Date: September 28, 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 FOLLOW THROUGH DAY FOR NEW RALLY, BUT ENTER WITH CAUTION!
The S&P 500 confirmed a follow through day on Thursday Sept. 25, 2008, but watch this market with caution. A follow through day for a new rally simply means to be prepared and monitor stocks that are breaking out in healthy volume. If you do enter into a stock position, enter in with caution and only buy a portion of your normal share size. This will allow you to test the markets and see how they behave in this new rally attempt. If the breakout fails in the stock you are entering into, do not be afraid to get out immediately and cut your losses short. Follow the rules of healthy investing.
Headlines for a rescue plan are currently what is driving this market, and news that a bailout plan agreement was near was exactly what drove the S&P 500 to its follow through confirmation. However, since the confirmation day on Thursday, no deal has yet to be made. Discussions are still taking place this weekend to map out all of the details of how this rescue plan for Wall Street will be structured. Congress seems to favor a rescue plan of $700 billion that would allow the government to buy bad mortgage loans from distressed financial services firms. The big question for the major indexes is, once an agreement on the rescue plan is made, how will the markets, and the big money investors of Wall Street react to the news. Within the next couple of days we should find out the true reactions the markets have to the bailout effort and this will most likely give us as investors a clearer direction of where the markets will take us. Remember the markets will always lead us in the right direction, and we must follow the lead, this is what healthy investors do.
In addition to the rescue plan news, keep an eye on Wachovia as it maybe the next big bank to fail. Last Friday Washington Mutual was seized by Federal Regulators and its banking assets were sold off to JP Morgan. This week Wachovia could follow in similar foot steps with possibly Citi devouring up the banking assets.
This week the major indexes all ended in the red with the Nasdaq leading the way with a -4% loss, the S&P 500 tumbled-3.3% and the DOW gave up -2.2%.
INDEX CHARTS
S&P 500: 6 Month chart with daily time frame.
The S&P confirmed a new rally follow through day on Thursday Sept. 25. #1 in the chart above indicates the first day the S&P attempted a new rally. A new rally attempt occurs when prices close above the previous days close following a down trend. The new rally attempt is a failure if at anytime the prices undercut the low of the first day. If you look 2 candlesticks to the left of #1 you will see that a new rally attempt first tried to occur on Tuesday Sept. 16. However the very next day prices undercut and closed below the first day of this rally attempt, thus making it a failure. Once a first day rally attempt begins, as in #1, we then begin to look for a strong move up in price of 1.75% or higher on good volume. This move should occur between days 4-11 to be most effective according to the studies of William O'Neil of Investors Business Daily. #2 indicates Thursday Sept. 25, the day a follow through confirmation occurred. A follow through confirmation is not a signal to jump back into the market; it is merely a signal that a change of trend may be beginning. When a follow through day confirms, begin to monitor your watch list closely for buy signals that are jumping out from strong chart patterns on heavy volume. It is OK to start re-investing but do so with only one or two stocks and on a quarter to half the share size you normally would. This is a time to test the markets and see how stocks react to the new rally confirmation. Stick with your sell rules with great discipline so that losses will remain at a minimum. As you recall from the last rally attempt many solid F.I.T. Stocks broke out of solid base patterns only to immediately retreat back below their buy points. Eventually the rally attempt fizzled out and leading stocks were giving us a clue as they were not willing to remain strong. Part of the puzzle in new market rallies is for F.I.T. Stocks or leading stocks to break out on strong volume and remain strong. This tells us Big Money Investors are buying up equities and sends a much stronger signal to the markets.
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Top 10 Industries:
- Insurance Brokers
- Retail Discount Variety
- Computer Software-Med.
- Medical-Genetics
- Medical-Outpatient/Home Care
- Leisure Toys/Games/Hobbies
- Retail Clothing Shoe
- Commercial Services Schools
- Elec.-Military Systems
- Retail Wholesale-Food
** The top ten industries offer a telling story about the markets. Medical has 2 industry groups as people will still need to pay for medications and have care. Retail discount stores as people look to pinch pennies. Food and Dairy- we all must eat. Commercial Schools- people looking to upgrade their resume or enter a new career all together.
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 |
44.61 |
20% |
9/2/2008 |
$44.61 |
7.42 |
| 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 |
51.13 |
1% |
9/2/2008 |
$51.13 |
0.3 |
| CVA |
7/27/2008 |
7/30/2008 |
C/H |
29.53 |
27.47 |
-7% |
7/31/2008 |
$27.47 |
-2.06 |
| APEI |
7/27/2008 |
8/1/2008 |
U |
47.13 |
43.84 |
-7% |
8/4/2008 |
$43.84 |
-3.29 |
| WBSN |
8/3/2008 |
8/4/2008 |
U |
21.33 |
23.85 |
12% |
9/4/2008 |
$21.79 |
2.52 |
| SXE |
8/3/2008 |
8/4/2008 |
C/H |
35.63 |
33.14 |
-7% |
8/22/2008 |
$33.14 |
-2.49 |
| PWR |
7/27/2008 |
8/8/2008 |
C/H |
34.73 |
32.3 |
-7% |
8/25/2008 |
$32.30 |
-2.43 |
| APEI |
7/27/2008 |
8/15/2008 |
U |
47.13 |
48.14 |
2% |
|
|
1.01 |
| MPWR |
8/10/2008 |
8/11/2008 |
U |
27.63 |
25.7 |
-7% |
8/13/2007 |
$25.70 |
-1.93 |
| NPO |
8/10/2008 |
8/22/2008 |
C/H |
40.93 |
38.07 |
-7% |
9/18/2008 |
$38.07 |
-2.86 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
18643 |
** 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.
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The F.I.T. STOCK PLAN
This week we have 3 NEW F.I.T stock meeting our 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: Varian Medical Systems
Symbol: VAR
Fundamentals: 9.9 out of 10
Industry: Medical Syst. Equip. Industry Strength: 20
Technical Pattern: Flat Base Avg. Volume: 1,709,200
Pivot or Buy Point: $66.03
Stop Loss: $61.41 or 7%
Profit 1: $72.63 or 10%
Profit 2: $79.23 or 20%
Varian Medical Systems develops oncology systems/equipment used in radiation therapy and x-ray imaging components. Earnings were up 45% last quarter and sales grew 21%. The medical industry has been hot and Varian has held up nicely through the correction. Varian broke out of a Cup with Handle pattern in July and performed nicely. It has since stalled out and is building a 6 week flat base pattern. If Varian can break above the resistance in this flat base, look to buy in at $66.03 on heavy volume.
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Stock: Merit Medical Systems
Symbol: MMSI
Fundamentals: 9.8 out of 10
Industry: Medical Products Industry Strength: 15
Technical Pattern: U TURN Avg. Volume: 253,100
Pivot or Buy Point: $21.53
Stop Loss: $20.03 or 7%
Profit 1: $23.68 or 10%
Profit 2: $25.83 or 20%
Merit develops disposable medical devices for use in interventional cardiology and radiology. Last quarter earnings were up 62%. Much like Varian above, Merit had a strong break out in July as medical industry groups began to take front stage. Merit has since stalled out on light volume forming a solid U Turn base pattern. If Merit can break above its previous high we want to buy in at $21.53 on a strong volume surge.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------ Stock: Sykes Enterprises Inc.
Symbol: SYKE
Fundamentals: 9.9 out of 10
Industry: Commercial Services Misc. Industry Strength: 27
Technical Pattern: U Turn Avg. Volume: 347,600
Pivot or Buy Point: $22.73
Stop Loss: $21.14 or 7%
Profit 1: $25.00 or 10%
Profit 2: $27.27 or 20%
Sykes provides outsourced customer contact management services to the technology, healthcare, financial and other industries. Last quarter earnings were up a phenomenal 169%. Annual earnings are expected to be +39%. SYKE is a nice study for the last newsletters educational piece on finding solid base patterns. The accumulation that has taken place since the end of July has been very nice. SYKE is currently reaching up to its previous highs on the left side of the base and if the stock can penetrate through this level on solid volume look to buy it at $22.73.
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