It took balls of steel but I bought a basket of June Calls near the low of day...looks like it's paying off. The stock is being bought up nicely and is climbing....chart formation is looking even strong now after that breather with the accumulation and charging on ahead now!
MU has a huge float and its doing right now what its supposed to do. Huge white candlestick up, then a small red one that retraces 50% of the move on lower volume. Not a bad sign. Its going to take a while to get where it wants to go though. This stock has been sold off to a point where it cant be sold no more. While the market went up huge, this thing went down. In fact, even during the darkest days of the tech bust it reached 8-9 bucks if I recall. This is a good entry point. Now I have to issue a market warning here. I just watched two stocks today (I dont own them) go into the tubes. The first one is Optionable (OPBL) and the next one is Tweeter (TWTR). I also saw a few other companies like Trump (TRMP) and Circuit City reach notable lows with no floor under them. In the past, I have been a buyer of junk and have made money off the bounces. However, we are entering a period in the market where buyers are becoming very picky. You want to take a deeper look at the fundamentals of the play and at the charts as well. If you truly want to stay safe, then you stick with stocks like Apple. Large well established companies that have reported good earnings. Stocks like Rackable may not bounce like they did in 2006 and may just go bankrupt. Some stocks that look good may suddenly tank real quick when the odds turn (like Optionable). Stocks that appear to be good turnaround plays may not be (like Tweeter). If I saw Trump last year at 14 dollars, then I would have bought it. However, now is not the time. Trump will fall deeper into the mix. I just looked at 4 mutual funds. The Vanguard Primecap (large growth), Vanguard Windsor (large value), Baron Small cap (small growth), and Janus Small value. All of them were off by the same amounts today which should not happen. Four classes of stocks were off in the same proportions. I do have a few good bounce plays though and with my above warning you buy it at your own risk. IHR. Look at the chart and read the conference call. It has completed a head and shoulders from last year. It had a good conference call and makes a good turnaround play.
Everything on my list is acting just as I thought except for MAMA and AIG. If you got into a few of them, then you would have seen some nice gains today. There is a big change going on in the market. Its been going on for a long time actually and I made a "market warning" statement last night about it. Basically, any stock that is the least bit questionable is being cast into the fire. The Street is not going to experiment anymore with junk. When they do cast a stock aside, it gets burned in the pits. There were a few notable stocks that I had traded last year that I still have on my watchlist that I watched get burned alive the last few days. Therefore I am going to apply the following rules to my trading and investing going forward: - no stocks under a 5 billion mega-cap - the stock can have no analysts stating "sell" - must be traded either on the nyse or the nasdaq, preferably the nyse - It has to be something that I have heard of and am familiar with the products. Nothing unknown. - I must see bullish articles in the media about it. There has to be a good story behind it. - I'll go through the financials and the stock must have reasonable ratios in comparison to its sector. The fundies must be good. - the average volume must be over a million per day - the stock must be running up its 20 day moving average with strength. no more cup/handle or bounce plays. Well, you get the idea. No more trading the junkyard anymore. This market is not forgiving stocks like RACK anymore where they crash down and then a few months later are back at their old highs. There is no forgiveness anymore. Its either quality or the trash bin. Lets take a stock that crashed and burned into the fire the last few days. Optionable. OPBL. That is simply scary. Im going to take all the risk out of the trades and just go with the "good stocks" from now on. I moved a good chunk in my 401k to the Windsor fund. I dont have too much of a choice in my company 401k of where to place the cash. large cap value.
In regards to my last post, we are definately seeing a change in gears. The DJIA is performing very well and so I am going to limit my search this weekend to within the Dow components. So here is my DOW select list and my price target for each: AIG- If it breaks 73, then it can go to the 90s. Its like a 7 dollar stock going to 9. AXP- Price target 90 dollars CAT- No price target, but going higher HON- This is going to 68 dollars and then it will make a decision to see if it wants to go higher. If if breaks 68 then the target becomes 100+++. HPQ- We are looking for the price target of 78 dollars. When it gets to 78 dollars then it will make a decision. The price target is over $120. IBM- Price target between 130-160. JPM- Price target is 67. If it gets past 67 then the target becomes 100+. MCD- Price target is $87. UTX- No target The above portfolio I put my guarantee behind. Its a very safe portfolio that will give at least a 30% return. You wont have to monitor it everday nor will you get a bad nights sleep. The logic is simple. The stocks with price targets had hit a certain high in 2000. Then those stocks proceeded to make a rounded bottom and have rallied off their old highs. The old highs now become the floor with the upside at least the height of the huge cup. The price targets are just that, targets. Since there is no overhead supply, they could go much higher. The stocks with no target have reliably walked up a staircase over the years and there is no reason to see why they cant continue. All of the stocks listed have a dividend and you get whats shown plus the appreciation. I would watch carefully what happens when the stocks reach their targets. These stocks are big heavily traded stocks and trade so well with technical analysis. When the stocks reach the targets, then there will be resistance.
This is my view of the Nasdaq Composite. If we can get above the top line, then a major breakout will occur. If we fail to get above the top line, then that will represent and a retracement will begin. The index closed above the 20 day moving average and seems to be respecting it. I suspect that it will go higher and move above the top line. The oscillators do not demonstrate an overbought condition and the price is near, but not above or scraping the top bollinger. There shouldnt be that much resistance on the way up.
I took an in-depth look at the Qs this weekend. My observations are the following: - The Qs are about to reach the top trend line. - Just because the Qs reach the top trend line does not mean there will be an instant correction. In early 2004, the Qs hit the top line and the total market then proceeded to chop for 3 months before a correction took place. In early 2006, the total market proceeded upward 3-4% after the Qs hit the top trend line. - The Qs either go up, down or chop. When the Qs start to chop and the 10/25 repeatedly cross each other then that will give a signal that the market is about to correct in a few months. This took place in late 2006/early 2007 and in early 2006. - If the top trend line is broken, then there will most likely be a breakout. - If the price bounces off the top trend line and then chops or retreats, that will be the warning sign for the total market that a correction will take place in 3-6 months. - The top trend line is somewhere around 47.5 - In analyzing the top ten holdings of the Qs which comprise 38% of that etf, I have found the following: AMGEN AMGN 2.32% APPLE INC AAPL 6.68% CISCO SYS INC CSCO 3.73% COMCAST CP A CMCSA 2.45 % EBAY INC EBAY 2.21 % GOOGLE GOOG 4.05 % INTEL CP INTC 2.66 % MICROSOFT CP MSFT 6.32% ORACLE CORP ORCL 2.36 % QUALCOMM INC QCOM 5.32% I have found that I am generally bullish to neutral on the charts. Apple seems the most bullish. AMGN may have reached a bottom. CSCO maybe consolidating and making for another run at 29. GOOG may go higher or lower, neutral. Im not counting on Intel. MSFT appears it might break out shortly. - Conclusion: I say there is a 50-50 chance of the top trend line being broken. The top ten holdings are not extremely bullish except for Microsoft and Apple. The Qs are sitting right at the 20 day moving average and resting on a support. I believe the Qs will go higher and come up against the top most trend line soon. Maybe in a few days to weeks. Then the real test will begin. In the past, the Qs sharply pulled back after a run to the top trend line. The larger picture is that there are quite a few indexes and individual stocks that are breaking out over 7 year highs after making a long rounded bottom. The foreign markets are also breaking out to new highs. The target is usually the height from the rim to the bottom of the cup. If the Qs can break above the macro trend line, then that should set the rest of the market in motion upward. You should buy the QID only if there is a credible bounce off of the top trend line which seems to be somewhere around 47.5-48. If the top trend line is broken, you can count on the market not correcting this year and the rest of the market moving up wildly. If the top trend line is not broken, you can count on a correction taking place in 3-6 months in Q3/Q4. During that time, the total market will either chop or it will move upwards probably by 3-6%. A few other observations. Here are the variables during the times when the QQQQs hit the top trend line and then hastily retreated: December 2004 ISEE Sentiment # 10 day moving average: 214 12/31/2004 214 12/30/2004 216 12/29/2004 217 12/28/2004 220 12/27/2004 218 12/23/2004 218 12/22/2004 223 12/21/2004 226 12/20/2004 228 12/17/2004 229 12/16/2004 229 12/15/2004 224 12/14/2004 Put/Call Ratio 10 day moving average: .77 January 2006- 188 1/31/2006 192 1/30/2006 186 1/27/2006 181 1/26/2006 181 1/25/2006 178 1/24/2006 178 1/23/2006 175 1/20/2006 177 1/19/2006 176 1/18/2006 174 1/17/2006 177 1/13/2006 176 1/12/2006 181 1/11/2006 182 1/10/2006 182 1/9/2006 178 1/6/2006 183 1/5/2006 188 1/4/2006 193 1/3/2006 Put/Call Ratio 10 day moving average: .74 Today: 134 5/11/2007 136 5/10/2007 134 5/9/2007 132 5/8/2007 135 5/7/2007 132 5/4/2007 130 5/3/2007 129 5/2/2007 130 5/1/2007 133 4/30/2007 132 4/27/2007 130 4/26/2007 130 4/25/2007 Put/Call ratio: 0.91 Looking at the blogger sentiment poll, we see that 40% are bearish, 34% are bullish and 25% neutral. http://www.themoneyblogs.com/millionairenow/my.blog/may-7th-blogger-sentiment-poll.html Looking at the AAII#swe see the following: http://www.aaii.com/ Bullish: 42.86% Neutral: 14.29% Bearish: 42.86% In April 2000, 77% were bullish. In late 2002, 42% were bullish. The deepest rut came in July 2002 where 33% were bullish. Investors Intelligence 53% bullish, 20% bearish During the February correction, the bullishness dropped to 47% and bearishness went to 29%. In early December, 59% were bullish and 23% were bearish. So we are seeing an elevated sense of bearishness with the only bullishness coming from newsletter writers. The people who are taking out puts obviously are not very bullish. The bloggers and individual investors still feel an elevated sense of bearishness. By the way, the bloggers have the same sentiment now that they had during the summer of 2006 which was a great time to buy. In closing, the amount of bearishness in the market right now does not support an immediate market correction.
Wow.. Quite an impressive thread Mike!! Thank you VERY much for your contributions to this board. I really appreciate it.
MAMA Im not done quite yet today. I've been looking at Mama. The formation these past few weeks has been an ascending triangle. Right before the earnings call I figured that the earnings report leaked as I saw all this cash piling in. No one suspected that Mama wasnt going to do well. The price was bid up. So what happened? The revenue was better then expected, but the expenses increased. This might still make for a good trade though. I never go into a stock before the earnings call, but right after. Im more risk adverse these days. This is the classic Bollinger Band trade. When the price goes under the bollinger, then its a buy signal. However, it doesnt quite work like that all the time, but most of the time. First, you wait a day to see what happens to the price. See which way it goes. If the price slips back into the lower channel, then you can buy it reliably. It will make it back either to the center line or the top Bollinger Band. In looking at the volume on Friday, it wasnt a high volume selloff. The price did rebound nicely from 4.52 and did not finish at the low of the day. I say if it goes higher on Monday then its a buy to the middle band or the high band. As I stated earlier, these small cap junk trades Im starting to shy away from. Why would a money manager go with mama at 5 dollars when they could have McDonalds at 50 dollars and we can then wait for it to go to 70 dollars? The returns on small-caps are not what they used to be. A few years ago we could throw all our cash on margin into a basket of small caps. Stocks were so depressed that buying and holding that basket for a year yielded great results. Things have changed. Stocks like Mama are way too risky now, interest rates are higher (meaning small companies dont have the borrowing power they had a few years ago), etc. Why would I want to go with a small-cap now especially when I can get a 30-60% return on some of the DOW or S&P500 components? They have dividends too and if there is a problem, these large caps wont take these wild waterfall dumps like mama. I can sleep well at night having my cash in MickeyDs, but I cant sleep well having an open position in Mama. In fact, having an open long position in Mama is like having an open short position on the diamonds. Its that stressful mentally. I say stick with quality mid/large caps that are riding up a moving average with ease and not simply running in place. However, I still think there is money to be made with mama. At least for a short swing trade.