I learned this idea from my stock buddy, Judy. Whenever a rising stock or index floats above its rising simple 4 week average (the weekly low is well above the average), that security often times is extended and it reverts to the average. This weekly chart of the SPY shows times in the recent past when this index ETF has become extended according to this definition. The red dotted line is the 4 week average. We may be facing a consolidation or brief pause now as DIA and QQQ are also showing this pattern.
IPGP, a stock that I have been watching at the suggestion of my brilliant stock buddy, Judy, rose nicely on Monday. I tweeted about it (@wishingwealth) early Monday morning when it moved up on unusually high trading volume, and I nibbled at it. Note the recent GLB to an all-time high.
Now that the GMI is 6 and many stocks are hitting new 52 week highs again, I am looking for strong stocks to buy. As you know, I prefer to buy stocks that have already doubled in the past year and that are trading at or near their all-time highs. I also want the stock to have appeared on the IBD New America or IBD100 list. FFIV meets all of these criteria. It is also a concept stock selection of my talented stock buddy, Judy. The weekly chart has the technical characteristics I look for, although the stock is extended on a daily basis. Finally, the stock appeared on my Darvas Scan that identifies stocks that have many of the attributes he liked. Below is the monthly chart of FFIV showing that the stock has recently burst through its all-time high reached in late 1999. (Click on chart to enlarge.) I purchased a little of FFIV and will add to it if it keeps rising. Other stocks that appeared on Wednesday night’s Darvas scan include: OPEN, APKT, VIT, BIDU, NTAP, ARMH, HWK, GSIT and IDSA. I own some of these. Please do not ask me to post my Darvas Scan. In the future I will post promising stocks that come up in my scans.