The Nasdaq led the way today as potential resistance around 2200 (see yesterday’s post) proved to be no match. Volume edged higher across all indices and closed near the highs of the day. The action doesn’t get any more bullish than that. While today’s action was significant and yet another indicator of great market strength, I think more important will be the follow through action over the next week or so. Will the Nasdaq hold and create a new support level at these four and a half year highs? Let’s see if the Dow can break out of its trading range between 10,600 and 10,700 and make a move on Dow 11,000. Now, that might even get old uncle Larry off his easy chair and into the market again, fueling a wild rally to Dow 12,000 by the end of the year. OK, I’m getting ahead of myself. I’ll stop now. Actually, I wouldn’t mind seeing a 2 – 3% pull back and consolidation throughout the month of August, creating entry points in stocks that have gotten ahead of themselves, then a big end of year rally. Maybe then, just maybe people will begin to start talking about stocks again at cocktail parties, instead of real estate!
ETF Movers: China, Utilities, Basic Materials
It’s been some time since I’ve posted ETF movers and today is a good day to begin again considering today’s move is a significant one. The Nasdaq is clearing key resistance at 2200 and looks like it will hold above that level into the close. However, today’s move is lacking oomph as indicated by the lack of ETFs making a big move today. In addition, volume levels for the major market tracking ETF’s (QQQQ, SPY and DIA) are running below average at this point in the trading day with volume 9%, 18% and 41% below average. (Data as of 2:30EST)
| Ticker | Name | Price | Price Change | % Vol Change | DI20 | DI40 | RS | % From 50DMA | % From 200DMA |
| FXI | Ishares FTSE/Xinhua China | 63.69 | 1.94 | 229 | 20 | 20 | 54 | 12.01 | 15.42 |
| XLB | SPDR Materials | 28.93 | 1.51 | 93 | 2 | 3 | 47 | 3.14 | 0.28 |
| ILF | Ishares Latin America | 102 | 1.54 | 51 | 2 | 3 | 74 | 10.49 | 23.95 |
| EWA | Ishares Australia | 18.3 | 1.1 | 157 | -1 | 0 | 59 | 4.33 | 8.22 |
| BDH | HLDRS Broadband | 17.48 | 0.92 | 93 | 1 | 0 | 65 | 10.42 | 13.65 |
| XLU | SPDR Utilities | 32.49 | 2.01 | 107 | -1 | -1 | 78 | 4.1 | 11.92 |
| EWZ | Ishares Brazil | 26.5 | 2.2 | 50 | 1 | -2 | 70 | 8.61 | 18.41 |
| UTH | HLDRS Utilities | 115.29 | 2.25 | 109 | -6 | -6 | 79 | 5 | 13.3 |
Note: The DI scores measure the demand of the ETF using price and volument movements. The higher the score, the greater the demand for the fund. The China Ishares ETF is making another big move today, as it has over the past couple of weeks. The fund showing the greatest demand over the past 20 days is the Ishares Malaysia (EWM) ETF with a score of 26. The following table shows the top 10 over the past 20 days.
| Ticker | Name | Price | Price Change | % Vol Change | DI20 | DI40 | RS | % From 50DMA | % From 200DMA |
| EWM | Ishares Malaysia | 7.51 | 0.94 | 67 | 26 | 27 | 56 | 6.22 | 6.37 |
| FXI | Ishares FTSE/Xinhua China | 63.71 | 1.97 | 228 | 20 | 20 | 54 | 12.05 | 15.46 |
| BBH | HLDRS Biotech | 195.9 | 0.26 | -19 | 11 | 10 | 79 | 12.12 | 28.24 |
| IYM | Ishares Basic Materials | 50.1 | 1.46 | -53 | 11 | 9 | 45 | 4.64 | 2.29 |
| HHH | HLDRS Internet | 62.55 | 2.02 | -22 | 10 | 7 | 54 | 8.93 | 4.65 |
| EWH | Ishares Hong Kong | 13.47 | 1.43 | -27 | 8 | 10 | 73 | 8.37 | 13.29 |
| IGW | Ishares Semiconductor | 60.18 | 2.1 | -45 | 8 | 6 | 49 | 8.98 | 15.2 |
| IYT | Ishares Transportation | 68.35 | 0.01 | -52 | 7 | -3 | 70 | 5.4 | 5.17 |
| IBB | Ishares Nasdaq Biotech | 77.57 | 0.66 | -10 | 6 | 12 | 41 | 11.34 | 12.06 |
| EWO | Ishares Austria | 25.48 | 0.16 | 25 | 5 | 7 | 57 | 7.78 | 13.45 |
Notable Earnings: August 2nd Before the Bell
Several high quality companies are reporting this morning led by United Therapeutics (UTHR) with a rank of 52 out of 60. The developer of therapies for the treatment of cardiovascular, oncological and infectious diseases posted a profit for the first time in the June ’04 quartrer and growth has accelertated ever since. Quarter over quarter earnings growth in the last 4 quarters has been 264%, 550%, 287% and 444%. This morning, the company isn’t hitting those lofty numbers again, but has smashed estimates nonetheless by .16/share by posting 172% quarter over quarter growth. The stock is soaring in premarket trading, up nearly 16%. United Therapeutics has carved out a very short base and volume levels don’t indicate real healthy action up to this point. Look for the stock to return to the area around 57 – 58 as a possible opportunity to initiate a position.
Rank 51/60
- A.M. Castle & Co (CAS): The plastic and specialty metals distributor is looking to bolt out of a base this morning on strong earnings. This is a company that has bounced back in a big way in the last year after losing money in the previous 3.
- Schawk Inc (SGK): The provider of digital imaging prepress services to the consumer products packaging market beats by a penny. The stock is in the process of carving out a new base.
- A.D.A.M Inc (ADAM): The publisher of interactive healthcare educational products is a very small company with no analyst estimates, but has posted another strong quarter with an increase in revenue of 29% and increase of 79% in earnings from the year ago period. The stock is currently working on carving out the right side of a base.
Other notables reporting this morning in order of rank….
Amedisys (AMED) – up 9% in premarket, Coach (COH), Laserscope (LSCP) – up 8% in premarket, Remington Oil (REM), Oskosh (OSK), Eagle Materials (EXP), Accredited Home Lenders (LEND), Vital Images (VTAL) – up 18% in premarket trading, Coventry Health (CVH), TXU Corp (TXU), Petroquest Energy (PQUE), Genesee (GWR) and American Capital Strategies (ACAS)
Notable Earnings: August 1st After the Bell
I wanted to highlight a few outstanding companies that reported after the bell today – Jupiter Media (JUPM), Cutera (CUTR) and SRA International (SRX).
Jupiter Media (JUPM) is a leader in internet research and digital images and has been growing and fast and furious in the last 2 years. The company reported earnings today that were in line with estimates and revenues that just beat estimates.. Apparently that wasn’t quite good enough as the stock is trading down more than 5% after hours.
The stock broke out above 20 in mid July with good volume but still faces resistance at all time highs in the 24 – 25 range. A retreat to the breakout point around 20 would offer a buy opportunity if you missed the initial breakout.
Cutera (CUTR), a provider of of products used in non invasive aesthetic procedures, is a company on the mend after struggling for most of ’04. After reporting quarter over quarter earnings growth of 300% last quarter, the company topped that today with growth of 450%, smashing estimates by .09 cents a share and raising guidance for ’05. No surprise that the company is up nearly 10% after hours.
Too bad the stock couldn’t make this kind of move AFTER earnings! I was hoping it would behave itself long enough to provide a decent entry point after earnings, but it didn’t happen. Along with USNA, this chart has to be up there at the top of the "best looking" charts list.
SRA International (SRX), a provider of information technology services and solutions in national security, civil government and health care really began to hit its stride in ’02 and has posted very consistent growth of around 35% on average each quarter since. Another solid quarter was posted after the bell as the company beat by a penny, however issued guidance for next quarter a penny below. Revenue estimates are in line. The stock is up 2% after hours.
Technically, the stock broke out of a somewhat sloppy base back in April and has had a decent run by gaining 17%. However, the action is a bit shaky with volatile swings and poor up versus down volume. Currently it sits just above support of the 50 day moving average.
Other Notables Posting After the Bell…
Herbal Life (HLF), Oil States Intl (OIS), LECG Corp (XPRT), Maritrans (TUG) and General Growth Properties (GGP).
How Does SelfInvestors Differ From Other Sites?
My Response:
I basically started this site out of a need for a system that would spit out
a list of stocks near a breakout (complete with pivot point) or within a buyable
range ranked according to fundamental and technical analysis. Think of this
site as a high end investing botique shop catering to a small number of investors
looking for a more personalized approach. Larger sites will never publish
a list of stocks near a breakout ranked according to fundamentals and technicals
because too many people would all be watching the same stocks and purchase
points.
The result of a need for this kind of service is the Breakout Tracker. Other sites
have databases of breakout stocks with rankings but the database here is
much more refined – every stock that makes it into the database is looked at
by me, not a computer. This creates a much more valuable database void
of unprofitable opportunities. Simple filtering will spit out a list of top ranked stocks
near a breakout or within a buyable range. You can also see a list of
stocks pulling back to support of the 50 day moving average.
Information overload is a key barrier to successful investing and I believe
this service boils the information down so that you are focusing on only a
handful of stocks each week.
Of course the database is just one component of the service. I also run a
model portfolio where you can follow a "real" portfolio in action,
complete with buy and sell alerts as well as updates throughout the holding
period (no hypothetical returns here!). There are very few sites that put
their reputation on the line and implement a real portfolio – simply because
if they did they’d probably be out of business. They prefer to highlight a few
outstanding recommendations and boast how much you would have gained
had you sold at the top. Or their is my favorite investing newsletter marketing
tactic, showing pictures of satisfied customers who made 5,000 last week
using the service. That’s fine and dandy, but what they don’t say is how large
of an account they are trading or how they did over a substantial time period.
What a joke. Be careful out there.
Hope that helps. The best way to see the difference is to try a 30 day free
trial through paypal. You can cancel anytime within 30 days and won’t be
charged. If you have questions during your free trial I would be happy to
open up a live chat session with you to walk you through the service.
Breakout Stock Highlights (7.19.05 – 7.29.05)
It’s about that time again to run through some breakout highlights of the past couple weeks.. and there have been many. In the past two weeks (using the 10 trading days between July 19th and July 29th), a total of 61 breakouts have occurred and of those 61 breakouts, 47 currently have a gain (through Friday’s data).
The biggest gainer award belongs to LMI Aerospace (LMIA). The manufacturer of aluminum and specialty alloys for the aerospace, tech and commercial sheet metal industries has vaulted 28% since breaking out on July 22nd and is at 6 year highs.
The biggest loser award belongs to Schmitt Industries (SMIT). The manufacturer of electronic and mechanical components for machine tool products and laser measurement systems worldwide, reversed sharply after breaking out on July 19th and is down 18% from the pivot.
The following is a screenshot of one of the several filters of the SelfInvestors.com Breakout Tracker database, which allows you to pinpoint opportunities in the world’s fastest growing companies very quickly. The screenshot belows shows breakouts of the past 2 weeks with a rank of 50 (out of 60) or better. Of course, the more powerful screen is the screen that lists stocks BEFORE the breakout – that is available to premium members of SelfInvestors.com.
(The larger pop up image is still a bit difficult to see, so I’ve created a separate page for viewing this screen.)
At the top of the list is Apple Computer (AAPL), which isn’t too much of a surprise. The stock gapped up with heavy volume out of a "less than perfect" double bottom base after reporting strong earnings, which presented a first buy point. Many stocks will provide a few different entry points while carving out the right side. I like to initiate a position at the first entry point and possibly add smaller increments to a position upon further breakouts. For example, in this case maybe I add a full position after the stock breaks out above 41, then add a smaller position to that should it break out above the handle that is currently forming at 44.48. Another way to play this position is initiating a position on a return to the pivot around 41, if you missed the first entry point. It just may provide that entry point, which would be low risk considering there is strong support there.
Considering USANA Health Sciences (USNA) exhibits outstanding fundamentals and one of the best looking bases i’ve come across recently, it’s also no suprise that it sits atop the "Top Breakouts" list. The stock broke Friday and tacked on more gains today.. I second Paris Hilton when I say "that’s hot." Did I just say that?
Nasdaq Faces Resistance
It’s been quite a ride for the market over the last couple of months and there really isn’t any reason to think it can’t continue.. which is what has me a bit on the cautious side. While the market looks very healthy here, there is a bit too much optimism out there. Not to mention the Nasdaq will face some pretty stiff resistance around the 2200 mark. I think this level is every bit as important, if not more so than the resistance at 2100 it cleared on July 8th. Its a level at which the Nasdaq has been unable to clear at the beginning of ’04 and at the beginning of ’05. Whether the 3rd time is a charm is anyone’s guess at this point, but history should make you swing just a wee bit to the side of caution. I’ve certainly begun to move off margin and will be vigilant about locking in profits should the situation arise. At any rate, should be another interesting week.. never a dull moment in this business!
Market Timing And Asset Allocation
Question:
Most of my money is tied up in my govenment TSP(Thrift Savings Plan). I have a choice to put the money in either government bonds, the S&P 500 fund, small cap fund, Foreign fund or bonds.
Currently I am using the tsppilot.com service to suggest which areas to put this money. I think I could do better. Is there a market timing area selfinvestors that I could use to decide when to move my funds to where they will do the most good depending on the market conditions? If not can you suggest where I might find this information other then tsppilot?
My Response:
I post articles at critical times (at the blog and the market outlook page) detailing the health of the market. On the market outlook page I also indicate how much I’m allocating on the long side, short side, how much in cash and how much is leveraged with margin. Whether you use this information to invest in stocks, bonds, real estate or whatever is up to you. I know you don’t want to hear it, but i’m going to have to go with the old cliche on this one – probably best to consult with a financial advisor. I’m not a registered financial advisor and I’m sure the SEC wouldn’t be too happy with me if I began dishing out individual financial advice. Good luck to you.
Finding Top Stocks in the Breakout Tracker – Pay Close Attention to Companies With Soaring ROE and Profit Margins
Question:
Just wanted to let you know that I am glad I continued with your service. I have been able to find some great stocks from your watch list. How do you find these stocks? Out of all the stocks that have increased in the most in the last few months, do they have something in common that the other stocks that have not gone up as much have?
My Response:
As far as finding companies that will be included in the database, I use a variety of screening tools to filter out companies that meet my requirements for a "financially superior" company. Certainly companies that go on to big gains are often companies that are experiencing accelerating growth and rising margins and ROE (hint: companies with surging ROE and Profit Margins should be singled out – these will be your big winners). In addition they will most likely come from the strongest performing industries at the time (which you can easily locate by clicking the Top Industries tab in the members portal).
Example: Lets say I want to get a list of companies with best fundamentals and a part of a top performing industry. What I’d do is Click the Top Industries tab, then click Show All Stocks. Then sort by F Rank to bring the highest scores to the top. By doing so, you get a Top 10 list like this: QSII, ADEX, SNDA, XXIA, ASVI, GILD, CKCM, UPL, CSCD, NSS and BHP. However, as you know you’ll want to focus on companies that are above the 50 DMA and within a buyable range and/or near a breakout. From the above list, only BHP and ASVI meet these requirements.
A more efficient way of achieving the same results, but filtering out stocks that don’t meet the above requirements can be had by clicking the "Breakout Watch" tab and hitting the "Filter by Top Industry" buttom below the search function, then sorting by F Rank to bring companies with the best fundamentals to the top. This will give you a list of stocks worth watching or still buyable that are part of a top industry currently very quickly. So, you’ll notice the top 10: BHP, JOYG, AKAM, RIO, ECLG, UNT, LSS, NBR, APA and PDC. (primarily metal and oil stocks!) Just be sure to pay attention to when each company will report earnings (these dates appear in the far right hand column).