Date: Mar. 08, 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!
The Market correction is getting steeper by the day. Last we discussed the possibilities of what could happen with the support lines of the major indexes once they have been broken. Two options could take place: One, the indexes could exhaust the selling and break back above their support lines, in what we call a false break out to the downside, or two, the support line is broken and more sellers step in driving the market down in a hurry. Unfortunately, the DOW and S&P, whose major long term support lines had been broken, decided on option two and big money investors watching these levels decided enough is enough and began to bail out of the stock market. For the DOW and S&P the correction is hitting lower lows and becoming steeper by the day.
The NASDAQ, on the other hand, is hanging on by a thread, but as of this writing at 12 noon on Friday, that thread is being cut and the NASDAQ is heading below its November low of 1295. The major indexes will follow each other, so it was just a matter of time before the NASDAQ followed its counterparts the DOW and S&P.
Bad news is still what is driving these markets lower and in all three of the indexes we may have a ways to go since these major support levels have been broken. As we continue to monitor the markets movements pay special attention to the daily price activity and the volume associated with it. On down days we want to see the volume begin to eventually get lighter, suggesting that for the time being maybe sellers are starting to dry up. Look for signs of reversals in the markets price patterns. This is when prices fall, but by the end of the day or week they have clawed there way back to the top of the price range. Look for any positive price days and see if the volume is strong associated with the move, suggesting that maybe some buyers have started to step back into the market. Staying on top of these price and volume movements will make you a healthier investor.
At this time you should be strictly in CASH and preserving your capital. If you are in any stocks make sure you have a sound exit strategy as this will keep you out of trouble. If you are in a stock that has a decent profit you may consider selling most of your position, if not all, to secure your investment. Any profit is a great profit.
This market correction is STEEP and has plenty of room to get STEEPER. DO NOT think you will out smart it by going bargain shopping for stocks. We may get a quick bounce in the stock market in a few days or a week, but do not let it fool you, STAY OUT AND STAY SAFE until there are clear indications that we may be in a bear market rally. It is important to understand that in a bear market, or steep correction, that eventually 3 out of 4 stocks will follow the markets downward spiral and you do not want to be caught in this whirlpool of selling watching your money go down the drain.
Stay on the sidelines, be patient, and let this market correction settle itself out. Sellers will dry up one day and we want to have our hard earned CASH ready to invest when the time comes. Keep practicing your healthy investment habits, be disciplined, be patient, and remain focused on the market and you will be a successful investor.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
STOCK MARKET NEWS:
NASDAQ heads down for the week by -6.1%. The S&P falls -7% and the DOW loses -6.2%.
Financials sink the markets lower.
651,000 more jobs lost.
GM may go Bankrupt.
$1 Trillion TALF Program starts.
$75 Billion Used to rework mortgages of borrowers in hardship.
----------------------------------------------------------------------------------------------------------
Index Charts
S&P 500 : 6 Month Chart with Daily Price Bars.
The S&P has continued through the support line of 740. Prices picked up steam selling off hard on Monday, looked for a quick bounce on Wednesday before continuing lower for the rest of the week. On Friday prices finished near dead even. The red candlestick furthest to the right shows us a bit of indecision on Friday. On this day prices finshed flat, ending the day almost exactly where they started. This could be a sign that the S&P is ready for a brief bounce up in price. It is not uncommon for prices to pierce through a support level and within the next few days or weeks bounce back up and retest that support line at 740. If the S&P bounces and retest this 740 level and then goes on to continue lower it would be a prime example of support being broken and than becoming resistance. Watch for the move next week.
S&P 500: ALL DATA with monthly price bars.
VERY LONG TERM CHART!
The Double top pattern in the S&P has been broken. This pattern is the upside down version of our double bottom pattern that we use for many of our F.I.T. Stocks. Rather than having the shape of a "W", the double top makes the shape of an "M". The middle leg of this "M" was where our last major area of support was holding and this level at 740 has been broken. We currently are just resting at the next minor level of support at 680. If we break below this level the next stop might be another 200 points down to the 480 level.
KEY AREA of SUPPORT for S&P 500: 680
----------------------------------------------------------------------------------------------------------
NASDAQ: 6 Month chart, daily price bars.
As you can see, the NASDAQ has just started to pierce through the major low we made back in November at 1295. We are currently just below this level and what will be interesting to watch for next week is whether the NASDAQ now will hold this support level or follow the direction of the major indexes and head lower. So far the NASDAQ has lagged behind the other indexes in its steep decline down and this is most likely due to the other indexes heavy involvement in the financial sectors.
NASDAQ: ALL DATA, Monthly price bars.
Very Long Term Chart!
If the NASDAQ cannot hold this November 2008 low it looks like our next stop down will be just above the 1100 price level. This 1100 level corresponds to the last low the NASDAQ made back in late 2002. This 1100 level is also very important in that when the NASDAQ hit this low, the index then went on to make a bull run for the next 5 years. However that Bull Run started after a 31 month long bear market. Currently we are only 17 months into this bear market.
KEY AREA OF SUPPORT FOR NASDAQ: 1295 or 1100.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Top 10 Industries:
- Metal Ores-Gold/Silver
- Commercial Services Schools
- Medical Genetics
- Food Flour and Grain
- Fnancepbl Inv Fdbnd
- Retail Wholesale Autoparts
- Finance Index Tracking Funds
- Computer Software Medical
- Food Misc. Preparation
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.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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% |
2/6/2009 |
$34.29 |
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 |
41.4 |
7% |
|
|
2.77 |
| 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 |
50.25 |
-4% |
|
|
-2.28 |
| |
|
|
|
|
|
|
|
|
|
| TOTAL x 100 Shares: |
|
|
|
|
|
|
|
-680 |
** 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.
----------------------------------------------------------------------------------------------------------
|
F.I.T. STOCKS Showing some Muscle
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Below are some F.I.T. Stocks that are showing signs of institutional buying as they build the right side of their chart patterns |
| These stocks have passed the F-Fundamentals and I -Industry test, but we must wait for the T -Technical Chart pattern to form |
| and the market direction to begin to rally once again. |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Please review the charts and save this as a watch list. |
|
|
|
|
|
|
|
|
|
|
|
|
|
| F.I.T. STOCKS Showing Accumulation |
|
|
|
|
|
|
|
|
|
|
|
|
|
| STAR |
|
|
|
|
|
|
| SVR |
|
|
|
|
|
|
| SNDA |
|
|
|
|
|
|
| BWLD |
|
|
|
|
|
|
| SXL |
|
|
|
|
|
|
| INT |
|
|
|
|
|
|
| SPH |
|
|
|
|
|
|
| BMC |
|
|
|
|
|
|
| CPSI |
|
|
|
|
|
|
| EPIQ |
|
|
|
|
|
|
| PZZA |
|
|
|
|
|
|
| AAP |
|
|
|
|
|
|
| AIPC |
|
|
|
|
|
|
| WW |
|
|
|
|
|
|
| ACM |
|
|
|
|
|
|
| GVA |
|
|
|
|
|
|
| IBM |
|
|
|
|
|
|
| CHKP |
|
|
|
|
|
|
| AMZN |
|
|
|
|
|
|
| DEP |
|
|
|
|
|
|
| PCG |
|
|
|
|
|
|
| SJI |
|
|
|
|
|
|
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
The F.I.T. STOCK PLAN
This week we have NO 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 *
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
F.I.T. Stocks Edcuation:
Understanding the Importance of Support and Resistance.
This one year chart of the John Deere company gives a great example of understanding support and resistance levels. Think of support as a ball bouncing off of a floor. In the case of a stock chart it is prices that bounce off of a floor. The support is created when a stock sells off to a certain level and each time it hits this level sellers are unwilling to sell below this level so buyers step back in to support it and drive the prices back up. Resistance is the exact opposite. Resistance acts as a ceiling for prices. In this case buyers drive prices up to a certain level, but not beyond what they feel the stock is worth. As F.I.T. Investors this level of resistance is many times what we look for and when this resistance level is broken on strong volume it shows us that there is now a much higher demand for the stock.
In the John Deere chart above we can immediately determine a strong support level to the far left of the chart at roughly $75. Prices hit this support level 4 different times before finally breaking through to the down side. After this failure of support we see a classic example of support becoming new resistance. On three different occasions prices tried to jump back up to the support level of $75. Each time the old support level became the new ceiling at $75. From mid June to mid September we notice a new support level taking place at $60. This support level held three times before the floor fell out from under the stock. Many times after a break below a support or resistance line prices will immediately come back to challenge the previous level. Somewhat of a head fake. Many people fall for this head fake before they realize they are in over their heads as prices like to flow where the support or resistance lines have been broken. In mid September this head fake would have caught a lot of people, as after prices broke below the support level at $60, buyers stepped back in offering a head fake, and then sellers jumped back in immediately driving the stock to lower ground. You might say the floor fell out from underneath them. The stock went onto sink almost $30 before finding another level of support at $30.
Learning to understand the importance of support and resistance lines can really help your investment decisions in making money in the stock market. When stocks break below a support line often it is a great time to short a stock. When a stock jumps through a resistance level it is a great time to buy a stock. Often times I will be sitting at the computer looking at charts and my son will come in and we play the line game. I merely have him draw lines on the charts where he sees price levels have hit at the same level. Basically, connecting the dots. I then tell him to enter a buy if the stock goes above a resistance line or a sell if the price goes below a support level. Many times he has made money just by learning to draw lines on the charts. Understanding how to recognize support and resistance levels will increase your chances of becoming a F.I.T. Investor.
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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.
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
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
