Date: April 12, 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.
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MARKET HEALTH:
MARKET IN RALLY!
WOW! Another strong week for the major indexes. All three of the major indexes pushed up for the week. Although we had a shortened trading week (markets were closed on Good Friday), the stock market offered a good example of monitoring price and volume movement.
As we study the markets movements for price and volume, during a market rally we would like to see prices pull back in lighter volume and move up in higher volume. Monday and Tuesday of last week were great examples of the stock market moving down in price with weak volume. Especially on Wednesday, if one were to just look at the change in price of the DOW Jones for instance, one would have been left with the impression that the 146 point drop was a very drastic move. However, we must always consider the conviction behind price movement and Wednesday's drop down in price had very little conviction behind it as volume came in well below the 50 day moving averages. This suggest that maybe big investors were just taking some profits off of the table as opposed to the bear market sellers coming in and shorting stocks.
Thursday on the other hand showed a stock market with big institution investors willing to jump back in and drive equities up. Thursday showed a stock market with improving signs of health as prices rose for the day on strong volume or accumulation. During healthy market rallies this positive action between price and volume is exactly what we like to see. Studying the daily price and volume movements of the stock market helps you keep in harmony with the major indexes and allows you to make healthy investment decisions.
Since our new stock market rally confirmed on March 12, we have seen 5 straight weeks of gains. The feel of this rally seems to be a little different as there seems to be more optimism about the economy. Remember the stock market tends to look 6-12 months out into the future. Thursday's strong rally in the market was helped by, of all things, a strong earnings report from banking giant Wells Fargo who posted Q1 earnings of 55 cents a share versus the 23 cents a share that was expected. The retail sector aslo showed signs of strength as several retail chains posted strong earnings and guided higher. Bed Bath and Beyond, Family Dollar, Buckle, and Jos. A. Bank all delivered strong quarterly results.
Conclusion: We are still in a bear market rally, but things have looked a little more positive this time around. Several of our F.I.T. Stocks have worked out well with GMCR leading the way with a 20% profit gain. As a healthy investor we need to keep testing this new rally by entering into the stock market a little at a time, continue to buy F.I.T. Stocks but at half the quantity you normally would. Once you have entered into a trade monitor the stocks price and volume movement and know your exit strategy. Follow your investment rules with no questions asked and continue to develop your healthy investment habits.
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STOCK MARKET NEWS:
NASDAQ leaps up for the week by 1.9%. The S&P bounces 1.7% and the DOW hurdles .8%.
Wells Fargo post Strong Q1 Earnings.
Retail sector post Stronger than Expected Earnings.
Treasury says it will help Health Insurers.
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Index Charts
S&P 500: 6 Month Chart with Daily Price Bars.
The S&P 500 held the support of its 50 day moving average line last week, which has been something it has been unable to do for several months. For now it appears that the 50 day moving average is now acting as support. We have drawn in a yellow horizontal line at roughly 880, this will be the next area of resistance for the S&P. Our best scenario for the S&P is for prices to break above the 880 level, head up to the 200 day moving average at the 1000 level and break through the resistance, and on its way up to hold support at the 50 day moving average. If the S&P loses its support of the 50 day moving average we need to put our guard up and be ready to react to a possible downturn and correction. Just a few things to watch for in the coming weeks.
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NASDAQ: 6 Month chart, daily price bars.
The NASDAQ has maintained the leadership role of the three major indexes. There are three positive aspects to the current conditions of the NASDAQ: First, the NASDAQ has held its 50 day moving average. Second, we made a new 2009 price high above 1600, putting the NASDAQ in positive territory for the year, let's see if the 1600 level will act as a minor support level in the coming weeks. Third, we have a big volume surge that occurred on Thursday, suggesting big investors are starting to put money back into the markets. Now we must expect some type of pull back as we have had 5 straight up weeks in the NASDAQ. If a pull back does occur we want the 50 day moving average to hold as a support line. Our next area above is the 200 day moving average that will act as resistance at 1800. Now that we are in a rally we just want to monitor the success of the rally. Again watch for prices to move up in higher volume and pull back in lower volume.
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Top 10 Industries:
- Retail Consumer Electronics
- Chemicals Fertilizers
- Retail Wholesale Autoparts
- Food Flour and Grain
- Oil Gas International Exploration
- Metal Ores Gold and Silver
- Retail Restaurants
- Metal Ores
- Computer Software Security
- Oil and Gas Canadian
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/ |
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Date |
Date |
Pattern |
Point |
Price |
Change |
Date |
Price |
Loss |
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| 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 |
47.3 |
22% |
3/29/2009 |
$47.30 |
8.67 |
| 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 |
48.86 |
-7% |
2/17/2009 |
$48.86 |
-3.67 |
| SGP |
3/8/2009 |
3/9/2009 |
C/H |
20.23 |
24.21 |
20% |
3/13/2009 |
$24.27 |
3.98 |
| GMCR |
3/15/2009 |
3/16/2009 |
C/H |
43.03 |
53.17 |
24% |
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10.14 |
| AIPC |
3/22/2009 |
3/25/2009 |
F/B |
33.63 |
34.24 |
2% |
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0.61 |
| RNT |
4/5/2009 |
4/9/2009 |
U |
29.03 |
29.11 |
0% |
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0.08 |
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| TOTAL x 100 Shares: |
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1252 |
READ ME:
Portfolio management and disciplined rules: If you notice are profit and loss statement above you can clearly see the benefit to sticking with sound investment rules and portfolio management. For the first time this year we have turned into positive territory for the F.I.T. Stocks Portfolio and this has been during a time where most people have lost half of their portfolio under management by someone else. The rules have been simple: Find high quality growth stocks with strong Fundamentals, in leading Industries, forming superior Technical Chart patterns. We enter into these F.I.T. Stocks during a rally, set our 10-20% profit target and take no more than a 7% loss. If you look at the spreadsheet above, you quickly notice that by following sound and healthy investment habits, we tested the market, we were only right less than 50% of the time, yet we have turned a profit. The key is we got out when the market and our stocks told us to get out, we followed our investment plan, we built healthy investment habits and we have come out ahead of most investment professionals. You can be successful in the stock market it just requires a strong investment plan and the courage and discipline to follow it.
** 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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F.I.T. STOCKS Showing some Muscle
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| 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. |
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| Please review the charts and save this as a watch list. |
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| F.I.T. STOCKS Showing Accumulation |
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| STAR |
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| SVR |
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| SNDA |
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| BWLD |
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| SXL |
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| INT |
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| SPH |
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| BMC |
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| CPSI |
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| EPIQ |
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| PZZA |
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| AAP |
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| WW |
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| ACM |
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| GVA |
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| IBM |
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| CHKP |
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| AMZN |
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| DEP |
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| PCG |
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**IMPORTANT**-
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The F.I.T. STOCK PLAN
This week we have 2 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: World Fuel Services
Symbol: INT
Fundamentals: 9.7 out of 10
Industry: Oil Gas refining and Marketing Industry Strength: 12
Technical Pattern: Double Bottom Avg. Volume: 768,400
Pivot or Buy Point: $36.13
Stop Loss: $33.61 or 7%
Profit 1: $39.74 or 10%
Profit 2: $43.35 or 20%
World Fuel Services is involved in the marketing and sale of marine, aviation, and land fuel products. They report earnings on May 8 and analysts are expecting a rise of 30% for Q1. You can see the "W" pattern that has developed in the chart above, but what we really like is the volume that has accumulated in the bottom of the chart as INT has built the right side of its base. When INT breaks above the middle leg of the "W" it is time to buy at $36.13 as long as volume is strong.
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Stock: BMC Software
Symbol: BMC
Fundamentals: 9.7 out of 10
Industry: Computer Software ENT Industry Strength: 26
Technical Pattern: Cup with Handle Avg. Volume: 3,740,600
Pivot or Buy Point: $35.03
Stop Loss: $32.58 or 7%
Profit 1: $38.53 or 10%
Profit 2: $42.03 or 20%
BMC Software provides mainframe distributed systems service and identity managementsoftware applications for enterprises. They are expected to grow 37% this year. BMC has created a beautiful Cup with Handle base pattern. Prices started to trade tight at the bottom of the cup at $24. Then BMC started to form the right side of its base as it did so look at the great volume that appeared as it rose past its 10 and 40 week moving averages. Definitely a sign of accumulation. Now BMC is resting in its first week of the Handle, when BMC breaks above the high of the handle look to jump in at $35.03 on strong volume.
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NEW PRICE POINTS
Stock: Open Text
Symbol: OTEX
Fundamentals: 9.9 out of 10
Industry: Computer Software-ENT Industry Strength: 26
Technical Pattern: Cup with Handle Avg. Volume: 546,800
Pivot or Buy Point: $35.33 NEW!
Stop Loss: $32.86 or 7%
Profit 1: $38.86 or 10%
Profit 2: $42.39 or 20%
Open Text had a 28% increase in earnings last quarter, but it is expected to grow 42% annually. OTEX develops content management software that captures, manages, stores and delivers organizational content through networks. Many of you probably use OTEX at your offices. OTEX has built a beautiful Cup with Handle pattern and the Handle in the pattern can now also qualify as its own U Turn base pattern. Either way we have the same buy point at $35.33, if OTEX can break out 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
