Date: Feb. 8, 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:
Rally Confirmed Jan. 28, 2009! Rally trying to pick up steam!
The Bear and Bull battle continues on. Just when it looks like the bears will take over again; the bulls bounce back up from a heavy blow and end up looking strong for the week. Although the S&P and DOW have had 2 distribution days since the confirmed rally, this week the major indexes tried to flex some muscle and pushed the bears back into a corner with 2 accumulation days.
If you remember when the rally first confirmed on Wednesday, January 28, 2009, the rally immediately took a turn for the worse as the next two days the markets tumbled down and it looked like the rally was over with before it even got started. This week has been a complete different story as the NASDAQ pushed through with 5 straight up days. What was even more promising for the indexes were the day's of accumulation that took place on Thursday and Friday. On these day's the stock market shot up on strong volume a clear sign that some Big Money was jumping into the major indexes. Another promising sign was the markets resilience, especially the NASDAQ, as a few of the days this week the markets started on a tear to the downside but fought their way back to end the day close to their opening prices or even closing up for the day.
We all know how tricky this market has been so stay on your toes and be disciplined. So what actually drove the market up for the week? NEWS once again is the culprit. Headlines seem to drive the market one way or another these days, and sometimes it is just the HOPE of good news. This week the Stimulus package was the front runner and this is what is giving hope to the market. As President Obama himself said in his speech on Thursday night, "Stimulus means to spend, that is what a stimulus package is..." or something like that. So the hope is that this money will be injected into the economy and this hope trumped another terrible jobless claims report.
Speaking of jobs it will be prudent that this stimulus package creates jobs for people. The plain fact of the matter is that as people lose their jobs, and companies cut back by letting more people go, peoples pockets will soon dry up and very little spending will be going on in the economy. No spending means bad earnings for companies. Bad earnings and sales lead to companies whose stock price starts to deplete as the big money begins to recognize it is time to get out and begin to unload the stock. So our hope is that this stimulus package begins to create jobs and people start to spend their money in the economy, earnings start to improve, sales start to increase, and the big money starts to reinvest in equities once again.
As F.I.T. Investors we need to be keenly aware of where this stimulus package is meant to be spent. Watch closely industries related to clean energy and construction for roads and bridges and anything that has to do with the materials involved. Also keep any eye on medical records as Obama makes a push to digitize medical records.
I am often asked will this market ever turn around. The answer is a for certain yes. We will see another big growth stock boom as new industries in clean energy and technology continue to emerge. As F.I.T. Investors we need to stay on top of anything to do with these growing industries and be ready to pounce when the market and the industries begin to show their growth opportunities. Also, please be advised that every major bull run has been driven by an industry in its growth stage. Stay Alert.
During these tricky markets be advised that it is still OK to remain in CASH until this market settles into a more predictable pattern. These market times are more geared for the trader than the investor. These markets are being driven by the rays of HOPE and than the loss of HOPE. There has never been a great investor who made big money on the idea of HOPE, so like a great athlete stay in the present, let the market present itself each day to you and follow the markets lead, not what you HOPE it will do. It is difficult, so realize your risk tolerance, and continue to gauge the markets direction on a daily basis, be disciplined, and never give up. You will persevere over these trying times in the stock market; this is what F.I.T. Investors do.
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STOCK MARKET NEWS:
NASDAQ leads the stock market higher with a 7.8% gain for the week. The S&P rises 5.2% and the DOW jumps 3.5%.
Senate compromises on possible $780 billion stimulus package.
Job losses hit 598,000 in January.
Treasury Secretary Timothy Geithner will re-introduce the Bad Bank Plan on Monday.
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Index Charts
SPY - SPDR ETF: 6 Month Chart with Daily Price Bars.
HOPE is once again driving the markets upwards. The question will be whether the HOPE will last. Notice the blue oval in the volume bars representing 2 days of accumulation. Let's see if this trend can continue. To continue this transition upwards the SPY will have to move convincingly above the 50 day moving average and then break through the resistance at $95. This $95 level would put the SPY in positive territory for the year, create a new high for the year, and break the downward trend line as indicated by the blue line. To the downside the $80 level offers the first level of support and then we must watch carefully for the $75 level. The $75 level is a major area of support on the 10 year chart and if prices were to break below this we could be on a sinking ship. See last weeks Newsletter.
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NASDAQ: 6 Month chart, daily price bars.
The NASDAQ appears to be the healthiest of the 3 major indexes. Currently, the NASDAQ has cleared its 50 day moving average on 2 days of heavy accumulation. We will want to see if the NASDAQ can now jump above the previous high it made in January at 1666. This would put the NASDAQ at a new high for 2009, break the triangle pattern that has developed, and maybe begin a new uptrend in this market. 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.
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.
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Top 10 Industries:
- Metal Ores-Gold/Silver
- Commercial Services Schools - This group showing resilience in tough market, watch CPLA.
- Medical Genetics
- Medical Biomed
- Telecom Wireless Equipment
- Computer Software Medical
- Medical Ethical Drugs
- Financepbl Inv Fdbnd
- Utility Water Supply
- Commercial Services Security
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 |
27.84 |
-7% |
2/3/2009 |
$27.84 |
-2.09 |
| HMSY |
11/23/2008 |
12/15/2008 |
U |
27.53 |
34.29 |
25% |
|
|
6.76 |
| 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 |
41.5 |
7% |
|
|
2.87 |
| 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 |
| GILD |
2/1/2009 |
2/3/2009 |
C/H |
52.53 |
52.45 |
0% |
|
|
-0.08 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
-450 |
** 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: Schering Plough
Symbol: SGP
Fundamentals: 9.9 out of 10
Industry: Medical Ethical Drugs Industry Strength: 7
Technical Pattern: Cup with Handle Avg. Volume: 13,513,200
Pivot or Buy Point: $20.23
Stop Loss: $18.82 or 7%
Profit 1: $22.25 or 10%
Profit 2: $24.27 or 20%
Schering Plough develops prescription drugs for the treatment of high cholesterol, arthritis, and allergies. It is expected to have annual earnings increase of 63% and last quarters earnings were up 44%. This is a one year chart of SGP with daily price bars to give you a better idea of how nice of a handle it has shaped. Notice how the handle had wedged down and now prices are peaking up to the high of the handle. This is where we need to be on alert and wait for SGP to break above the high on the handle. If it does, let us jump in at $20.23 on heavy volume.
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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