Date: October 19, 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 RALLY!
The markets confirmed a follow through rally day on Thursday, Oct. 16. The follow through is a good sign, but does not mean we jump right back into the stock market. Now is the time to prepare for battle, gather our ammunition, and develop a sound strategy so we are ready to march ahead if this new follow through day gains momentum. Remember we just got pounded with two weeks of heavy selling; so many leading stocks have suffered some major wounds. Now we must look for those F.I.T. Stocks that held up well during the attack of the Big Bear and wait for the opportunity to strike back with some strong stock leaders. The fearless 5 Star General Warren Buffet has declared it is time to buy stocks again! However, we are investors with healthy habits! We know how to make our own decisions on when to buy back into the stock market! We know how to study the health of the stock market by tracking the daily price and volume patterns strengths and weaknesses!
Last week was a roller coaster and I would venture to say the top day traders loved the volatility. On Monday the major indexes gapped up at the opening bell and continued to run in the green on one of the biggest up days in the history of the stock market. Tuesday looked to be another big day on Wall Street when the markets gapped up again at the opening bell. However, this time the markests faded fast and ended in the red. Wednesday the sell off continued and the indexes gave back everything from Monday's meteoric rise. Life shot back into the markets on Thursday! Just like the Boston Red Sox historic come from behind win over the Tampa Rays to stay alive in the play offs, the indexes made a come back of their own and registered a follow through day on huge volume. Friday was another wild swing in the market, but by the end of the day the DOW and S&P had finished down and the Nasdaq squeaked out a small gain. The volume was light on all 3 of the major indexes.
In the news, more details surfaced on how the U.S. would begin to try and manage the financial crisis. In correlation with the British government, the U.S. government decided to inject $250 billion into our banking system. In addition, it plans to buy back distressed mortgages from financial institutions. The question now is whether these rescue efforts will help make a difference in the financial crisis we are facing. My fellow F.I.T. Investors, you must continue to stay disciplined in your investment habits!
Last week we discussed the panic that had settled into the stock market. I shared with you that when FEAR is at its worst, the markets usually find a bottom and turn around. Investors Business Daily documents the market crashes of 1987 and of late 2002 when the major indexes felt the same type of panic selling. It is in these times of panic that we need to become even more interested in the daily price and volume movements of the stock market. We need to be ready to catch the signals of a market bottom. Please remember that a follow through confirmation is a signal to be prepared for battle in this new rally attempt! We need to be patient and wait for the right F.I.T. Stocks to form strong base patterns. If this new rally holds up, we want to ease into our stocks with half of our normal positions, and only in one or two stocks at a time. This technique allows us to test the strength of the new market rally without suffering a major loss if the stock market begins to retreat again. However, if the market does take off, some of our best profits will be in the first 13 weeks of this new rally.
Index Charts
NASDAQ: 6 month chart with daily price bars.
NASDAQ FOLLOW THROUGH CONFIRMATION!
The NASDAQ's attempt at its first rally began on Friday, Oct. 10 (#1). This was the first day the NASDAQ was able to close in price above the previous day's close. After our first rally day we begin to look for a strong increase in price of 1.75% higher on stronger volume and this should occur 4-12 days after the initial rally day. #2 indicates the strong price movement that occurred on Thursday, Oct. 16., five days after the first rally day. On this day the Nasdaq increased in price by 5.5% on huge volume confirming a follow through day for the NASDAQ. If at anytime prices break below the lowest price of the first rally day as indicated above by the red horizontal line, the rally is considered a failure.
So the good news is we have confirmed a new rally in the stock market, the bad news is stocks and the major indexes were so beaten up that it may take a couple of weeks before this new rally can gain some strength. Technically at this point we sit far below the 50 day moving average that rests at 2200. There also appears to be some tough resistance at 1900 for the Nasdaq to deal with. Hopefully, we will see the NASDAQ start to plod along in an upwards direction with good volume piercing through the resistance at 1900 with strong volume. Possibly it will take a breather and pull back a little bit showing lighter volume, before surging higher to test the 50 day moving average. These actions would tell us that big money investors are starting to accumulate stocks once again.
That being said, we must keep a laser like focus on the daily price and volume movements of the stock market, and also any news associated with it as Wall Street is very sensitive to any statements being made around the globe. Most importantly, please remember that we would all like to see the stock market go up, and we all have our predictions as to what will happen next, unfortunately, we must realize that as healthy investors we must let the stock market take the lead, for she is always right, we must merely follow her lead.
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Top 10 Industries:
- Retail Discount Variety
- Electrical-Military Systems
- Medical Outpatient/Homecare
- Retail Drug Stores
- Banks-West/Southwest
- Computer Software Medical
- Banks-Southeast
- Commercial Services Schools
- Soap and Cleaning Preparation
- Medical Genetics
** Keep an eye on BANKS as an Industry we now have 2 in the top 10. Several sub groups have been moving up in the industry rankings. Banks Supr. Regional has moved from 164 7 months ago to 12 last week. Several other regional type banks have had strong moves up the industry group rankings: Banking-Southeast, Banking-Northeast, Banking-Midwest... to name a few.
Important Message:
Please remember as you build your portfolio, you are trying to find the best player for each position, 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 you list your 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 |
43.84 |
-7% |
10/6/2008 |
$43.84 |
-3.29 |
| 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: |
|
|
|
|
|
|
|
18213 |
|
|
|
|
|
|
|
|
|
|
** 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 stocks 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!
**IMPORTANT NOTICE** This week we are listing 2 F.I.T. Stocks as buy candidates. Please remember to go lightly at first. At this time we only want to buy one or two F.I.T. Stocks at half of our normal position size. If normally you buy 200 shares, only purchase 100 shares. Most importantly be very disciplined in your sell rules. If a F.I.T. Stocks hits the 7% sell rule get out with no questions asked.
* All Charts are One year time frames with weekly price bars *
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Stock: Life Partners Holdings
Symbol: LPHI
Fundamentals: 9.9 out of 10
Industry: Insurance Brokers Industry Strength: 15
Technical Pattern: Cup with Handle Avg. Volume: 93,200 - very lightly traded so only buy 100 shares.
Pivot or Buy Point: $37.63
Stop Loss: $35.00 or 7%
Profit 1: $41.39 or 10%
Profit 2: $45.15 or 20%
Life Partners Holdings is a Brokers Service facilitating viatical and life settlement transactions worldwide. Last quarters earnings were up 56% and sales grew 47%. LPHI has formed a nice Cup with Handle pattern. Notice the rounded bottom of the Cup and the strong volume associated with the right side of the base. The handle dipped sharply, but that can be expected with the steep sell off the markets had. LPHI rebounded nicely from the sell off and immediately regained its 10 week moving average. When LPHI breaks above the high of the handle, buy 100 shares at $37.63. Confirm the move with strong volume.
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Stock: Thoratec Corp.
Symbol: THOR
Fundamentals: 9.9 out of 10
Industry: Medical-Products Industry Strength: 12
Technical Pattern: U-Turn Avg. Volume: 948,300
Pivot or Buy Point: $29.83
Stop Loss: $27.75 or 7%
Profit 1: $32.81 or 10%
Profit 2: $35.79 or 20%
Thoratec develops ventricular assist devices, point of care blood diagnostic test kits and vascular grafts. THOR's earnings increased 122% last quarter and had a 44% sales growth. Now here is what is amazing about THOR, while the rest of the market has been tanking, THOR actually broke out of a beautiful Cup with Handle pattern back in July on huge volume. We did not list the stock as the market was in a correction, but this is one stock that took on the big bear market and won. THOR is now in the process of building a 6 week U-Turn pattern and if the stock can break above its previous high on the left side of the U, we will buy in at $29.83. Always confirm with strong volume.
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