Setting Up Positions

I literally haven’t done a thing in this stock market in about two weeks. That’s because the market has barely inched higher, as investors seemed to be nervous of those Dow 11,000, S&P 500 1200 and NADAQ 2500 levels.


What I have been doing, however, is keeping a close eye on my watch list, which hasn’t changed much since I last posted it.

One new stock is ISRG, which I seriously started considering two days ago and bought today. I don’t often buy a stock the day before earnings, but I felt that strongly about ISRG. I’m writing this at 2am Friday the 16th, so I may be wrong by the time the market opens.

Normally, I’d say perhaps you should consider selling a stock if you don’t have any profit in it, and almost certainly if you have a loss in it if you are coming up on an earnings report. However, if you’ve done your research, have conviction in the stock and like its break out regardless of the earnings cycle, buy it.

In the case of ISRG, it was up 4.2% from its buy point, just inside the 5% range that is ok to buy a stock off a break out. Obviously I’d prefer getting it closer to the buy point, but I missed the move Tuesday, promised myself to catch up on research yesterday (Wednesday) and perhaps buy on a slight pullback, which never happened.

Because I have been familiar with ISRG and its highly innovative da Vinci robotic surgical system for a couple of years now, I completed my research quickly after yesterday’s close and pick some up on a very tiny pullback today. When you like a stock, buy it. It was up as much as 3% after hours on news it easily beat estimates and raised guidance, then went down almost 4%, only to finish down 2% after hours. We’ll see how Friday goes.

I mentioned Jim Cramer in the post prior to this – he expects a slight market pullback Friday or in the near term, but then expects to see it cruise higher after that. I wouldn’t be surprised to see a down day Friday, which could cause ISRG to pull back itself – but keep an eye on it if it does. How does it behave? It may offer up a bargain price. We shall see.

Another stock I picked up today was BCSI. It broke out of a 5 weeks tight pattern yesterday (Wednesday) on big volume. BCSI doesn’t have huge sales growth – in fact, it comes in at only 16% in the recent quarter. For this reason, I am really just looking at this as a short term play. I thought the break out was strong enough out of a great patter that it was worth getting in to. Plus, despite the less than spectacular sales growth, the fundamentals are solid.

However, the stock ended the day down, showing something of a negative reversal on volume – but on volume that was lower than the break out volume, and the stock finished higher than the buy point. Mixed messages. I have found in a good market, stocks can cruise higher despite a mixed signals. We’ll see how strong the recent buyers’ appetite is for the two aforementioned stocks.

This means I now own ISRG, CTRP (in lieu of PCLN) and BCSI. I sold my calls in ATHR and GMCR because they were expiring. Watch GMCR as it may set up in a 3 weeks tight pattern if it moves up about 40 cents Friday. ATHR, as I mentioned below, is in buy range, and I may pick some up.

What I often do in rallies when I’m confident in the market’s action is buy 4 or 5 stocks with the intent of whittling it down to the 3 I really like. I do this by spreading my money out, then selling shares in the stocks I don’t like as much (but which still may be good) and concentrating in the stocks that start showing strong action.

Some of this pruning (or outright exiting a bad position) could happen Friday.