Date: March 16, 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!
The Good News, Bad News continues on in the markets. The Bad news started on Monday, when the indexes broke below previous lows for the year. Our trade in QID seemed like a lock in for healthy profits. But Tuesday, the Good News came when it was announced that the FEDS would inject a 200 billion 28 day swap plan for Banks. This allows the Banks to swap the mortgage paper they hold, once highly rated debt they could borrow against, for Treasury Debt. This Good News sent stocks sky rocketing and bonds selling off hard. This also marked the first day of a reversal in the markets, as it was completed on solid volume. Wednesday the markets remained rather quite. Thursday the indexes all gapped down and it looked like we were in for the big sell off when Bad News came out with the Commerce Department reporting retail sales dropped 6% in February. Couple this with rising oil prices, the weakening dollar, and a research report from RealtyTrac that in February 60% more homes faced foreclosure than a year ago. Stocks looked like they were heading for a painful day and that's just when... the Good News came out from the S&P's rating services suggesting that subprime write downs from major financial institutions may be coming to an end. This news sent the DOW from a 200 point deficit to a 97 point gain. Now for Friday, more Bad News. After totally denying that they were in trouble Bear Sterns, a financial giant, comes out and says "Our liquidity position in the last 24 hours had significantly deteriorated", UHUH! They pay big money for some of the most talented mathematical people in the world and they could'nt figure out that their balance sheet was in tough trouble. The Fed came to the rescue with a bail out. Soon after another great financial institution, Lehman Brothers, also denied rumors that they were in trouble, saying they had secured a fresh 2 billion dollar line of credit. So it is hard to believe any of the news you hear anymore. One important tool we have as Healthy Investors is that we are not only Fundamental investors, but also Technical investors. It is times like these that a picture truly is worth a thousand words.
Let us take a look at the 6 month NASDAQ chart:
The 3 major indexes exhibit this similar down trend pattern. The Nasdaq down trend started back at the end of October 2007, broke through some major support at the beginning of January at the 2500 level, and now has started a new mini down trend since then. As stated in past newsletters, there is now heavy support at the 2200 level. We broke this level briefly on Monday, however, Tuesday the Good News came out and the markets sky rocketed forward creating our first reversal day in the markets on good volume.
What to look for Next week in the Markets:
The Nasdaq chart above clearly shows that we continue to hit lower highs and higher lows with 2200 be solid support. The question remains which way will this tightening of prices break. Will the FED announcement coming up on March 18, and a possible .75 rate deduction be enough friction to stir the market one way or another. This will be important to watch.
Another important event to watch is whether the new rally will confirm. Tuesday was the first day of the rally, now we need to confirm this rally with a good up day on heavier volume than the previous day's volume. This confirmation attempt should occur 4 to 11 days after the first reversal day. Tuesday was the first reversal day, Friday was the 4th day and where we start to look for confirmation in the new rally. ALL BETS are OFF if prices break below the low of the first rally attempt that occurred on Tuesday.
Next week we figure to be a big week for the markets either Up or Down. As healthy investors we will continue to watch diligently the daily market action, and be prepared to respond one way or another.
F.I.T. STOCKS TO KEEP AN EYE ON IF A NEW RALLY IS CONFIRMED:
These 4 stocks have held up Fundamentally, are in a leading Industry, and have a sound Technical Chart Pattern:
IF THE NEW RALLY CONFIRMS I WILL BE SENDING OUT EXACT PRICE POINTS AND CHARTS FOR EACH STOCK LISTED BELOW.
DNR - Cup with Handle Pattern
OXY - Cup with Handle Pattern
PRGO - Cup with Handle Pattern
RIG - Cup with Handle Pattern
If the NASDAQ breaks through its major level of support at 2200, and the new rally fails, follow the same steps as last week for our QID vs. QQQQ trade. The information is still listed below under F.I.T. Stock Education.
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