Date: Jan.18, 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 is Correcting!
Last weeks market health suggested the major indexes were showing signs of weakness having added on several distribution days. The Dow Jones was especially looking rather sick and the NASDAQ was trying to hold on. This past week the major indexes definitely turned ill as all three of the major indexes closed below the 50 day moving average and two more distribution days were added on to the count sending the major indexes back into a CORRECTION.
Once the market health turns to a CORRECTION, it is time to be very diligent and disciplined with your sell rules. Going to CASH with small losses makes great investment sense. Most of the F.I.T. Stock trades have hit their 7% stop loss, but two remain holding on and showing some strength. Monitor HMSY and THOR for price and volume, if they show any signs of weakness get out. Weakness would be any heavy selling on strong volume.
Since the new year of 2009 has started, the main culprit to the decline in the stock market once again relates to Financials. Bank of America has now hit 18 year lows and is seeking more government money to help absorb its payment of Merrill Lynch. Wells Fargo has now hit a 7 year low on dividend fears and Citi has now bottomed out near its 16 year lows.
Thursday was the one bright spot for the stock market as the NASDAQ rallied 1.5%, the DOW .2% and the S&P squeaked out a .1% gain. Thursday's reversal was fueled by the hopes that the government would give the banks the help it needs, as well as by falling oil prices. We have mentioned several times in the last few newsletters to keep any eye on the Commercial Services Schools industry as it has been showing great leadership. On Thursday it showed its strength with APOL, ESI, and COCO sky rocketing to new highs. So please keep an eye on CPLA from last weeks newsletter as it has formed a nice Cup with Handle pattern and may follow suit with the rest of the group.
Another important aspect to watch for is past F.I.T. Stock candidates. ITT Educational Services and Dollar Tree were both stocks we had listed in our Nov. 14 newsletter. Both were in top 10 industries back then and are still in top 10 industries now. So even through market corrections these two stocks have been able to be resilient and now have broken out of the sound bases on strong volume. The message here is to continually monitor F.I.T. Stocks on a watch list unless they completely break down. In the case of ESI and DLTR they held up strong and were resilient, they maintained sound Fundamentals, remained in a strong Industry, and showed strong Technical support by remaining above their 50 and 200 day moving averages. These are all signs of a F.I.T. Stock. When a stock does not break out right away, if it shows these signs of resilience continue to monitor them on a watch list. A healthy investor always has a list of key players ready for the game.
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STOCK MARKET NEWS:
Stock Market ends first full week of trading on a sour note: NASDAQ slips 2.7%, S&P 500 declines 4.5%..
Bank of America gets 20 billion in aid from the government.
House Democrats release 825 billion stimulus plan.
Retail sales drop 2.7% for December.
Circuit City looks to liquidate.
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Index Charts
SPY - SPDR ETF: 6 Month Chart with Daily Price Bars.
The key point for the major indexes last week were to see if they could hold above the 50 day moving average. The SPY was unable to do this as Tuesday it broke below the 50 day moving average line and held below there. We have drawn to support lines in red on the chart, the first support line rest at $85 and last Thursday the SPY broke below this level and then reversed in price movement and finished up for the day. Look at the nice volume that swelled on this reversal day, indicated by the blue oval. To end the week the SPY again reversed in price on solid upside volume and climbed back above the $85 support level. This week it will be key to see if the SPY can stay above the $85 mark. If it slides back below this $85 level, the next low is roughly at $81, indicated by the solid red line. If SPY breaks the $81 level we could be going down to the lows of late November 2008, at $75.
The best news scenario for the Bulls would be for the SPY to break back above the 50 day moving average line and continue up to new highs above $95.
With President Obama starting his time at the White House we will have to see how Wall Street reacts to the changing of the guard.
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NASDAQ: 6 Month chart, daily price bars.
The NASDAQ also fell below the 50 day moving average line and is currently bumping its head against this level to try and regain it. The NASDAQ did hold support at its last low in mid-December which is positive. Thursday was a very positive reversal for the NASDAQ and it occurred on strong volume. Therefore, Thursday will mark the first day of a new market rally attempt. Now we must wait for another follow through day that should begin in the next 4-12 days. To confirm a new rally the follow through day should jump up in price 1.75% higher than the previous day's price and volume should remain strong to the upside. If the NASDAQ drops below the low of Thursday's first day rally attempt all bets are off and we wait for the next reversal day.
Please remember at this point you should be watching your stocks very closely for price and volume movement. DO NOT let a stock get 7% below your cost of entering the trade. Follow your sell rules specifically. Monitor the major indexes for a follow through confirmation in the next 4-12 days and turn to CASH if we have a follow through failure. It is the NEW YEAR so make it your New Years Resolution to practice healthy investment habits.
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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 Property/Casualty/Title
- Insurance Brokers
- Utility Water Supply
- Medical Genetics
- Retail Super Mini Markets
- Retail Discount Variety
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 |
29.69 |
-1% |
|
|
-0.24 |
| HMSY |
11/23/2008 |
12/15/2008 |
U |
27.53 |
31.67 |
15% |
|
|
4.14 |
| TWGP |
12/21/2008 |
12/31/2008 |
U |
27.73 |
25.79 |
-7% |
1/12/2009 |
$25.79 |
-1.94 |
| 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 |
36.4 |
-7% |
1/15/2009 |
$36.40 |
-2.73 |
| 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: |
|
|
|
|
|
|
|
-652 |
** 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 1 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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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: DeVry Inc.
Symbol: DV
Fundamentals: 9.9 out of 10
Industry: Commercial Services-Schools Industry Strength: 2
Technical Pattern: FLAT BASE Avg. Volume: 1,016,100
Pivot or Buy Point: $60.63
Stop Loss: $56.39 or 7%
Profit 1: $66.69 or 10%
Profit 2: $72.75 or 20%
DeVry provides post secondary education to 61,924 students through 91 locations. It "I" for Industry is red hot with several of its compatriots recently breaking out of sound bases such as: ESI, APOL, and COCO. The last time we listed DV it broke from a sound base only to stop us out with a loss. This time around DV has formed a new 6 week Flat Base. Notice the big reversal DV had at the beginning of January. Although the volume bar shows big and red, we notice that prices fought there way back for the week from below $52 back to above $56. This is a bullish reversal sign. Last wee volume to the upside pushed up again suggesting big money investors are jumping in. When DV breaks above the high of its Flat Base pattern and if the market returns to rally mode lets jump in at $60.63. As always confirm this move with strong upside volume.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------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