The GMI is still 6. One anomaly was that the tech stocks lagged on Tuesday. Only 57% of the Nasdaq 100 stocks advanced, compare with 72% of the S&P 500 stocks and 90% of the Dow 30 stocks. Monday was the 28th day in the current QQQQ up-trend….
On September 29, I mentioned one of Judy’s picks, PAY, at 44.33. It closed Monday at 44.96 and appears to be in a nice up-trend. Judy had become interested in PAY well below $40. On Tuesday evening, Judy talked to me about COMV, a company that makes smart meters for controlling the flow and reporting of electricity. Judy, as I noted on 9/29, is the most talented stock picker that I know. She researches a company thoroughly and buys the concept if she likes it. She has picked many stocks that later are bought out or climb. So I examined COMV and found that it looks like it is forming a bullish cup-with-handle pattern. I will consider buying COMV if it breaks the pivot point of 35.81 on high volume.
The GMI remains at a maximum value of 6 and the current QQQQ short-term up-trend completed its 21st day (U-21) on Friday. What a great September—my account rose a little more than 5% for the month. Almost all (90%) of the stocks I wrote calls on were called away from me in my IRA. Writing short term (present month) calls on IBD100 stocks in up-trends has proved to be a highly successful and profitable strategy. Someday I will describe how I do it….
I have heard traders claim that the IBD100 stock list is a list for “suckers” because by the time that stocks appear on this list, they are ready to fall. Nothing could be further from the truth. Like all stocks, the IBD100 move with the overall direction of the market. I looked at the 100 stocks published on the list in IBD on Monday, 8/20. Since the prior Friday’s close (8/17) through last Friday’s close (9/28), the Nasdaq 100 index has climbed 11%, but the median stock on the IBD100 list is up 15.6%. Most important, almost half (42/100) of the stocks on that IBD100 list are up 20% or more. During the same period, only 12% of the Nasdaq 100 stocks and less than 4% of the S&P500 stocks rose 20%or more. So, the IBD100 stocks list is a prime place to look for stocks that will outperform in a rising market. Sort of a no-brainer and another busted myth….
Speaking of brains, I have met a woman, Judy, who does exquisite research into stocks and has selected a number of companies that later get bought out. She tends to find these nuggets before the stocks move up and show up in my technical scans of the market. I wanted to show you how I can still marry her talent for picking great stocks with my technical approach. Judy recently told me she was interested in PAY because of its connections to China. PAY produces those machines that make it possible to scan your charge card quickly at the cash register. With the Olympics coming and Chinese merchants preparing for the onslaught of tourists and sales, Judy thought this company was promising (this was only one of her reasons for liking PAY). So, I went to the charts in mid-September and noticed that PAY (an IBD100 stock) had formed a base (maybe a cup-with-handle) and was consolidating after a high volume spike on September 7. Its peak price was 40. So, not being in a position to watch stocks closely during the day, I put in an on-line order to buy 100 shares of PAY if it traded higher than 40. A few days later PAY broke out and while I tended to my work, my shares were purchased around 40.05. PAY closed that day at 41.16. Seeing that this break out occurred on unusually high volume for this stock, I bought more PAY as it rose. I am telling you this story, not to recommend PAY, but to show you how one can automatically (without looking–remember Nicolas Darvas made a fortune trading while he danced around the world) buy a stock that breaks above a specific price level. One can use buy stop orders or price triggers, depending on your broker. If PAY had closed back lower on the break-out day or showed little increase in volume, I would have sold out my position immediately.
In future posts I will discuss the technicals of other stocks brought to my attention by my good perspicacious friend, Judy….