Date: Dec. 21, 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 Rally!
The market rally continues in the major indexes although we are still not seeing much conviction in the move. The Government is coming up with new and innovative ways to try and help this economy and the credit crisis, but big money investors are still not committing fully to investing back in the stock market. The stock market is no different from any of us in our health, meaning the more severe the sickness or injury the longer it will take us to recover and rehabilitate. So, although we have had a new rally confirmation it may take some time for the stock market and big money investors to get back in the game.
Last week we thought the Tuesday Fed meeting might ignite the big money investors to start buying up stocks again when they announced they would cut the funds rate to a range between 0% and .25% from 1%. They also stated they would use asset purchases, including Treasuries, as its primary tool to ease the credit crunch and revive the economy. The major indexes picked up strength and soared with a close above the 50 day moving average and the NASDAQ closing up 5.4%, the S&P rose 5.1%, and the DOW plus 4.2%.
The next big news item we thought would spark the markets came Friday when Pres. Bush approved a 13.4 billion dollar loan for General Motors and a 4 billion dollar loan for Chrysler if they agreed to prove their viability by March 31, as opposed to formulating a "orderly" bankruptcy. This sparked the markets in the morning, but the spark died out by the end of the day with the DOW even closing in the red with a 26 point drop. In addition, all three of the major indexes were unable to hold onto their 50 day moving averages.
The 50 day moving averages are important technical support levels for the major indexes and it would have been nice to see them hold above this level. Since they did not, we must remain on our toes as the major indexes seem to be consolidating in a neutral position for now, not wanting to drive forward, yet not wanting to reverse back either.
We are bound to be remaining in this NEUTRAL position for now as we head into the holidays and should expect some quite trading days in the next 2 weeks as the stock market will be closed for Christmas and New Years. This will only allow for more consolidation in the stock market indexes, so we may expect a big break through in one direction or the other as we enter into 2009. For our sake we hope its to the upside with big volume.
Please remember we have just gone through one of the unhealthiest times in the history of the stock market, so although we have confirmed a new rally it may take sometime for well qualified stocks to build healthy bases. As stated last week it has been hard to find F.I.T. Stocks formulating these nice chart patterns and much of this has been caused by the severe drop the stock market has taken. Three out of four stocks follow the direction of the stock market, so as the market consolidates and decides what to do, it will allow high quality stocks to begin building strong base patterns.
As the markets continue to consolidate and stocks continue to work on strong base patterns, this stock market and growth stocks themselves may be building themselves up for a very profitable year in 2009. Stay alert and continue to monitor the situation this is what healthy investors do.
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STOCK MARKET NEWS:
Nasdaq gains 1.5%, S&P 500 jumps .9%, and DOW falls with a .6% loss.
Federal Reserve slashes the key funds rate to a range between 0%- .25%.
Bush approves $13.4 billion for GM and $4 billion for Chrysler.
Light sweet Crude January contract falls 8% for the week.
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Index Charts
SPY 500 ETF: 6 Month Chart with Daily Price Bars.
Today we are taking a look at the SPY 500 ETF that replicates the movement of the S&P 500 index. The key factor here is to notice the consolidation taking place between the green and blue lines. Prices between these lines are slowly getting squeezed into a smaller and smaller pattern. The green line represents some heavy resistance that continues to occur just above $92. The blue line shows prices continuing to hit higher lows. Prices cannot continue on this type of pattern. Eventually we'll break out of this consolidation with wild abandon. We hope that it will be to the upside.
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NASDAQ: 6 Month chart, daily price bars.
The NASDAQ is forming the same pattern as the SPY. Notice how the prices are squeezing tighter and tighter together. Eventually there will be no place for the prices to go anymore and we will see some type of extreme price movement in one direction or the other. The 1600 level for the NASDAQ will be a very important resistance level as it coincides with the 50 day moving average and a price point that has been hit by the NASDAQ 3 different times. Usually the more times a price level acts as resistance or support, the more extreme the price break will be when it does occur. Watch the NASDAQ very closely.
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Top 10 Industries:
- Transportation Airlines
- Commercial Services Consulting
- Commercial Services Security
- Commercial Services-Schools
- Medical Generic Drugs
- Insurance Property, Casual, Title
- Computer Software Medical
- Insurance Brokers
- Retail Super Mini Markets
- Medical Outpatient Home Care
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
We had 2 F.I.T. Stocks Break Out Last Week. They are highlighted in YELLOW. Please review the entry prices and set your stop loss limits.
| 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 |
| THOR |
12/7/2008 |
12/16/2008 |
C/H |
29.93 |
30.39 |
2% |
|
|
0.46 |
| HMSY |
11/23/2008 |
12/15/2008 |
U |
27.53 |
29.24 |
6% |
|
|
1.71 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
17904 |
|
|
|
|
|
|
|
|
|
|
** 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: Green Mountain Coffee
Symbol: GMCR
Fundamentals: 9.9 out of 10
Industry: Retail Wholesale Food Industry Strength: 33
Technical Pattern: Cup with Handle Avg. Volume: 497,300
Pivot or Buy Point: $38.63
Stop Loss: $35.93 or 7%
Profit 1: $42.49 or 10%
Profit 2: $46.35 or 20%
Green Mountain Coffee distributes coffees and teas, single cup brewers and single cup portion packs to supermarkets and food stores throughout the United States. Last quarters earnings were up 76% and sales grew 45%. GMCR now rest in a Cup with Handle pattern and is looking to percolate itself past its buy point. What a better way to start the new year off then to have a coffee company break out of a Cup with Handle pattern. Look for a $38.63 buy point on strong volume.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Stock: Quality Systems
Symbol: QSII
Fundamentals: 9.9 out of 10
Industry: Computer Software Medical Industry Strength: 7
Technical Pattern: Double Bottom Avg. Volume: 456,000
Pivot or Buy Point: $43.63
Stop Loss: $40.58 or 7%
Profit 1: $47.99 or 10%
Profit 2: $52.35 or 20%
Quality Systems is a company that may benefit from Pres. elect Obama's health plans. QSII develops healthcare practice and electronic records management software which is what Obama has been pushing for. Volume in the form of accumulation has really picked up in the last 3 weeks as it builds a double bottom base pattern. If QSII can break above the middle leg of the double bottom jump in with a buy point of $43.63 on surging volume.
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Stock: Tower Group Inc.
Symbol: TWGP
Fundamentals: 9.9 out of 10
Industry: Insurance- Property, Casual, and Title Industry Strength: 6
Technical Pattern: U TURN Avg. Volume: 232,400
Pivot or Buy Point: $27.73
Stop Loss: $25.99 or 7%
Profit 1: $30.50 or 10%
Profit 2: $33.27 or 20%
Tower Group offers property and Casualty Insurance products to small and mid size firms. They have an expected annual growth rate of 46%. Last quarters earnings were up 27%, just barely making the F.I.T. Stocks requirement. But here is what we do like: TWGP has built a nice rounded U Turn pattern with 2 weeks of nice accumulation on the right side of the pattern. The industry itself has moved up from 135 to 6 in 7 months. If TWGP can shoot above the high on the left side of the U, let us join the ride with a $27.73 buy point.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------F.I.T. STOCKS TO STILL WATCH!
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.
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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