Well, this market is really moving. Did you see GOOG’s $13+ rise today? Honest, I had no idea when I wrote Sunday’s post. Cramer is shouting– BUY GOOGLE!!! He obviously had this one right.
The GMI is solid at +5. This reading does not mean that we won’t have declines–only that the current trend is up. These indicators have gotten me out of every major market decline since 98, and I will let you know when I begin to get defensive. (Remember, past performance does not guarantee future results and blah, blah blah…) Right now things could not look much better to me. There were 171 new 52 week highs in my universe of 4,000 active stocks, and only 17 new lows. Let’s say it again: there were ten times as many new highs than new lows today! What a turn around in just a couple of weeks. Today, 53% of the NASDAQ 100 stocks rose, 70% of the Dow 30 and 65% of the S&P 500 stocks. These numbers are good, but not as strong as a few days ago when we saw 70% or more of the stocks in all of these indexes rising. So, we are getting a little weakening, which is a good thing. We want a market with some backing and filling so this rise will last a while.
I moved my 401(k) funds from the money market fund to equities about a week ago. Most mutual fund families allow a limited amount of transfers between funds. Did you know, however, that there are at least 2 mutual fund families that are designed to allow you to time the market? If you are good at trading the market indexes, you owe it to yourself to check out the Rydex Funds and the ProFunds. These funds allow daily trading back and forth in a variety of index and sector funds. In fact, you can buy funds that move with or opposite to an index, so you can profit from a decline in an index if you are bearish. Better still, some of their funds are leveraged so that they move twice as much as the indices they track. So, if you have the minumum ($15,000 for ProFunds) to open an account and you want to take a bullish or bearish position on the market, these funds may be the way to go. You could also open an IRA in one of these funds. Read the prospectus carefully and note each fund’s management fees.
I have been meaning to tell you that JNJ is looking sick. The chart shows high volume selling last week and it only managed a small gain today. Is the stock telling us something?
BOOM looks like a high volume breakout today–cup and handle? (I own a few shares of BOOM). The cup with handle pattern was made famous by William O’Neil and his newspaper, IBD. Note the huge rise in BOOM from under $10 to almost $39. Then it entered a 3 month base. It formed the top of the right side of the cup on May 10 at 35.18. Note the huge gap up on high volume to build the right side of the cup. Today BOOM burst through the top of the handle on volume that was far above its 50 day moving average (blue horizontal line) and closed at 37.64. The IBD ratings for BOOM are: Overall–94; RS-99, EPS-89. Thus, according to the IBD criteria this company ranks in the top 4% of all stocks, with a relative (technical) strength rating in the top 1% and earnings per share rating in the top 11% of all companies.
I already own this stock. How would I play it if I did not? I might make a small pilot buy tomorrow and place an immediate sell stop below today’s low at around 31.75. Alternatively, I might place a buy stop at 39 to purchase a small number of shares it if it breaks through to an all time new high. In that case I might then place a sell stop closer to the breakout point. In a true breakout, the stock should not come back down below the prior peak.
Other strong stocks to watch include: SNHY, CLHB, BEBE and of course, HANS. There are so many more.
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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.