Date: Feb. 1, 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: New Rally Confirms! But already feeling pressure!
Last Friday marked the first day of a new rally attempt for the major indexes and on day 4, Wednesday, Jan. 28, both the NASDAQ and S&P confirmed the new rally. On this day the NASDAQ jumped up 3.5% in price on very solid volume. More positive news came from the NASDAQ when prices were able to close above the 50 day moving average. News was once again the culprit for driving the markets up with such power as the FED said they would maintain interest rates near 0% for some time and also that they would implement a bad bank rule. This news shot the financial sector up off its bottom like a rocket ship.
Although Wednesday was a new rally confirmation, the markets immediately began to feel the pressure from the bears once again with two immediate down days. Friday, in fact was listed as a distribution day for the markets. These are not the healthy signs you would like to see soon after a market rally follow through. Once again the sell off was on bad news when CNBC reported that the "bad band" rule for the government to take the bad debt off of banks hands was meeting resistance. The good news, bad news head fakes of the major indexes seem like they will continue until the dust in the financial sector settles down.
When the stock market is so driven by news, it is more important then ever to keep a watchful eye on the daily price and volume movements of the indexes. We always want to be prepared for when the bulls finally retake control of the market, but we must also play great defense by sticking with are sell rules. This market is very tricky in that it searches for any little ray of HOPE when good news comes out about the economy or the government's willingness to inject more money into the system. The good news sets the bulls in motion and prices rise, however the very next day the bears will step right back in if bad news comes out about the economy or a company's earnings report.
This weekend we have the Super Bowl taking place and I can guarantee you both coaches have a strict game plan for their offense and defense as they prepare for their battle on the grid iron. This is no different for investing; we must have a game plan. These are tricky times, so be disciplined in every bit of your approach to investing. During these times you must monitor the daily price and volume movements of the stock market and any stocks you maybe invested in. Follow your investment rules with no questions asked. Never, ever second guess your sell rule that is what they are there for. If the major indexes begin to show distribution days and a correction be prepared to get out. When the markets rally does begin to pick up steam be prepared with a list of F.I.T. Stocks that are ready to get into the game. Stay focused, have a game plan, and be disciplined enough to stick with it and your healthy investment habits will make you a Super Bowl champion investor.
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STOCK MARKET NEWS:
Stock Market ends first full week of trading on a sour note: NASDAQ closes FLAT, S&P 500 declines .7%, and the DOW lost .9%.
House Democrats approve 825 Billion stimulus package.
Bad Bank Plan Falters.
FED leaves interest rates unchanged.
Heavy layoffs continue in the Corporate World.
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Index Charts
SPY - SPDR ETF: 6 Month Chart with Daily Price Bars.
Alright, so the green arrow is the first day of the new rally attempt. The green circle is Wednesday, Jan. 28, the day the new rally confirmed. Wednesday was day 4 of the new rally attempt and on this day prices in the SPY gapped up and continued to rise for the day, closing near its highest price of the day. However, the next 2 days the SPY spent its time selling off and immediately putting the new market rally under pressure. Notice the blue oval in the volume bars where on Friday the indexes marked a distribution day.
Next week we have two key support areas the bulls need to maintain. The first mark is at the $80 level. If prices break below this level we will have broken through the low of the first day's rally attempt, and by the rules this would be a rally failure. If we do break below $80, we then must watch the last low created in Nov. 2008 at $75. If this happens the markets could go into another heavy sell off.
For this new rally to gain steam, the bulls need to drive the prices back above the 50 day moving average with some strong volume behind it. Next we would want to see the rise continue above the last previous high that occurred at the beginning of January 2009, at $95.
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.
Once again we see how similar the major indexes charts are, the only difference is the price levels. The two key areas of support for the NASDAQ will be the 1430 level and if prices break through there, the November lows at 1300.
To the upside the NASDAQ needs to regain the 50 day moving average and then surge past the peak it made in early Jan. 2009 at 1666.
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:
- Commercial Services Schools - This group showing resilience in tough market, watch CPLA.
- Transportation Airline
- Commercial Software Medical
- Commercial Services Security
- Metal Ores Gold and Silver
- Insurance Brokers
- Utility Water Supply
- Telecom Wireless Equip.
- Insurance Property/Casual/Title
- Medical Ethical Drugs
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 |
28.97 |
-3% |
|
|
-0.96 |
| HMSY |
11/23/2008 |
12/15/2008 |
U |
27.53 |
30.95 |
12% |
|
|
3.42 |
| 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 |
56.39 |
-7% |
1/28/2009 |
$56.39 |
-4.24 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
-1220 |
** 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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Stock: Gilead Sciences
Symbol: GILD
Fundamentals: 9.9 out of 10
Industry: Medical Biomed Industry Strength: 13
Technical Pattern: Cup with Handle Avg. Volume: 8,534,500
Pivot or Buy Point: $52.53
Stop Loss: $48.86 or 7%
Profit 1: $57.78 or 10%
Profit 2: $63.03 or 20%
We have had GILD on our F.I.T. Stock list for awhile now and it looks to have finally shaped the perfect Cup with Handle pattern. GILD develops therapeutics for the treatment of viral, fungal, respiratory and cardiovascular diseases. Last quarters earnings were up 34% and sales increased 30%. Returnn on Equity is a rock solid 66%. Last Wednesday, Thursday, and Friday while the market started to sell off, GILD began its climb to the high of its handle. If the market holds up and GILD breaks above the high of the handle jump in with a $52.53 buy point. Confirm the move with strong volume.
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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: 1
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