Date: November 16, 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: Market in Correction!
All in one day our market health in the major indexes went from a rally trying to find its legs, to a rally failure, to a new rally attempt. On Thursday we had one of the wildest swings in the stock market I have seen. At one point we were 300 points down in the DOW and all three of the major indexes had broken below the lows of the first day rally attempt, suggesting the follow through day that occurred on Oct. 28 had failed. And indeed it had, placing the market health in a market correction. But by 2pm the market started to gain some strength, with the BULLS stepping back in and driving prices up for the day on some very strong volume. This marked the first day of a NEW RALLY ATTEMPT and a chance for the BULLS to gain some ground back in these uncertain market conditions.
With the strong rally day of Thursday Nov. 13, we will now wait for another follow through confirmation that should occur within the next 4-12 days. If this confirmation does occur it should occur on prices moving up 1.75% higher and on strong volume. One could get discouraged of confirming these new rallies only to see them fail after only a week or so. But stay involved with this market activity as eventually you will be the first to recognize the new bull run and will be rewarded with some handsome profits because you stayed patient, disciplined, and involved. This is NO TIME to step away from the markets as these are interesting times and eventually if you stayed with it you will be the first to spot the new opportunities that will present themselves.
Consider this volatile action in the stock market like a football game between the Bears and the Bulls. Right now it feels like we are in the 4th quarter and both sides are playing such great defense that we are going three downs and out. Both sides are playing for better field position and right now with the amount of new rally attempts we have had it feels like the BULLS maybe gaining the upper hand and the better field position. Our hope for growth stock investing is that eventually the BULLS will receive the ball on the 50 yard line and run it back for a TOUCHDOWN to win the game.
As a good COACH and healthy investor, you played good defense (stayed in CASH) as the BEARS tried to score, and played for better field position. Once the new market rally confirms, you want to be ready to send in your star players who have been waiting patiently on the sidelines for a chance to PLAY. The point here is to be a great COACH of you investments, watch the FILM of your opponent (the BEARS) and study their moves, then when the BULLS take over the ball, send in your best players that have been waiting patiently (your watch list) and watch them lead you to victory in this game called the Stock Market. Most importantly be a Good Coach and stay in the GAME, this is what healthy investors do.
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STOCK MARKET NEWS:
Nasdaq drops 7.9%, S&P 500 slides 6.2%, and DOW falls 5%.
Jobless Claims peak over 500,000.
U.S. Gov. decides not to buy troubled mortgages.
Retail sales fall 2.8%
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Index Charts
S&P 500: 6 Month Chart Daily Price Bars.
The S&P remains in a downtrend, defined as a series of prices that reach lower lows and lower highs. In the market health section we discussed the new rally FAILURE. This occurred on Thursday, Nov. 13 (green arrow) when prices in the S&P undercut the low made on Oct. 10. This sent the stock market conditions back in a correction. However, this same day the 3 major indexes made a huge comeback in the last hours of trading to also start the first day of a new rally attempt. The great news on this new first rally day is the strong volume associated with it. The volume on Thursday, Nov. 13 was well above average and a very positive sign. We would have expected this rise to continue the very next day, but on Friday the stock markets reversed course ending sharply lower. Volume was light compared to Thursday's volume surge.
Now the watch continues to see if this rally will confirm a follow through day. This will occur when one of the major indexes will rise in price 1.75% or higher on strong volume. This should take place within the next 4-12 days. On the other hand if prices break below the low of Thursday, Nov. 13, all bets are off.
Some positive signs we must also look for are for the S&P to be able to hold this support just under 850 (red line). Next we would like to see the S&P start to develop an upwards trend. For this to happen we would need to start seeing a series of price movements that have higher lows and higher highs. Therefore the S&P would need to move above 1000 and then 1050 (green horizontal lines) and move above the 50 day moving average and remain above this point.
As a great COACH of your investments keep an eye on these critical field position points.
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NASDAQ: 6 Month chart, daily price bars.
The NASDAQ offers the same conditions as the S&P 500 just at different price levels. Watch closely the 1500 level for support and the 1800 and 1900 price points for a new uptrend to develop. Notice the huge volume swell that took place in the NASDAQ on Thursday, Nov. 13.
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XLF- Financial Select Sector SPDR FUND: 6 Month chart, daily price bars.
Here we have another similar pattern to the two above charts and the same conditions apply for this chart to show positive action. XLF represents some of the big wigs in the financial sector such as: Citi, Bank of America, JP Morgan and Wells Fargo. Most likely for the stock markets to stage some sort of new rally or uptrend it is going to have to start with the Financial Sector healing its wounds. If the Financial Sector can sure itself up, big money investors may start to dump money back into equities lifting the indexes to new high territory and starting this new uptrend. Key areas for XLF are to hold support at its last low of $11.70 (green arrow) and then to start making new highs over $16.53 and then $18. This would be a great step to getting out major indexes back on track. Keep a close eye on XLF and the stocks within it: C, BAC, JPM, and WFC for early signs this market maybe starting to claw its way back.
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Top 10 Industries:
- Commercial Services Schools
- Medical Outpatient/Homecare
- Retail- Super mini Markets
- Medical Genetics
- Banks-Northeast
- Medical Generic Drugs
- Retail- Discount Variety
- Medical Biomed/Bth
- Food-Msc Preparation
- Medical-Drig diversified
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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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 *
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**IMPORTANT NOTICE** The F.I.T. Stocks listed below should only be entered into when the market conditions are right. Currently the market health is in a correction. Before entering these stocks make sure the major indexes have confirmed a NEW RALLY. Flowing with the market, not against it, is a healthy habit we should all employ.
Stock: ITT Educational Services
Symbol: ESI
Fundamentals: 9.9 out of 10
Industry: Commercial Services Schools Industry Strength: 1
Technical Pattern: Cup with Handle Avg. Volume: 1,361,600
Pivot or Buy Point: $90.13
Stop Loss: $83.83 or 7%
Profit 1: $99.14 or 10%
Profit 2: $108.15 or 20%
ITT Educational Services provides career oriented education programs to 53,027 students through 97 technical institutes. ESI rest in the number 1 industry sub group commercial services schools. Why is this stock looking good? Most likely people are trying to find a way to re-invent themselves during this time of uncertainty. To do this they go back to education. ESI has an unbelievable Return on Equity of 174% telling us that it is a very well managed company. The stock has held up very well during this correction in the market, and even formed a beautiful Cup with Handle pattern. If ESI can break above the high point of the handle we will want to buy in at $90.13 and confirm this move with good volume.
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NEW BUY POINT AND INDUSTRY STRENGTH FOR DLTR!
Stock: Dollar Tree
Symbol: DLTR
Fundamentals: 9.8 out of 10
Industry: Retail-Discount Variety Industry Strength: 7
Technical Pattern: Cup with Handle Avg. Volume: 2,338,000
Pivot or Buy Point: $40.63
Stop Loss: $37.79 or 7%
Profit 1: $ 44.69%
Profit 2: $48.75%
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 has built a nice Cup with Handle pattern and the volume on the right side of the base implies that Big Money Investors have started to get involved in the stock. When DLTR breaks above the high of the handle we want to jump in at $40.63 and confirm this move with strong volume.
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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