The GMI stayed at +1 today but there were some positive developments. The successful 10 day new high index climbed to 47, the highest since last April 6. Moreover, 55% (47/85) of the stocks that hit a new high 10 days ago closed higher today than 10 days ago. There were only 31 successful new lows–only 40% of the new lows 10 days ago closed lower today than 10 days ago. Thus, a trader betting on new highs 10 days ago has had a better chance of succeeding than a trader shorting new lows.
Still, there were only 54 52-week highs today compared with 63 new lows in my universe of almost 4,000 stocks. The Daily SPY index went to undecided today and the important Weekly QQQQ index improved, but is still too close to call. About 74% of the NASDAQ 100 stocks rose today, along with 84% of the S+P500 stocks and 90% of the DOW 30 stocks. So the big caps joined in the party with the tech stocks today. I am most positive on the action of the QQQQ and am long that ETF. The short term interest rate index (see graph in yesterday’s post) closed below its 50 day average for the second consecutive day, a very good sign of less pressure on rates.
My strategy now is to maintain some long positions and wait to see if this rise is for real. Every long position has a stop order to sell not far from today’s price. I have no patience with any stock that fails to behave as I expected. This is the discipline needed to succeed in the market. It took me 40 years of trading to get to this point. You can teach yourself this rule immediately.
Among the stocks hitting new highs today that all have triple digit increases in earnings last quarter and are at all time highs: KND, FORD, CHE, PTRY, SE, PRU. These are stocks for further study. Some are extended. Study their charts and look up their fundamentals and company profile at Yahoo finance (just enter the stock symbol on that link).
Let’s take PTRY as an example. PTRY topped out at 35.60 on February 17. It then began a decline to 27.33 on April 18. It next began a rise to 34.77 and reacted back to its 10 day moving average (dotted line). Today it broke to a new high and closed at 36.70 on the highest volume since last October. (The horizontal blue line reflects the 50 day moving average of volume.) PTRY produced a gap of .65 between Friday’s high of 34.03 and Monday’s low of 34.68.
How might I trade this stock? One way would be to make a pilot buy of a small number of shares at the open tomorrow and to place a GTC (good til canceled) sell stop at 34.65, just below today’s low. If this stock is really strong it should not trade below 34.68 and close today’s gap. If I am wrong, I will risk a little more than 2 dollars per share (purchase price-sell stop execution price). Another way to trade it is to buy it only if it breaks today’s high of 36.95. (On stocks rising like this one, I often consider selling, the day it closes below its 10 day moving average.)
But before buying, I would check out the company profile and its key statistics on Yahoo. Looks like the company is making money in the convenience store market. And the IBD stats give it an EPS rating of 95 and a RS rating of 95, and a composite rating of 98. Thus IBD rates this company as being in the top 2% of all stocks. It is noteworthy that other companies in the same sector include SE, WFMI and SPTN, all stocks that have been hitting new highs–a very good sign that the sector is strong.
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Please remember that the stock market is a risky place, especially now. I am not providing recommendations for you to follow. My goal is to share tools and methods that I have used over the past 40 years of trading, so that you may learn from them and adapt them to your trading style and needs. While I do my best, I do not guarantee the accuracy of any statistics computed or any resources linked to my blog. Please consult with your financial adviser and a mental health practitioner before you enter the stock market, and please do not take unaffordable risks in the current market environment. See the About section for more statements designed to protect you (and me) as you navigate this market. Past performance does not guarantee future results, but I would rather learn from a former winner than a loser.