November 7th, 2009

More Stocks on the Move

I did a little market researching this weekend and visited two, outstanding but dramatically different retailers: Whole Foods and Ikea. And even though they cater to two different clientele, I found one thing they had in common: both were filled with shopping families lugging their kids and totting bags full of stuff. It sure didn’t look like these stores were suffering much from the 10.2% (or close to 17% as some say when you add in those who stopped looking) unemployment.

At the end of October, I inserted some chart projections and outlined the following game plan:

“If the market successfully bounces around 1018, there’s a possibility it could then lunge ahead …. for a final gasping 10.5% gain to 1125….. The 1125-1150 range of significant for several reasons: 1) it’s been mentioned by many analysts as the high for the year and 2) it’s on the extension of top boundary of that channel….Violating the 50- (and 200-) day moving average wasn’t calamitous in July (the market then proceeded to surge ahead by over 25%). Another big, though not as extreme, move may follow this violation. Simultaneously, the 200- may cross the 300-dma and the 300-could turn up paving the way more gains later.”

The market did touch an intra-day low of 1029.38 (pretty close to 1018, wouldn’t you say) a couple of days later and has since jumped to 1069.30. Even with a consolidation or correction anticipated just over the horizon (I can’t tell just yet how severe or deep it will be), it’s might also be prudent to replace some of the stocks that you’re pruning some of the losers out of your portfolio with better performers just in case the bull market surprises us all and continues moving higher and longer than expected. If there’s another 6-7% left before a correction begins (or, if I’m wrong and the market continues heading even higher) then what sorts of stocks might lead in addition to the precious metals, energy and other groups or stocks mentioned here previously.

Last July, I outlined a screen called “Stocks on the Move” and presented a spreadsheet of 135 stocks meeting the following criteria:

  • Price per share > $15
  • Price percentage change today > 0.5%
  • Relative Strength Indicator today > top 50%
  • MoneyStream Surge for past week > top 50% (proprietary to Telechart grew out of joint venture with a large regional brokerage firm to develop a price/volume indicator. The result is an indicator with much the same objectives as OBV and is interpreted in the same way you would interpret OBV. Generally, you look for divergences.)
  • EPS percentage change from 4 qtrs back > top 50%
  • Volume surge over past 5 days > top 50%

Since then, those stocks have appreciated, on average, the marginally more than the S&P 500 Index (12.9 vs. 12.0%). However, relative to the high price during the period (July 22-Nov 6) the group’s performance, on average, more than doubled that of the Index (25.0%). If STEC, DRIV and ICON had been excluded from the original group, the groups average performance had been appreciably better than the index (for an updated spreadsheet of these 135 stocks, click here).

A new “Stocks on the Move” screen now produces a list of 107 stocks, of which only 7 stocks were on the previous list (the list is on the second tab of the spreadsheet). Of the total, only 39 stocks are trending such that the moving averages are aligned in a Bull Cross (P>50DMA>100DMA>200DMA>300DMA) and the 300DMA has turned and is now rising. Based on these technical indicators, these 39 might have the best chance of smallest impact of any market correction. A short list of these stocks might include:

  • AMZN
  • ATHN
  • BIDU
  • DGIT
  • GG
  • IAG
  • LL
  • MELI
  • SYKE
  • TEVA
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