Date: November 2, 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 HEALTH: NEW RALLY CONFIRMS!
Another new rally for the S&P 500 and the DOW confirms on Tuesday, October 28. Finally the major indexes end the last week of October on a bright note with the NASDAQ jumping 10.9%, the S&P popped up 10.5% and the DOW finished the week with an 11.3% increase.
The follow through confirmation can offer us a glimpse of hope as we finish off one of the worst months in the history of the stock market. In the month of October the NASDAQ took a free fall and lost -17.7%, the S&P 500 crashed -16.8%, and the DOW tumbled 14.1%. Much of the cause was the Big Institutional Investors dumping out of stock mutual funds. If they would have followed our advice they would have started dumping those equities in October 2007 and no later than January 2008 when the signals of a correction presented themselves in the form of distributional selling. Instead they started selling out of their stock mutual funds a year to the date when the first signs of distribution appeared in the market. Not only did they sell those stocks, but they sold with a fury. The month of October 2008 registered over $52 billion being removed from stock mutual funds according to Investors Business Daily and as researched by TrimTabs.
Now for a glimpse of HOPE: As we have stated, it is often in these times of PANIC and FEAR that the markets will begin to bottom out and the BULLS will try to fight for control. This is why we, as healthy investors, continue to keep an eye on the markets daily pulse. We look for signs of new life in a market that everyone else has run away from. When everyone else thinks the market has Flat lined, we watch the screen for any sign of a pulse. Once we see the pulse, we watch to see whether the pulse gets stronger. Once the pulse is stronger, we monitor our sick stock market to see if it will stabilize and fully recover. We watch, we wait, we're patient as we check the markets vital signs of price and volume, soon it will let us know when it is ready to stand on its own again.
This is why it is so important to understand the importance of recognizing any small sign of health the markets are showing us. This is what a follow through confirmation day is. It is a pulse, it is a possible sign that the vital stats of the market are beginning to show signs of strength. Could the market have another relapse? You bet! The last couple of times the markets have given us this pulse, this follow through confirmation, the markets have been unable to sustain it without another paddle shock from the Government. But this is what we do know, according to Investors Business Daily, all bull markets have started with a follow through confirmation, but not all follow throughs have led to a bull market. As healthy investors we must recognize the pulse of the major indexes so that we maybe prepared when the stock market comes out of this emergency state, stabilizes, and begins to run with the bulls again.
IN THE NEWS:
Major indexes finish with Big Gains as global economy fights for damage control.
Fed cuts the key rate by .5 point to 1%.
Crude Futures gain 6% for the week, but close down 33% for the month of October.
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Index Charts
S&P 500: 10 Year Chart with monthly price bars.
The S&P 500 falls as much as 327.23 points in the month of October (red arrow), before finishing only down -195.42 for the month. Much of the recovery takes place last week as the S&P gains 10.5% back and confirms a new market rally (green arrow).
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S&P 500 FOLLOW THROUGH CONFIRMATION! 6 Month chart, daily price bars.
The S&P 500 confirms a market follow through day on Tuesday October 28, 2008. #1 indicates the S&P's first rally day where prices found support just under 850 and buyers stepped in to drive the S&P back up and close to its opening price. Once the markets initiate a first rally day, in this case the S&P, we begin to look for a follow through confirmation day 4-12 days after. The confirmation day should have prices advance 1.75% or higher on strong volume. If at any time prices drop below the low of the first rally day, the rally attempt is considered a FAILURE. On day 12, indicated by #2, the S&P confirmed a new market follow through day with prices advancing almost 11% for the day on strong volume.
If this new rally is to show us some healthy signs of life, we would like to begin to see prices make higher lows and higher highs. #2 marked the S&P's higher low, but we would now like to see the S&P break above recent highs indicated by the orange horizontal lines.
On the other hand, if we start to see several days of distribution (selling on higher volume than the previous days volume) begin to develop or prices drop below the low of our first rally day (#1), these signs would mark this new rally as a failure and the BEARS are back in control.
As healthy investors continue to monitor the daily pulse of the markets for signs of strength or weakness so you will be ready to react if the Bulls begin to run or if the Bears begin to stalk bargain shopping equity buyers.
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Top 10 Industries:
- Retail Discount Variety
- Commercial Services Schools
- Insurance Brokers
- Medical Outpatient/Homecare
- Banks-West/Southwest
- Retail Drug Stores
- Electrical Military Systems
- Transportation-Airlines
- Utility Gas-Transportation
- Food-Misc. Preparation
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 |
| LPHI |
10/19/2008 |
10/20/2008 |
C/H |
37.63 |
35 |
-7% |
|
|
-2.63 |
| LPHI |
10/19/2008 |
10/27/2008 |
C/H |
37.63 |
40.18 |
7% |
|
|
2.55 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
17950 |
** 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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F.I.T. STOCKS EDUCATION
Two weeks ago we listed Life Partners Holdings (LPHI) in our list of F.I.T. Stocks ready to run. This week in our educational section we want to discuss the importance of rules and why we follow them with no questions asked. Following is the F.I.T. Stock Recommendation:
BEFORE:
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.
AFTER:
This is a little hard to read but stay with me because it is important. We keep investment rules so that we do not second guess ourselves. Investment rules help us to plan a trade and trade a plan. This way we take the emotion out of investing. LPHI is one of those trades that can make you second guess yourself and make you possibly NOT follow your rules the next time.
LPHI broke out of a nice Cup with Handle Pattern hitting our buy point of $37.63 on very strong volume #1. Things were looking great and in 2 days we were up 9%. On the third day the market tanked and LPHI tanked with it hitting our stop loss of $35 (#2). You should be out with no questions asked because you followed your investment rules.
If you continued to follow LPHI, the very next day the stock gapped down to $30 went to as low as $28 before heading all the way back up and closing at $37.67. This was 4 cents past our original buy point and if you had held on you would be up 7% right now.
So here is where one can begin to second guess themselves. If you did not follow your rules you dodged a bullet and you are up 7% and feeling great. Unfortunately, you have started to head down the road to building bad habits and will have a tough road ahead if you do not get yourself back on the right road. Most likely the next time this happens and your down in a stock you will remember how LPHI came back for a gain and how good it made you feel that you turned a loss into a gain, and you will stay in again. If you chose this path you are in for a difficult run as an investor. You have now become a gambler that does not know when to fold them, and this is a tough habit to break. Set yourself straight right away and get back to the investment plan. Follow the rules at all cost as this is what healthy investors do.
If you did follow the rules, but got stopped out at $35 congratulations. However, you are probably kicking yourself because now you see LPHI is now up by 7%. Be proud of yourself because you have notched one of the biggest healthy investment habits there is. You followed your investment rules with no questions asked. Yes, you took a loss of $263, but you my friend are well on your way to becoming a healthy investor. Stand tall because you will survive the investment business and you will succeed.
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One Industry Looking F.I.T. - Commercial Services - Schools
The Commercial Services - Schools industry is looking hot. With the economy the way it is people are most likely looking into how to re-invent themselves for better jobs or a new line of work. Here are 3 F.I.T. Stocks starting to build the right side of their bases on strong volume.
DV
ESI
STRA
All 3 of these F.I.T. Stocks are showing signs of Institutional buying on the right side of their bases. This is a positive sign to the construction of the right side of a base. If the new market rally holds up we would like to see these U Turn bases possibly form Handles as the stocks digest and consolidate their recent gains. Watch closely!
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The F.I.T. STOCK PLAN
This week we have 2 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 *
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Stock: Dollar Tree
Symbol: DLTR
Fundamentals: 9.8 out of 10
Industry: Retail-Discount Variety Industry Strength: 1
Technical Pattern: U-Turn Avg. Volume: 2,338,000
Pivot or Buy Point: $42.23
Stop Loss: $39.28 or 7%
Profit 1: $46.45 or 10%
Profit 2: $50.67 or 20%
Well we have all heard of Dollar Tree. There is one located on practically every strip mall you see. When the economy is down people begin to budget more and look for cheaper ways to spend their money. At Dollar Tree they have a fixed price of a $1 and they operate over 3,000 of these stores. DLTR is starting to build the right side of its base and volume has picked up. We have a buy point of $42.23 if DLTR just pushes right past its U Turn pattern on strong volume. However, on the daily chart of DLTR, it looks like it is trying to etch out the beginning stages of a Handle. A Handle takes at least 5 days to develop and currently DLTR is only in day 3. Next week, if DLTR continues to build the Handle of a Cup with Handle pattern we will change our buy point to $40.13. Adjust your Stop Loss and profit targets accordingly.
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Stock: Gentiva Health Services
Symbol: GTIV
Fundamentals: 9.8 out of 10
Industry: Medical Outpatient Homecare Industry Strength: 4
Technical Pattern: U-Turn Avg. Volume: 265,000
Pivot or Buy Point: $29.43
Stop Loss: $27.37 or 7%
Profit 1: $32.37 or 10%
Profit 2: $35.31 or 20%
Gentiva provides Home Healthcare and Hospice services. Last quarters earnings grew 40%. GTIV rest in a top rated industry of Medial Outpatient Homecare. On a daily chart, as GTIV rounded out the bottom of its base, it did so on very light volume. This suggest that sellers have stepped away and buyers have jumper back in. Last week GTIV started to build the right side of its base on Big volume. When GTIV breaks above its recent high on strong volume, look for a buy point of $29.43.
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