Date: Jan.11, 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, but Looking SICK!
The market rally that confirmed December 2, 2008 is trying desperately to hold on, but since the New Year the BEARS don't seem to want to cooperate. The news has been grim to open up the new year of 2009 and distribution days have been picking up in the stock market. The Dow Jones is acting the weakest with 5 days of heavy distribution since the middle of December. A distribution day is any day where the indexes sell off on higher volume than the previous day's volume. The NASDAQ has held up best so far with only 2 distribution days, but this could change in a hurry if the other major indexes begin to sell off hard.
The warning flags are up at the moment suggesting the BEARS maybe trying to drive this market lower and this new rally may be condemned if the BULLS start backing out of the picture. The Dow fell below its 50 day moving average which is NOT a very encouraging sign. The S&P is currently resting right on its 50 day moving average and the NASDAQ is so far holding above its 50 day moving average. Many institutional investors use the 50 day moving average as an indicator to determine bearish or bullish price movement. If prices are above the 50 day moving average and holding there, they view this as bullish and looking for prices to hold support at this level. Below the 50 day moving average and a bearish sentiment is given.
Another tell tale sign that this rally maybe faltering is once again we have started to see leading stocks break out from sound bases only to immediately give the gains back and hit the stop loss requirements. Tuesday in the markets was a very interesting day as the NASDAQ shot up on nice volume, yet many of the leading stocks in the Investors Business Daily research tools, as well as, several of the F.I.T. Stocks recommendations, all faltered on pretty heavy volume. If stocks are healthy and the markets are being bought up, so to should leading stocks, but this was not the case on Tuesday. This created a strong divergence between leading stocks and the stock market and should have raised a red flag to those of you watching the daily routines of the major indexes.
When these red flag scenarios occur we must watch our F.I.T. Stock selections with hawk like vision. Monitor them closely and follow your investment sell rules with great discipline. Our sell rules are to be followed with no questions asked. Also, if you have entered into a F.I.T. Stock and prices have begun to slip, watch for clues of health versus distress in the stock. A healthy stock will move down in price, but it should move down in lighter volume. A healthy stock will also hold strong at different levels of support such as the 50 day moving average. On the other hand stocks in distress will move lower on stronger volume, come to important support areas such as the 50 day moving average and break through them to the downside.
Watch closely for these clues in the stock market and as well as in your stocks to build healthy investment habits. Remember you are the Doctor in this investment game and you must always be able to determine the health of your patients.
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STOCK MARKET NEWS:
Stock Market ends first full week of trading on a sour note: NASDAQ slips 3.6%, S&P 500 declines 4.4%, and DOW tumbles 4.8%.
Retailers beat views, but holiday sales are still the worst in decades falling .9%
U.S. cut 524,000 jobs in December.
Economy loses 2.6 million jobs in 2008, 75% in the last 4 months.
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Index Charts
DOW JONES INDUSTRIAL AVERAGE: 6 Month Chart with Daily Price Bars.
The first thing to notice about the DOW chart is the amount of distribution days that have occurred since mid December, indicated by the red arrows in the volume chart. Several of these heavy distribution days within a couple weeks time frame can be enough for the DOW to head into another tail spin south. We have drawn another red arrow on the right side of the chart indicating the DOWS penetration of its 50 day moving average to the downside. At this point the DOW has reached above the 50 day moving average 3 times and failed each time. If the DOW is to get itself back in shape we will need to see it jump back above the 50 day moving average and hold above its mini uptrend support level indicated by the green line. Also, we would like to see the DOW crash through the horizontal resistance level indicated by the top green line and reach to new highs. What we do not want to see is the DOW fall below its most recent low below 8400.
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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
- Commercial Services Schools - This group showing resilience in tough market, watch CPLA.
- Commercial Services Security
- Commercial Software Medical
- Insurance-Brokers
- Insurance Property/Casualty/Title
- Commercial Services Consulting
- Retail Wholesale Auto Parts - Moved up 14 spots
- Utility Water Supply
- Retail Super Mini Markets
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 2009
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 |
| |
|
|
|
|
|
|
|
|
|
| THOR |
12/7/2008 |
12/16/2008 |
C/H |
29.93 |
28.25 |
-6% |
|
|
-1.68 |
| HMSY |
11/23/2008 |
12/15/2008 |
U |
27.53 |
29.13 |
6% |
|
|
1.6 |
| TWGP |
12/21/2008 |
12/31/2008 |
U |
27.73 |
26.9 |
-3% |
|
|
-0.83 |
| GMCR |
12/21/2008 |
12/29/2008 |
C/H |
38.63 |
35.93 |
-7% |
1/9/2009 |
$35.93 |
-2.7 |
| SJI |
12/7/2008 |
12/30/2008 |
C/H |
39.13 |
37.35 |
-5% |
|
|
-1.78 |
| QSII |
12/21/2008 |
12/24/2008 |
D/B |
43.63 |
40.58 |
-7% |
1/5/2009 |
$40.58 |
-3.05 |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
-844 |
|
|
|
|
|
|
|
|
|
|
** 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.
FOLLOW YOUR SELL RULES. As you can see we went from lots of green last week to lots of red this week suggesting the BEARS are trying to take over again.
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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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No New Added F.I.T. Stocks this Week, but Keep a Close Eye on CPLA as Education stocks have been holdiong STRONG!
Stock: Capella Education
Symbol: CPLA
Fundamentals: 9.9 out of 10
Industry: Commercial Services Schools Industry Strength: 2
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