October 7th, 2009

Five Stocks Making All-time New Highs

Life used to be so simple 9 months ago. All stocks were on sale for rock bottom prices and hundreds, if not thousands, were in the starting gates waiting for the starting gun (if you remember the analogy. All we had to do was find stocks that had formed clear reversal patterns, pick the ones with the highest volatility and buy a bask full of them and we would make a huge profit with little risk.

But finding stocks with momentum or a potential for momentum is harder now. Few stocks are still forming reversal patterns and the risk is that they breakout just as the broader market or, more correctly, the stocks that have been driving the market up to now, start running out of steam. [See yesterday’s report on media stocks.]

Alternatively, we could hitch a ride on the stocks that have had huge runs over the past four or five months and hope they aren’t the ones who’ll run out of steam first. Remember, for example, Diedrich Coffee, Vanda Pharmaceuticals or Dendreon?

As a true chartist, I much prefer looking among stocks making new highs and the more significant the new high the better (for example, all-time new high is better than 2-year which is better than 1-year new high). Here are several that meet the criteria:

  • CERN
  • NPK
  • PETS
  • CHKP
  • MNRO

But I give you these with a word of caution. Keep your thumb on the market’s pulse and make your own assessment as to its health and strength. Any guesses in which life cycle stage the market is in now?

I think the market is transitioning from the accumulation to the mark-up stage. That transition will be completed and the exciting mark-up stage will be launched after the consolidation correction we will have to contend with, probably most of next year (see “Two Market Consolidation Models: 2004 and 1933-35“). Or in which emotional stage it’s in?

I feel we’ve just experienced a huge relief rally, are waiting for a test to see whether “it’s for real” and then the market will move into the “optimism” state.

Since the easy pickings are over, the easy money has been made, market timing is again going to be important. If you buy stocks today, even if they’re breaking out to all-time new highs, don’t get wedded to them. The market has to mature and it’s about to experience some turmoil as it evolves into the next stage.

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  • Anonymous

    The Baltic Dry Index was tanking and now really rebounding,any thoughts?

  • Guru

    Speaking of tanking, I notice that stocks of tankers (oil and nat gas) are doing better than the bulk dry shippers. Other than that, I don't know enough about the BDI to comment.

  • ace

    I agree that stocks making new highs — preferably all-time highs — are a great place to look for investment/speculation opportunities. Thanks for sharing your analysis.

  • Manoj

    Hi Guru
    What is your call for HIG/LNC/GNW?
    So far pretty good.
    Which one should added at this time.

  • Guru

    Manoj, add? I'm not sure about adding. I still own them from when I first mentioned them here before their nearly 100% move. They've had a terrific run. I wouldn't sell just quite yet but it's getting close. So I certainly wouldn't put on a new position or even add to a position.

    When the market tops out in a consolidation move, these will be some of the first to crack. As a matter of fact, they might even be leading indicators. Weakness here could foreshadow market weakness.

  • Jesse Caris

    guru, if you are allowing me to post I just want to tell you that you have done an outstanding job. I have been wrong for far to long. The market wants to go higher regardless or reality. The bulls apparently have kept the momentum. It looks as though my 1050-1100 will inevitably be compromised, most likely this week. The good news is you get to keep your blog. :o)

  • Guru

    Jesse, you're always welcomed here … so long as we keep our discussion on a professionally polite level. Welcome back and I hope to hear more from you in the future. By the way, I don't remember your 1050-1100 projection but it may still be pretty close to the mark. I think the main thing we disagreed about was what comes after the top…. huge decline or consolidation? I'll go for consolidation.

  • Jesse Caris

    yeah, remember your facebook question of what will the SP high of the year be? I answered 1050-1100 and said what do I win if I'm right. You replied, you may give me your blog. :o)

    I think consolidation, when it happens, will turn into the beginning of the next big down leg to new lows (below 666)over the next 1-2 years. But for now, bulls on parade….