Date: Jan.25, 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 Correction!
Last weeks attempt at a new rally immediately failed on Tuesday as prices dipped below the low of last Friday's rally attempt. The market health remains in a CORRECTIVE state. Keep a close eye on F.I.T. stocks that have held up nicely such as HMSY and THOR. Monitor their daily price movements and look for signs of any kind of weakness. Weakness will occur on any down days in heavy volume, a breach of the 50 day moving average or 10 week moving average.
The Commercial Services Schools industry continues to show great leadership in a correcting market. ITT Educational, which we talked about last week and was a F.I.T. Stock recommendation on Nov. 14, 2008, had another brilliant week on strong volume when it came out with a strong fourth quarter earnings result. Many of the stocks followed the coattails of ITT Educational (ESI) with strong moves on solid volume. DeVry Inc., which we listed last week, broke out of its Flat Base pattern with a buy point of $60.63 on strong volume and CPLA is nearing its buy point of $61.33. If you jumped into this F.I.T. Stock be extra careful as we are in a correcting market and you are going against the tide which can be dangerous. Follow the strict sell rules of 7% or whatever stop loss you have set for yourself. That being said the educational stocks seem to do well in Bear markets, as people go back to school to revamp their resumes and regain an upper hand in the workforce.
Although the Commercial Services Schools is the leading industry at this time, it will be hardly enough to help rise this market out of the doldrums it is in. The markets thrive on Financials and until Wall Street feels these bailout efforts, stimulus plans, and mortgage messes are coming to an end or at least bottoming out, it may be awhile before the Big money institutions are ready to start buying up equities again. So far in 2009 the markets have been very news driven which makes it tough on investors. One day the Banking sector will get slammed, driving the indexes down, when news comes out that they need more bailout money from the government or that their earnings are much worse than expected. The next day the markets will shoot up when rumors begin to stir that a stimulus plan and bailout efforts from the government will throw the financial sector a lifeline. The question now becomes when will we see the financial sector settle down and begin to turn? As healthy investors we need to understand that the indexes think 6-12 months in the future and this is why we must continually monitor the daily price and volume movements of the stock market as well as keep a list of F.I.T. Stocks. When the day comes and Wall Street feels the financial sector has bottomed out, the bulls will begin to rally, we want to be prepared, and this is what healthy investors do.
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STOCK MARKET NEWS:
Stock Market ends first full week of trading on a sour note: NASDAQ slips 3.4%, S&P 500 declines 2.1%, and the DOW lost 2.5%.
President Obama sworn into office.
Financial firms continue to get beaten down U.K. in recession as GDP weakens.
Housing starts fall 15% in December.
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Index Charts
SPY - SPDR ETF: 6 Month Chart with Daily Price Bars.
There are 3 key elements to this chart of SPY. First the chart shows the formulation of a triangle pattern indicated by the blue lines.. Notice how prices are starting to squeeze together, eventually prices will need to break out of this pattern. Second, we have the two green arrows; the first is last Friday's first rally attempt. This rally attempt immediately failed as prices broke below the low of our first rally day on Tuesday. The second green arrow indicates the price action this past Friday. On this day prices gapped down from the opening bell the SPY's were able to fight back and end up for the day. This creates another first day at a new rally attempt for the SPY's. Third, notice the two distribution days that occurred last week in the SPY's volume was bigger on the down days than on the up days. This is a sign of weakness.
Next week if prices break through the bottom of the triangle we will need to watch the support line just below $75 (drawn in red) very closely as this level as this is a major support area from the lows made in 2002 (see the chart below).
Watch closely for this key level of support at $75 over the coming weeks.
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NASDAQ: 6 Month chart, daily price bars.
This 6 month chart of the NASDAQ tells the same picture as the SPY 6 month chart listed above. The only difference being that if the NASDAQ breaks through the triangle pattern to the down side we need to watch the 1300 level of support which is the last low created in November of 2008.
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 Medical
- Commercial Software Security
- Insurance Brokers
- Utility Water Supply
- Insurance Property/Casual/Title
- Retail Discount Variety
- Retail Super Mini Markets
- Commercial Services Consulting
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 |
30.31 |
1% |
|
|
0.38 |
| HMSY |
11/23/2008 |
12/15/2008 |
U |
27.53 |
30.87 |
12% |
|
|
3.34 |
| 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 |
| DV |
1/18/2009 |
1/21/2009 |
FB |
60.63 |
60.87 |
0% |
|
|
0.24 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
-670 |
** 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 holding 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.
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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