Judy

GMI: 3; GMI-R: 6; Day 2 of QQQQ up-trend; CPST–a Judy’s pick

@ 12:01 am

The GMI is still 3 (of 6) but the GMI-R fell one, to 6 (of 10).  This is because there were  only 27 new highs and 28 new lows in my universe of 4,000 stocks on Wednesday.  The indicators in the GMI have kept me out of all major market declines since 1995,  including the bad markets of 2001-2002.  I then got back in the market in 2003  and my account was up over 50% that year.  I also avoided the decline that began last January, which lasted 55 days.  The new QQQQ short term up-trend is in its second day and I am beginning to wade into this market slowly by buying QLD and writing some covered calls.  If this up-trend should end quickly, I will get out and go immediately to cash again.  There is always time to catch a real up-trend that can last months……. 

The service that I use to scan stocks for writing covered calls is at www.poweropt.com. I like this service because I can narrow down my scan to include only IBD100 stocks.  The IBD100 stocks include the strongest stocks based on fundamentals and technical action as assessed by IBD.  I also eliminate stocks that will report earnings during the option period.  I was burned several times by writing covered calls on stocks that announced earnings and then plunged.  In a market up-trend writing calls on growth stocks with large premiums is the easiest and least stressful way I have ever made money in the market. Joseph Hooper’s book educated me about this new way to look at writing covered calls for income. While I do not follow his method of stocks selection and technical analysis, I do like his philosophy of writing near month covered calls for 3-5% income each month.  I do all of this trading in my IRA and do not have to worry about taxes.  Check it out…

My friend Judy, who is the best stock picker I have met, buys stocks based on concepts long before the technical action meets my requirements. Cpst
When she told me about this stock that she bought for about $1 per share, I told her I do not buy cheapies. But the stock has been rising, so I bought some around $2.09.  CPST makes microturbine engines and appears to be getting a lot of contracts.  If Judy likes a concept, it is good enough for me–as long as the chart looks good.  This weekly chart shows that CPST is now holding well above  its rising 10 week average (dotted line), which in turn is above its rising 30 week average (red line).  As long as the stock holds above this dotted line, now at 1.73, I will hold the stock.  This is not a recommendation, just an example of the chart pattern I look for and how I limit my risk.  By the way, most recent volume spikes are occurring on up weeks, suggesting strong buying. So, again, Judy buys at a price much lower than I do… 

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GMI: 0; GMI-R: 0; Nibbling a little at rocket stocks

@ 12:01 am

The GMI and GMI-R are still zero.  This means that most stocks are in a down-trend.  I have therefore been on the sideline for most of the decline.  There were 22 new highs and 174 new lows in my universe of 4,000 stocks on Friday.  The Worden T2108 indicator stands at 41%, in the neutral range.  The markets have been in a tight range since the January decline, going back and forth.  At the same time, a small group of sectors and stocks have been rocketing up.  It seems to me it may be prudent to nibble a little at these strong performers.

I therefore ran a scan using TC2007 to uncover IBD100 stocks that have been incredibly strong throughout the general market’s decline. The following stocks from the IBD100 lists I have monitored over the past year hit a new high during the past week and meet my strict technical criteria for rocket stocks:  MOS, MTL, CF, SID, POT, PCLN, CMED, RRC, PRXL, OIL, SWN.  While not an IBD100 stock, I also like FDG, which this monthly chart indicates has had a high volume break-out to a new all-time high, breaking its peak from September 2005.Fdg  In fact, this monthly chart of FDG looks like a three year cup-with-handle formation.  My smart stock picker friend, Judy, is interested in RIMM, which just bounced off of its 30 week average. (She, of course, started buying it in the low 80’s!)  I may nibble at some of these stocks and place close stops in case they reverse. Many of these stocks have rich premiums on their March call options.  I may buy some shares and immediately write March calls.

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GMI: 4; GMI-R: 8; GMI performance; Judy’s pick: CYTR

@ 12:01 am

The GMI fell one, to 4, as my 10 Day Successful New High Index turned negative–barely. (Click on Table to enlarge.) Gmi1026  This index measures the number of stocks that hit a new high 10 days ago that closed higher than they did 10 days earlier.  (In a strong market, stocks should rise after hitting new highs.) The GMI-R also fell one, to 80% for the same reason.  If the SPY holds its own on Monday, the Daily SPY Index will turn positive.  The QQQQ is in the 41st day of its short term up-trend and the QQQQ and SPY have closed above their 10 week averages for 7 weeks.  (I typically make money trading growth stocks when the QQQQ is consistently above its 10 week average.) The longer term trends are strong, with the GMI-L now at 94%.  The Worden T2108 indicator is now back to 55%, up from its recent low of 44%….

The GMI continues to do its job of defining the QQQQ trend.  I will trade long  in the market as long as the GMI is greater than 2.  Gmiperf1026 (Click on chart to enlarge.)   I continually have to learn the lesson that if I would just ride the QQQQ up-trend by holding the Pro Shares Ultra-QQQQ ETF, QLD (the QLD aims to rise or fall twice as much as the QQQQ), I can virtually outperform every other strategy I am likely to pursue.  Thus, since the GMI turned 3, on August 31, the QQQQ has risen 10.35% and the QLD by 20.07%.  How many of us have had their portfolio rise more than 20% in this time period, with a single trade?  Since August 31, only 19% of the Nasdaq 100 stocks and 7% of the S&P500 stocks have risen more than 20%, along with 34%of the stocks on the IBD100 list published on August 18.  We would have had to have been pretty lucky to select an entire portfolio of individual stocks that would have outperformed just sitting in the QLD! So many traders are interested in being right (proving their strategy or that they are smart), instead of just making money.  I continually have to resist falling into this trap…..

As I have written before, my friend Judy is an excellent stock picker who thoroughly researches a stock and only buys it after she has fallen in love with its concept. Well, Judy recently told me about a stock in the promising RNAi field.  You can look up this exciting technology yourselves by going to the company’s home page.  Well, I don’t like cheap stocks and I always subject Judy’s picks to my own technical analysis before I buy. Cytr  She buys at much lower prices than I do and amusingly watches others buy at higher levels as brokerage analysts discover her picks. So Judy told me about CYTR, which I did buy around $3.50.  The stock closed Friday at $4.65 up 12.59% for the day and 28.45% for the week!  CYTR has a lot of technical strength, so I thought I would share it with you, not as a recommendation, but to show you some signs that I look before I buy a stock.  (Click on chart to enlarge.) The weekly chart shows that CYTR has now closed above its 30 week average (red line), a critical buy signal for me.  It is also coming off of a nine month base that came after a huge rise. As you know, I like to buy stocks that have already doubled, and CYTR is up 250% in the past year.  And other RNAi stocks (ALNY, ISIS) are strong.  If CYTR’s clinical trials prove successful and the stock becomes a big winner, I will have plenty of time to average up as the stock climbs….

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