Date: Dec. 14, 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 Market Rally Confirms!
The major indexes are still very volatile, but are still in the fight to hold onto this new rally. The engine driving the markets last week was whether or not a deal will be made to bailout the Auto Industry. It appears something will be done it is just a matter of when.
Leading stocks are still having a bit of trouble finding their footing, as is a leading industry to step forward and show us the way. It seems to me as though the big money investors want to invest their money; they are still just not sure where is the best area to invest it as so many companies have been beaten up. So far this whole new market rally seems similar to the market rally that occurred at the end of July and into August. Many leading stocks attempt to break out only to reverse in the next few days and hit the 7% stop loss. Also, of note is that it is very hard with the hit the market has taken to find chart patterns that look neat and tight. Instead many patterns we come across as we do our research look wild and loose. Take a look at this example of John Deere:
Look at how nice and clean the Cup with Handle pattern looked as it broke out in late Nov. 2006. John Deere had a nice rounded Cup base, built a beautiful and slightly down handle before it broke out and gained over 50 dollars. Now notice the Cup with Handle base it tried to form near the end of its run and just as the markets were telling us it was time to go to CASH in Dec. 2007. This base is very loose with wild price swings and is best to avoid.
The point here is that with the sharp down turn the major indexes have had, many of the stocks we have been looking at have taken those same sharp down turns because of the volatility of the markets. Nice rounded patterns have become harder to find and tend to be faultier patterns with wild price swings.
The stock market and stocks seem to be rather unsettled and are making for some of the toughest investing times we have seen. If you are a lower risk person it is OK to keep sitting on the sidelines until the markets become surer of themselves. If you have the capital and are more risk tolerant, it is during these times of new market rallies we want to test the markets and F.I.T. Stocks, but do so smartly. As we state all of the time as a new market rally has confirmed invest only 100-200 shares into a F.I.T. Stock and see how it reacts to the market conditions. Most importantly follow the investment sell rules with NO questions asked, so if you do take a loss it is a minimal loss. After you have gotten out of an investment either by the sell rule or by taking your profits, go back and study why the trade worked or did not. Check the F.I.T. system to see if the Fundamentals, Industry and Technical Chart patterns were as solid as they should be. Note what the market was doing at the time. A little bit of reflection after you are out of a trade is always a wise and healthy habit.
Keep a pulse every day on the market to check the major indexes health and stick with your sell rules with no questions asked, this is what healthy investors do.
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STOCK MARKET NEWS:
Nasdaq gains 2.1%, S&P 500 jumps .4%, and DOW falls with a small loss.
Treasury Fund may be utilized to help the sinking Auto Industry.
Jobless Claims hit 573,000 for the week of Dec. 6.
Nov. Retail sales slump 1.8%.
Crude gains for the first time in months finishing up 13%.
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Index Charts
S&P 500: 6 Month Chart with Daily Price Bars.
The S&P confirms a new rally on Dec. 2, but some important resistance levels are going to have to be broken for this new rally to get some momentum and look a little healthier:
First: The S&P needs to break above the 50 day moving average at roughly the 900 level. Last week prices bounced above the 900 level and then hit resistance at the 50 day moving average. We need to break and hold above this level.
Second: It appears as though the S&P is trying to make a series of higher lows indicated by the blue oval, and a series of higher highs indicated by the green ovals. This type of pattern needs to continue for an up trend to develop and remain healthy. Just over the 1000 level is an important new high we need to make.
Third: We need to break above the downwards slanting trend line at 950. New important high levels that we need to reach are indicated by the green ovals.
These 3 important factors will be pivotal in establishing the health of this new rally.
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NASDAQ: 6 Month chart, daily price bars.
There is heavy congestion going on in the NASDAQ and which way prices burst from this congestion could very well determine the health of the market.
Notice how prices in the NASDAQ are converging upon each other into what technical analysis call a triangle pattern. This type of pattern develops when prices start to make a series of higher lows, indicated by the blue "L", and lower highs, indicated by the green "H". This type of pattern can be explosive as prices will break from this pattern in one direction or the other. For our sake we hope it is to the upside and next week will be pivotal in deciding which way she breaks.
Just like the S&P, the 50 day moving average has acted as a heavy resistance level for the NASDAQ and if the NASDAQ explodes up next week it should do so by bursting through the 50 day moving average at the 1600 level. This action will be very positive for the Big Money investors watching the NASDAQ as it will snap a major down trend line and also clear the 50 day moving average.
Next week there is enough news on the line to be a major catalyst in driving the major indexes either through these resistance levels at the 50 day moving average or back to new lows, so it is key that you keep a close eye on the markets. Wednesday is of special note as this will be the FOMC news on the next interest rate decision.
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Top 10 Industries:
- Transportation Airlines
- Commercial Services Schools
- Retail-Super Mini Markets
- Medical Generic Drugs
- Commercial Services Security
- Commercial Services-Consulting
- Medical Genetics
- Banks Northeast
- Banks Southeast
- Telecom Wireless
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 |
35 |
-7% |
|
|
-2.63 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
17687 |
|
|
|
|
|
|
|
|
|
|
** 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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Please be advised that we are maintaining the same 3 F.I.T. Stock recommendations as last week. Of special note is that CMTL is nearing its Buy point and its industry sub group jumped from 45 to 10 last week as the stock added another week of heavy buying to its base pattern.
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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Stock: Comtech Telecom
Symbol: CMTL
Fundamentals: 9.8 out of 10
Industry: Telecom-Wireless Equipment Industry Strength: moves from 45 to 10
Technical Pattern: U Turn Avg. Volume: 405,700
Pivot or Buy Point: $50.63
Stop Loss: $47.09 or 7%
Profit 1: $55.69 or 10%
Profit 2: $60.75 or 20%
Comtech manufactures satellite based telecom transmission and mobile tracking systems for defense and commercial markets. Last quarter earnings were up 81% and sales grew 67%. CMTL has formed to U Turn patterns within each other, but we have grouped it into one big U Turn pattern. Last week CMTL showed a great increase in volume suggesting Big Money Investors stepped in. CMTL has strong resistance at the $50.50 level having hit there twice before declining. If or when CMTL can break above this resistance level we will want to jump in with a buy point of $50.63 on strong volume.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Stock: Thoratec
Symbol: THOR
Fundamentals: 9.8 out of 10
Industry: Medical Products Industry Strength: 30
Technical Pattern: U Turn Avg. Volume: 1,272,200
Pivot or Buy Point: $29.93
Stop Loss: $27.84 or 7%
Profit 1: $32.92 or 10%
Profit 2: $35.91 or 20%
Thoratec develops ventricular assist devices, point of care blood test kits and vascular grafts. They currently have a new pump called the HeartMate II in clinical trials that will replace the older model. Earnings grew a remarkable 325% last quarter. Volume really pumped up last week as some Big Money started accumulating the stock. When THOR jumps above the high of the U turn pattern, lets pump up some profits with a $29.93 buy point and confirm it with a strong volume surge.
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Stock: South Jersey Industries
Symbol: SJI
Fundamentals: 9.9 out of 10
Industry: Utility Gas Distribution Industry Strength: 16
Technical Pattern: Cup with Handle Avg. Volume: 254,800
Pivot or Buy Point: $39.13
Stop Loss: $36.40 or 7%
Profit 1: $43.04%
Profit 2: $46.95%
BEFORE: U-Turn Pattern
NOW: Cup with Handle Pattern: 6 Month Chart with daily price bars.
Many times a U Turn Pattern, if it does not break above it's pattern, it will consolidate one last time shaking out weak investors, thus creating a handle in a Cup with Handle Pattern. Notice below how the pattern has changed, however in this case the buy point remains the same at $39.13.
South Jersey Industries is a holding company engaged in the distribution of natural gas to customers in southern New Jersey. Earnings increased 180% last quarter and sales jumped 35%. SJI is also going to meet heavy resistance at the $39.00 level, but if the stock can break through this level it would be a very positive sign. In addition, since the beginning of October, SJI has had 4 weeks of heavy accumulation suggesting heavy buying by big money investors. If the market rallies and SJI breaks above its resistance point of $39, let's jump in with a $39.13 buy point.
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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