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Stock Tiger Stalking Stocks™
For Tuesday February 20, 2007
Close
Dow +2.56 at
12767.57, Nasdaq -0.79 at 2496.31, S&P
-1.27 at 1455.54
The market had a
very good week and on Friday after such a nice 3-day move
consolidated. Near the close the bulls jumped in and bought most
indexes to about flat for the day. That was bullish as MSFT has
some comments that could have been taken more negatively.
The Microsoft CEO Steve Ballmer said that analysts' sales
estimates for Vista are "overly aggressive." Microsoft is on the
Dow and Nasdaq but despite its small decline they held up well.
I think I heard this correctly; in a CNBC piece about Vista
sales it was mentioned that Microsoft said that in countries
with a higher percentage of pirated copies of software they have a better
computer upgrade cycle. If I did hear that right it makes sense
if you do not have to pay the few hundred for new software you
can instead put it into hardware. So for tech to get going in
the USA again maybe you need more pirated copies of Vista.
Other news on Friday was a larger
decline in housing starts. 14% less - the lowest in 10 years.
However that also is good in some ways. If permits drop and new
construction slows then the big inventory of homes will decline
as those get sold instead of making more new ones.
The fact that news is having little
effect on the markets shows how strong it is. Overbought perhaps
but no signs of breaking yet. This has been one of the longest
rallies since 1932. Here is a chart showing the S&P 500 and the
other rallies in the last 75 years. This one is 3rd in duration
but not so high in the gains - so far that is.
At Stock Tiger we had 36 stocks
hit their buy points this week and only 2 closed lower than the
buy point. If you do not watch the market during the day the
easiest way to trade is to set your buy orders at the suggested
prices and diversify. Of course you need sufficient capital to
do this. One way is to use the same amount of money on each
trade (when the volume permits that) lets say 10% on each stock. With
some brokers you can set trailing stops if you wish at the time
of the buy order or on others you can enter one after the buy if
desired. It is a good idea to sell some on the first day
and you need to decide this of course. In the last five months
if you bought all watch list stocks at suggested prices in equal amounts and sold all
at the close on the
first day you would be up over 130% and no need to watch the
market. Some day the break outs will not work so well but we will
know when that is but it is sure not the case now.
For February so far there have been 84
trades and 8 closed lower than the buy price. The trade record on the site uses the
high of the day prices to show the potential of same day profits
for active traders but if you put in buys at the buy price on all
of the watch list using 10%
of you capital on each and sold at the close of the first day would
would still be up over 20% so far this month shown in the table
below. This figures the portfolio to have $100,000 and uses 10%
per trade but there were never 10 open trades the most was 9 so
you never had the full amount invested therefore the gain is
more than 20%.
The table used $10,000 as the amount
of each trade but your percentage gain would be the same if
you used $2,500 per trade or $25,000. If you had sold near the
highs of course your profit would be much higher or if you held
some for further gains but this shows automatic results by
placing buy stops and sell on close orders. Regardless of how
you trade the results are impressive. The ULBI short
shows why trailing stops are good as if you had set it to maybe
20 cents under the buy price your loss would be minor on that
one. Many of course continue to climb right now.
You have of course looked at the public
charts and can see how many have kept running long after the
initial buys. CRM will be interesting near this
price. This was a bull flag buy much like TWTC was
last summer. These in good markets often return at least to
their former high at the top of the flag and many times then
break out. There are two sets of Fibonacci lines both
showing projections. This stock rallied up to the $44.32
high at the start as a good stock should and pulled back to
test the break out area then powered on up. Using the $44.32
as a Fibonacci point at 38% a valid projection took the
stock at its current level. It may then pullback here.
However, using the September low instead ads the base the
projection is at $52.40. That suggests that if the $50.13
blue line is taken out then it will run another $2.30.
Friday gave us two gap ups
that could not be played in the normal way without more risk so
here we show again the 15-min gap rule in action for these two.
On these charts the candles are 5-min each so it takes 3 candles
for the first 15 minutes. During that time you do not buy but
only watch. If the stock keeps gong from the get go then you do
not trade it. You in your head or on the chart draw two lines.
One at the high point of the first 3 candles and one at the low
and make you trade in the direction of the break. Usually on a
gap up on good news if it does break the lower line and you short
it is more often a riskier trade and experience will help you
decide on this so it best on gap ups to figure you will play it
only long and only if it breaks above the top line.
On the CPB chart
there is also the 9-period EMA as it can often be of help in
determining support areas. This stock broke above on the forth
bar at about $41.40 and promptly pulled back under the bar. This
is common as the "break out line" gets tested. In this case it
only dropped a bit below the line and the 9-period also and in
the next bar ran back up and gave $1 gain in 40 minutes. It never
got much higher for the rest of the day. It is your decision how
to play ones like this but one way is to treat them as an
unplanned for gift so any profit is like free money.
HURC was another that gapped up on Friday
and if you were not holding and wished you were you can join in if
the rule works out. Here you see (oops a mistake) the line
should be on top of the 3rd candles' spike high around $40.75 as
that would have been your buy on the 5th candle or 25 minutes
into the day. From there it rallied to a high of $43.87 so a
possible $3 gain.
The idea of using this rule is it gives you a
point of reference and the first 15 minute are often the most
volatile as the players decide what to do. If you buy then you
at least have some chart history going already and you can sell
if it looks like it is not going to hold up. Paying attention to
the volume is a good guide as you want to see high volume on the
up times and lower on the down ones.
Also on the chart I wanted to point our how the
MACD and RSI can be helpful though they are not great timing
indicators they do give early warnings. Notice how after 11 AM
the MACD was already going down while the stock price was going
up. That indicates that a high may be coming. The RSI reached
its peak over the 70 level also a bit before the stock peaked.
To lighten up on positions at those times is a pretty good
idea for short term trading. With the MACD giving such negative
divergence then when the stock broke the 50-period EMA at about
3 PM it would have made a good place to sell any remaining shares
if you were day trading this one.
We showed this 15-min Dow chart in the Friday morning
video. Note the parallel channel and how the Dow was at the top of
it while MACD was showing such negative divergence. I thick this is
the reason for the slight pullback Friday and it has little to so
with any news. The MACD has now turned up and stochastics are below
80 so this may rally some more as it now has room to go to the
line again. This run from the bottom of the channel to the top was
242 points so a single e-mini Dow contract that uses about $1,800
made $1,210 in 3 days or a 66% gain. If you cannot trade futures and
want to trade the Dow you an also use the proxy DIA
Diamonds or better is the new Ultra Dow 30
DDM which movea more than the DIA.
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