Date: March 9, 2008
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 Update
MARKET HEALTH: MARKET IS in CORRECTION! BEARS DELIVER KNOCKOUT PUNCH!
So, the markets busted below the triangle pattern, and the BEARS delivered the knockout punch. As we have stated, the markets have also been very NEWS driven, and the BAD NEWS just seems to keep coming. On Friday, the February jobs report came out with a loss of 63,000 jobs. This was the biggest loss of jobs in nearly 5 years. Credit worries are still another issue hammering the markets. On Thursday news hit the markets that home foreclosures reached a record high in the last quarter as home owners are just walking away. A major headline in the Investors Business Daily's Monday Edition reads, "As Home Values Undercut Loans, More People Simply Walk Away". The sub title reads, "Why pay the mortgage with no equity in house".
These markets have a lot of bad news to digest, and speculation has already begun that the recession probably had already started at the end of last year. How do all of these HIGH PAID economist miss this action, were not sure. One thing we do know is that F.I.T. Stocks was writing back in its late October and early November issues that this market was in trouble. By the end of December, it was definitely time to be in CASH and out of stocks. If you had done this you SAVED yourself a lot of heart ache and stress. The lesson here is the MARKETS are ALWAYS right, and we as HEALTHY INVESTORS must follow their lead.
Let's take a look at the charts to see the action that took place in the NASDAQ.
6 Month Chart of the NASDAQ:
Let's take a look back on this 6 month chart of the Nasdaq. #1 shows the 4 days of heavy distribution that took place during the month of October. Leading into November the Nasdaq began to drop to its previous low and then busted through the 2700 support level on huge volume #2. The Nasdaq then traded within a range between 2500-2700 from mid November through the end of December. #3 shows the Nasdaq pierce through the support level of 2500 and drop immediately down to 2200 on swelling volume. In mid January, the Nasdaq made its low for the new year at 2200 where it then began to stage its comeback. The Nasdaq then started to make a series of lower highs and lower lows in price, which set up the Triangle Pattern we have been discussing over the past several weeks. The Bears WON this battle throwing a KNOCKOUT PUNCH that busted through the Triangle pattern. Friday the Nasdaq came down in price to test the January low at 2200 and if we break through this level of support, we most likely will be heading to the 2000 level.
Here is a 3 year chart of the Nasdaq to give us a longer term picture.
In this 3 year picture of the Nasdaq each price bar represents 1 week of price action. This long term picture shows the Head and Shoulders pattern that we discussed in our December Newsletter. The Head and Shoulders pattern is a very powerful reversal pattern, and it did not let us down at the end of December when the Nasdaq busted through the support level, at what they call the neckline, at 2500. Once this 2500 level was penetrated the Nasdaq dropped 300 points in roughly 3 weeks. Look at the red volume swell associated with the dive down. The last red price bar to the right of the chart is last weeks price move. We are currently testing the 2200 level established in January, If we break below this low we could quickly fall to the 2000 level as our next area of support. Let's let the market tell us what it wants to do.
What to Do? The BEARS win this FIGHT, so it is time to get back to training. Make a sound watch list, monitor which stocks and industries hold up well, study your technical chart patterns and read up on fundamental analysis. The BULLS are known for their STRONG comebacks and when they start to run again we need to be prepared as the biggest PROFITS will be made when the BULLS make their RUN AGAIN. FOR NOW, NO BUYING IS RECOMMENDED.
Top 10 Sectors: F.I.T. Stocks within the Sector:
- Energy
- Medical
- Telecom
- Agriculture
- Finance
- Business Services
- Transport
- Machinery
- Metals/Steel
- Chemicals
Also of special note is the Top 10 Fidelity Industry Funds since Jan. 1, 2008 as reported in Investors Business Daily:
- Gold
- Transportation
- Medical Equipment & Systems
- Chemicals
- Natural Gas
- Construction & Housing
- Consumer Discount
- Multimedia
- Biotechnology
- Home Finance
These areas will be the areas to search for when looking for F.I.T. Stocks. As sound Technical Base Patterns begin to develop in fundamentally sound stocks, and as Institutions begin to start accumulating stocks, we will once again begin posting F.I.T. Stocks formulating F.I.T. Formations to the Newsletter.
F.I.T. STOCK EDUCATION
ELECTRONICALLY TRADED FUNDS or ETF's - A security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange, thus experiencing price changes throughout the day as it is bought and sold.
SHORT SELLING - The selling of a security that the seller does not own, or any sale that is completed by the delivery of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower amount than the price at which they sold short.
In the March 3rd newsletter we discussed the opportunity ETF's may give us as a hedge against the Bear market or as a possibility for creating gains in a downside market. The key to all investing is to stack the ODDS in our favor. In these market conditions we DO NOT want to be buyers in a down trending market, we want to be sellers. However, there are two ETF's out there that run opposite of what the NASDAQ and S&P 500 indexes do. These two ETF's actually sell their associated indexes short (See above short selling definition). Because short selling can be a difficult concept to grasp, many investors stay away from this great investment tool. Well, along come these great ETF's that allow us to BUY them like a stock, but that actually make us money when the stock market indexes are going down. So here is F.I.T. Stocks first ever ETF buy recommendation.
Follow these instructions exactly:
Electronic Traded Fund: Pro Shares Ultra Short QQQ
Symbol: QID
Buy Point: $56.63 100-200 shares only! Stop Loss: $52.67 Profit Target: $62.29
BUY 100-200 Shares of QID if the price BREAKS ABOVE $56.63 on GOOD Volume
ONLY IF
QQQQ BREAKS BELOW $41.49 on Good Volume
These two ETF's run opposite of each other. So please remember, buy QID at the above price of $56.63, only if QQQQ breaks below the price $41.49. Follow the appropriate Stop Loss and Profit Targets.
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