a week for the markets. Last week was a great example of why healthy investors should monitor the markets action daily. After the sell off 2 weeks ago it appeared as though the markets were ready for a rally. Wednesday began the start of the rally with a good reversal. Thursday saw another up day but it was to soon to count it as a confirmation of a new rally. What we would like to see ( according to William O'Neil, Author of How to Make Money in Stocks ) is a strong volume surge of 1.75% or higher than the previous days volume in one of the major markets. This did not occur as Firday saw all of the major markets break back below the intial rally day on Wednesday. Once the the low of the rally day is undercut the rally is considered a failure and we then wait for the next rally day to begin. Patience and Discipline are the keys to healthy Investing. Please remember that market corrections are a healthy sign for the market and stocks. A market correction allows for our F.I.T. stocks to build healthy bases so that we are ready to pounce when the market confirms its new rally. This is not the time to avoid your stocks because you have seen some profits eaten away or even taken some losses. At this point you should be mostly in cash, and keeping only your best performing stocks and monitoring them closely. Lets take a look at the chart of last weeks market action and the rally attempt in the S&P. On this 6 month chart of the S&P you can see the rally attempt that began on Wednesday Aug. 1. On this day the S&P dropped below its 200 day moving average, but was able to recover back above it by the end of the day. This was the first day of the rally attempt. As a healthy investor we would now wait for confirmation 4-12 days later. However, by Friday this rally attempt was not to be, as the S&P closed down below its 200 day moving average ( blue oval ) and undercut the low of Wednedays rally attempt. What we will be looking for now is to see if this 200 day moving average will now act as resistance for the S&P or if it can break back above.
Stocks Showing F.I.T. Formations
The following 3 stock picks held up nicley last week as the market sold off, but the healthy investor will be more cautious jumping into the market as it is correcting. Remember most stocks will follow the trend of the market no matter how F.I.T. they are. * All charts are 3 year time frames with weekly price patterns *
Stock: Flotek Industries
Symbol: FTK
F undamentals: 9.7 out of 10
I ndustry: Specialty Chemicals Rank: 9.5 out of 10
T echnical Pattern: The U Turn
Pivot or Buy Point: $34.09
Stop Loss: $31.69 or 7%
Profit 1: $37.49 or 10%
Profit 2: $40.89 or 20%
FTK PROFIT: $13.42 or 39%
Flotek has shaped out a nice U turn pattern. FTK found nice support at the 10 week moving average ( Orange Line) and is heading towards its old high of $33.99. We like the big green volume bars, reperesented by the blue rectangles, this is a sign of the big investors buying into the stock. Now let us look for a nice rally in the market as we wait for FTK to break above its $34.09 buy point on good volume.
Stock: Boston Beer Company
Symbol: SAM
Fundamentals: 9.0 out of 10
Industry: Beverages-Alcoholic Rank: 8.2 out of 10
Technical Pattern: The U Turn
Pivot or Buy Point: $43.54
Stop Loss: $40.50 or 7%
Profit 1: $47.89 or 10%
Profit 2: $52.24 or 20%
SAM PROFIT: $10.80 or 25%
Boston Beer has formed a nice U shape pattern. SAM has spent the past 2 weeks correcting. Last week makes me a little wary as it had above average volume during its sell off. What I do like is how SAM held its 10 week moving average ( orange line ) which is a good sign of support and then last week rebounded off that line. Let us now see if people will buy enough beer to break SAM above its buy point of $43.54 ob good volume.
F.I.T. Stocks still Flexing some Muscle
Stock: CNH Global
Symbol: CNH
CNH is definelty a stock flexing its muscles.
CNH is in the leading Farm and Contruction Machinery Industry. Its fundamentals are in the top 10% of all stocks, and as you can see above, CNH has had excellent chart formations. CNH first broke out of a Cup with Handle in January 07 on great volume. After 2 weeks it began to consolidate in a Flat Base for 9 weeks before shooting out like a rocket in May.
As you can see a F.I.T. Stock is a Healthy stock. Please remember to stick with your Invesment business plan, be disciplined, monitor price and volume daily and make money.
Happy and Healthy Investing,
Steve Martin
Fitstocks.com