November 17th, 2005

Many Stocks to Break Out

Through last week, the market completed a strong upside move that many claimed was the beginning of an extended bull move. As proof, I researched how often there were 8 up-days out of 10 and found about only two dozen in the nearly 8 years since December, 1997 …. a fairly rare event. So, it has been a strong market, one worthy of taking a breather before moving further. And the market, as measured by the SP500, is pausing at a critical resistance level which it has tried to breach twice before this year:

The market’s strength creates many opportunities among stocks that have themselves breaken through resistance levels in anticipation of continued market strength into 2006 or are about to. There are so many, though, that I almost feel like the proverbial “kid in a candy store”. As is usually the case, it’s unclear beforehand what fundamental factors will generate the rationale for higher valuations , the reasons and explanations of such a positive move will become clear only months after the fact in hindsight and will be continuously enumerated by others in print and over the airwaves.

What’s clear now is that investors are voting for such a move as evidenced by their increasing demand for certain stocks as reflected in higher prices, increasing volume and more stocks bridging long-standing resistance levels.

Many stocks on my watchlist are breaking through daily so the challenge is weeding out those that turn out to be duds to make room for some true rockets. Some of the most notable include:

AC Allied Capital
ARI Arden Realty
BBSI Barrett Business Svces
CLB Core Labs
BPFH Boston Private Fncl
CNET CNET
IVIL iVillage
MGI Moneygram Intl
MNST Monster.com
MXRE Max Re Capital
MXTT Matrix Initiatives
NILE Blue Nile
NVDA Navidia
RATE Bankrate.com
RAVN Raven
SBUX Starbucks
WL Wilmington Trust

Other stocks to be added to your watchlist include:

ADM Archer Daniels Midland
EV Eaton Vance
GBL Gabelli
RKH Regional Bank Holders
WFC Wells Fargo
CPF Central Pacific Financial
BBT BB&T Bank
BSC Bear Sterns
ING ING N.V.
ORH Odessy Re Holdings
ORI Old Republic International
WITS Witness Systems
VISG Visage Technology
ANT Anteon International
PMTI Palomar Medical Tech
ADBE Adobe
AFFX Affimetrix
OSUR Orasure Tech
CYH Community Health
CCK Crown Holdings
PACR Pacar
ATI Allegheny Tech
USAK USA Truck

To increase the probability that a stock has sufficient momentum for a significant move up, it should be purchased only if it clears (by approximately 5% with significant higher than average volume) the upper most resistance trend lines indicated in red when you click on any of these stock’s charts.

This imperfect survey of so many stocks breaking through consolidation patterns (and this is only a sampling, many more could be added and will be in future postings) confirms, for me at least, that perhaps up to 50% of a stocks action can be attributed to the overall market (i.e., macro economic, financial and political factors), 35% to industry action and only the remaining 15% to specific stock factors (such as share of market, management, new product developments, productivity and efficiency).

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