Date: Jan. 4, 2009
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!
Well we just made it through one of the hardest investing years in the history of the stock market, but if you followed healthy investment habits you not only came out of 2008 unscathed, but you made a profit. The key to becoming a healthy investor is: First, being disciplined in your approach to investing by having an investment plan with a strict set of rules and following those rules with no questions asked. If you have not made this investment plan yet make it your first goal to sit down and get this plan written down. Second, make it a daily habit to monitor the stock market activities so you consistently have a pulse on the health and direction of the major indexes. Finally third, find a specific way to find stocks showing healthy fundamentals, industries, and technical chart patterns so that when the market is showing you good health you put probabilities on your side by finding the most superior stocks. If you do not take these 3 steps into consideration you are setting yourself up for failure. It is like being a Superbowl coach and going into the big game without a game plan. Make it your first priority in this new year of 2009 to put these three steps into play.
Now let's talk about the market health. On December 2, 2008 we confirmed a new rally in the stock market. This situation means we can start looking for F.I.T. Stocks looking to break out of sound base patterns and begin to ease into the stock market as a way of testing the waters. In previous confirmed rallies of 2008, many of the F.I.T. Stock break outs shot out of sound base patterns only to immediately reverse and hit the stop loss sell signal. This is OK, and this is why we merely TEST the waters as a new market rally confirms. If we follow our rules we stay in business.
This final new rally confirmation of 2008, so far has seemed to have a different feel to it. For the first 2 weeks since the confirmation on Dec. 2 no F.I.T. Stocks were breaking out, but no F.I.T. Stocks were selling off either. Most likely big money investors still needed more proof that this new market rally could sustain itself after stocks had been beaten up so hard from the previous months of September and October. Also, many stocks had yet to build solid base patterns or proper buy points. Yes, many of the big fish investors look for the same set ups we do.
Now however, in the last two weeks of 2008, we have seen many F.I.T. Stocks climb to the top of their technical chart patterns and break out past their buy points on solid volume. Since the last newsletter of Dec. 21, 2008 we have had 6 of our F.I.T. Stocks break out: HMSY, SJI, QSII, GMCR, THOR, and TWGP. So far their prices have help up well unlike the previous market rallies. What this may be telling us is that stocks are beginning to find their ground again. Leading stocks are holding up better to market conditions which is a positive sign.
Another positive sign has been that many leading stocks are starting to formulate solid technical chart patterns, rounding out their bases and climbing the right side of the base on strong volume.
Finally, last week the major indexes were able to clear their 50 day moving averages and remain above these levels for a couple of days. The major indexes have not been able to sustain the 50 day moving average for a long time.
Now the WARNING: the one draw back to all of this has been the shortened weeks of trading because of the holidays. Volume has been light on these moves up in price the major indexes have made over the last two weeks.
This week the Big Money Investors will report back to duty, volume will kick back in, and we will find out whether this new rally can sustain itself and stay positive or if the move up was just a head fake to set us up for another big move down. WATCH THE MARKETS CAREFULLY THIS WEEK AS TRADERS RETURN. FOLLOW ALL OF YOUR SELL RULES.
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STOCK MARKET NEWS:
Stock Market starts 2009 on a positive note: Nasdaq gains 6.7%, S&P 500 jumps 6.8%, and DOW climbs 6.1%.
Israel attacks Hamas.
Holiday Sales fall from previous year from 1.5-2%.
GMAC gets 6 billion dollar loan from Treasury.
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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. Technically some positive characteristics have developed in the SPY. First, we have broken out of the triangle base that had been building, which suggest a bottom in prices may have been reached. We have now reached a series of 4 higher lows and 3 higher highs. This suggests that for this small time we have started a mini uptrend within a bearish market or a bear market rally. Second, the SPY has now spent 2 solid days above the 50 day moving average indicated by the red arrow. The one draw back is the light volume. Next week as the big money steps back into the market we need to see if the major indexes can maintain the support of the 50 day moving average and continue upwards on increasing volume.
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NASDAQ: 6 Month chart, daily price bars.
Notice the similarities between the NASDAQ and the SPY. Next week will be a very telling week for all 3 of the major indexes. Remember as the big money returns from holiday we want to see the major indexes hold above the 50 day moving averages and for volume to increase to the upside. If we reverse to the downside and the NASDAQ breaks below 1500, be prepared to protect any profits you may have at this time.
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Top 10 Industries:
- Transportation Airlines
- Computer Software Medical
- Insurance-Brokers
- Commercial Services Security
- Commercial Services-Schools
- Retail Super Mini Markets
- Retail Wholesale Food
- Insurance Property, Casual, Title
- Banks-Northeast
- Utility Water Supply
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
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 |
32.02 |
7% |
|
|
2.09 |
| HMSY |
11/23/2008 |
12/15/2008 |
U |
27.53 |
31.57 |
15% |
|
|
4.04 |
| TWGP |
12/21/2008 |
12/31/2008 |
U |
27.73 |
27.9 |
1% |
|
|
0.17 |
| GMCR |
12/21/2008 |
12/29/2008 |
C/H |
38.63 |
39.09 |
1% |
|
|
0.46 |
| SJI |
12/7/2008 |
12/30/2008 |
C/H |
39.13 |
39.94 |
2% |
|
|
0.81 |
| QSII |
12/21/2008 |
12/24/2008 |
D/B |
43.63 |
43.61 |
0% |
|
|
-0.02 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
18442 |
|
|
|
|
|
|
|
|
|
|
** 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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Stock: Capella Education
Symbol: CPLA
Fundamentals: 9.9 out of 10
Industry: Commercial Services Schools Industry Strength: 5
Technical Pattern: Cup with Handle Avg. Volume: 306,600
Pivot or Buy Point: $61.33
Stop Loss: $57.04 or 7%
Profit 1: $67.46 or 10%
Profit 2: $73.59 or 20%
Capella Education provides online post-secondary education to people by offering 950 courses and 19 academic programs. Online education has been one of our top 10 industries for several weeks now as people go back to school to re-invent themselves. CPLA is building a nice Cup with Handle pattern and currently sits in the sixth week of the handle. In the handle, prices have wedged down and volume has dried which are classic signs of a healthy handle pattern. When CPLA breaks above the high of the handle enter a buy point of $61.33 and confirm the move with strong volume.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------Stock: Panera Bread Co.
Symbol: PNRA
Fundamentals: 9.7 out of 10
Industry: Retail Restaurants Industry Strength: 32
Technical Pattern: Cup with Handle Avg. Volume: 935,000
Pivot or Buy Point: $56.63
Stop Loss: $52.67 or 7%
Profit 1: $62.29 or 10%
Profit 2: $67.95 or 20%
If you have ever gone into a Panera restaurant and ordered a cinnamon bagel then you already know why the company is worth investing in. I am often in PNRA as I do my research on stocks and am always amazed at the volume of people in there eating during these economic times. The volume of people has showed up in the last quarter earnings with a 44% increase. PNRA is forming a perfect Cup with Handle pattern and rest in the third week of the handle. When PNRA breaks above the high point of the handle jump in with a $56.63 buy point on good volume. When you make your 20% profit, go try one of those cinnamon bagels.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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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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