September 20th, 2009

New Place to Mine for Winners

It seems as if it were longer but only two months ago I described stock picking then being as easy as “shooting fish in a barrel” since many stocks had formed classic bottom reversal patterns. I even included a spreadsheet of 135 stocks, labeled “stocks on the move” because they met certain specific criteria (click on article above for the criteria); they looked like horses at the starting gate waiting for the bell.

Fortunately, this time I did take my own advice and did buy some for my portfolio because as a group, the stocks have increased 16.7% to their highs during the period and 13.2% to last Friday’s close. Of the 135, only 5 declined, 5o increased less than the S&P 500 but 85 went up more (click here for the updated recap). The biggest winners, if you were lucky enough to have picked them were:

What’s upsetting and distressing is that only 5 of the 135 are on the Stocks on the Move scan today. As a matter of fact, the scan produced only those 5 stocks. So even though the Index continues to move higher, it’s more and more difficult finding stocks that look attractive at this point.

So what is one supposed to do now? Should I swap out my big winners (if you were lucky enough to have bought WYNN, you’d over 60% to Friday) and put the money elsewhere? If I have some cash waiting on the sidelines, is this a good time to buy and, if so, where should I put it?

Good questions and, unfortunately, the answer isn’t so good. I’m having a hard time finding stocks where the future reward currently exceeds the attendant risk. But when I do find them, they seem to concentrate in the familiar commodity-based Industry Groups of Energy (see “Mysterious Happenings in the Oil Patch (Stocks)“), Metals, Steels, Coal and Precious Metals.

Does it have something to do with the continued weakness of the $US? Probably, since many were expecting the dollar to rebound when it touched a level that seems to have been support since the early ’90’s. It didn’t hold and the dollar continues sliding to the levels it hit in early-mid 2008:

There’s a lot of debate around which is best for the US today, a strong or a weak dollar. We’ll let other duck that out. What I’ve thought for quite some time is that about the only way out of our huge debt position in the hands of other countries is to devalue our way out. What that means is inflation, higher interest rates and higher commodity prices (when expressed in terms of $US). Having said that, some of the stocks (ETFs) where the expected rewards and risks might still be in balance include:

  • OIL
  • REA
  • XME
  • PTM
  • X
  • CENX (or AA)

Plus, of course, the precious metals complex including: SLV, GLD, UGL, DGL, GDX plus the wide range of miners.

Subscribe below or click here to learn more about help for navigating turbulent markets.
  • Jesse Caris

    your discovery is telling you that now is not a good time to get long. The market has just about worn it's self out at this point. Time to sell long positions guru.
    The rally is way over extended without a meaningful correction.

    get short or get crushed

  • Minnesotalee

    "To the upside we hope". Jesse remember this? Your comment on August 17. Well we chartists didn't need it. What happened? We're up big since then. Actally nearly 100 SP500 points. How much did you lose going short. I think you got crushed.

  • Pingback: Will 2010-2030 Equal 1910-1930? | Stock Chartist()