Stock Market Going Higher

The S&P 500 pushed above a key trend line Friday suggesting it wants to go higher. Just go with it for now, even if it doesn't make sense given all the continuing bad news we are barraged with.

The market had been showing some resilience, even with the push lower over a week ago, it suddenly reversed higher last week without even touching the bottom trend line you see on the chart below.

One can never be sure how far this goes, but if we start seeing high quality growth stocks breaking out, it might be worth taking a chance on some and see where this market takes us. As always, let the price and volume action tell the story and don't argue with the direction.

Gold Breaks Long Term Trend Line

The previous post on gold pointed out that gold fell right to a long term uptrend line. Since then, as the chart below demonstrates, gold broke down through this line. This suggests one should expect more downward pressure in the near term.

Gold bugs will suggest this is a buying opportunity as they all believe gold is going to one million, sarcasm intended.

Weather gold goes higher in the long run or not, it should be clear that there is a definite change in tenor for the metal for now.

So how does one trade this? Shorting rallies using your favorite tools: fibonacci retracements, trend lines, etc. Having been distracted early last week, I missed the break of the trend line, so I shorted silver Friday, perhaps a little late, but I am up in the trade. Which reminds me, I want to give a shout out to the fellow I met at the Reagan Library last week who suggested in line at the gift store that silver was a great buy at $30. Ride it out, friend.

Will Gold Maintain Its Long-Term Uptrend?

Gold took a thumping today, sending it down to a long-term trend line. Uptrends are defined as moving from the lower left on a chart to the upper right. In the chart below, you can clearly see gold's uptrend, marked by the white line. Gold is represented here by it's ETF, the popular GLD, which tracks the price of gold.

Gold's recent action has something of an ugly appearance, with its recent top hit in September towering over the november "hump" high.

It could present a terrific buying opportunity if you think gold still has long-term legs to the upside. If you are an aggressive trader, perhaps it's worth a stab at buying to see if you get a little pop, putting tight stops in place (stops at today's lows seem appropriate to me). If you are more cautious, waiting to see if it holds this trend line isn't a bad idea.

On the other hand, if gold fails this trend line, it could experience a quick drop to an area just above the $155 level on the ETF chart.

I'm leaving it alone for now.

Dollar General Breaks Out

This market has been choppy and unpredictable, so what do you do when a stock breaks out, like Dollar General, DG, did today? The safe approach is ignore it and wait for the market to begin an uptrend, otherwise you will be swimming against the current. When an uptrend resumes, then jump on break outs.

That the market isn't rolling over amidst all the terrible news is positive. Yet the market is hostage to news headlines, creating a herky-jerky environment, even if it seems to want to move higher. If you think the market might move higher, even if for a very short while, perhaps it's worth taking a chance on a break out - if you are not faint of heart.

I recently took this chance on October 6, 2 days before IBD put the market in an uptrend. I did it because the market had shown a tremendous upside reversal on October 4 (see chart below - this day happens to mark the market's recent low point), and market rallies can be exceptionally strong, strong enough for a short swing trade. It isn't clear that the market today has as much upside potential as it did on October 4, however.

The market's move had a definitive nature to it on October 4 and, from my perspective, was worth attempting a trade in a break out stock. My stock of choice was Nuance Communications, NUAN, (and there were others). The green arrow marks my buy point from a cup with handle. The stock is currently forming a new base along its 50 day average.

Getting back to Dollar General, DG, you will notice that it formed a flat base, as outlined by the rectangular box, which it just broke out of today on volume that was 89% above average.

DG is an IBD 50 stock with strong earnings, and while its sales figures aren't stratospheric, it does have a 17% Return on Equity as reported by IBD, a key feature shared by past market leaders. An additional supportive feature is that it has been accumulated by some big funds lately including Berkshire Hathaway. Good to see the big boys supporting the stock.

But be forewarned: buying break outs in this environment is risky. A stop loss should be used, as always, but perhaps a tighter one than the usual 7% or 8% would be wise right now.

IL regains its footing; SOHU breaks out; PPO near break out

As the markets edge higher, stocks have shown some more life again. However, this is not the go-go market of years past. We have discussed this in our IBD Meetup Group, and most of us agree it is a challenging market to find solid winners in.

Sticking with the CANSLIM approach and favoring companies with top notch earnings and a new product with secular growth is the best way to find good winners even in this more challenging environment. Not every good company's stock is moving higher. Just when you think you've got one, it seems, a pullback snuffs the gains right away.

Stocks to consider: IL, SOHU, PPO

IL broke out, and immediately retreated, but it didn't go down 8%, which I often use as my stop loss. I view it as a quintessential CANSLIM, Bill O'Neil style stock. It's young, has a new product in a very new space, and sports top notch earnings. It lacks a little in ROE (12%) which is about the only flaw I find in it. Today it popped back up above its buy point after spending four days below it.

SOHU hesitated on its initial break out of a cup, then formed a three week's tight pattern which it recently broke out of. It is still in buy range.

PPO is setting up in a tight cup with handle. It's a little harder to get as excited about this one as its recent sales and EPS growth is on the weak side, but it looks to rebound in the next quarter. It's in a hot group and certainly looks like it wants to go higher. As always, wait for a break out on volume to consider getting in.

Two More Stocks Close To Breaking Out

The market’s pop caused at least a few breakouts today (yesterday by the time of this writing) and as we get ready for Thursday’s action, keep an eye on Netflix, NFLX, and Acme Packet, APKT.


Both stocks have stellar fundamentals and have unique products showing secular growth. Perhaps the most negative aspect of these stocks is that they have had long runs.

Nonetheless, funds have been aggressively buying shares of these stocks and the stocks’ strong technical action suggests their uptrends could continue, if even for just a little longer.

Below are daily charts of these stocks. The arrows indicate their pivot points. Both stocks are cup with handle patterns.

Silver On Its Way to $50

Silver is in a major uptrend that appears headed for $50. It has been difficult buying silver as it hardly pulls back on its way higher. This is truly exceptional behavior for a commodity such as this.


As we witness history in the making, how do you trade it at this point? If you missed any of the previous breakouts, silver hasn’t offered much of a pullback at all.

If you are an aggressive trader, if you get a slight pullback, it’s worth attempting a purchase with a stop in place two bars back. If you are wrong, take the loss and view it as an opportunity to establish a position at a lower price before silver regroups and heads higher.

If you are more cautious, perhaps this runaway train isn’t for you. You could wait for at least sideways action as it exhibited not long ago, but this may not happen. What seems more likely at this point is that silver shoots to $50 and maybe even higher before we start experiencing some serious gyrations, as always happens with assets and securities in hyperbolic action.

Whatever you do, treat this as a trade and don’t get married to your position. Just try to make some money on the way up.

Below is a daily chart of the SLV, a highly liquid ETF that tracks the price of silver. I've included a Keltner Channel with my own flavor. As you can see, silver is trading well above the bands, indicating exceptional strength. The green arrow is the most recent clean breakout which happened just after I posted an alert for silver in February.

Which Way, Market? Break Outs Suggest Up, Perhaps...

My previous post asked if the market rally was over. It appears suspicions of its death were somewhat exaggerated. While IBD listed it as “under pressure”, today’s action was heartening as the major indexes pushed up against recent highs, on higher volume than the day previous, with the DOW hitting a new 52 week high.


Just when you think the market is going to fail, it surprises us all with another bounce higher. While it is frustrating, it is refreshing on some level – that even the experts cannot predict exactly what will happen. If we all knew what would happen, we probably wouldn’t make any money. A strange paradox indeed.

At any rate, I previously posted a watch list of stocks setting up in bases, and for the most part, the list is still valid. The only stock on that list which is seeing a meltdown in its consolidation pattern is ACOM, which is too bad because it showed tremendous potential.

Stocks that broke out today and are still in buy range include IL, RAX, RHT, ALTR and CPX. RAX and ALTR broke out on increased volume, but it didn’t push above the 40% volume spike you’d like to see (IBD once used to say 50% was the amount you wanted; lower volume levels generally were ok for bigger stocks…use your discretion). DECK previously broke out and is still in buy range.

IL, RAX and RHT all benefit from cloud computing and all seemed to break out on the earnings report of IBM, among others, which made mention of the growing market. This is the kind of secular growth you want to see in a prospective stock purchase. New products, especially from a young company, coupled with tremendous earnings growth spell appreciating stock prices.

This market is still questionable, so use caution proceeding.

The daily stock charts of IL, RHT and CPX are below. Each of these broke out today past their pivot points on volume that was over 50% above average. In IL's case, it was 318% above average. This is the kind of volume spike often seen with new, young companies that are gaining the attention of bigger investors, a most positive sign.
 

Is This Market Rally Over?

As I sit here watching the market action at 10:30 in the morning, I’m looking for any sign that the market may show some life – any attempt to cut today’s terrible losses and at least try to finish in the upper half of the day’s range.


So far, the market juts looks plain awful. Looking at the chart, does this spell the end for the current uptrend?

The catalyst this time is a serious one: a downgrade in the outlook of US government debt by S&P.

The bond rating for US government debt is AAA, but S&P lowered its outlook to negative which raises the chances for an actual downgrade of the US’s sterling AAA credit rating. This could wreak all sorts of havoc if that occurred.

It is no wonder gold is up today. However, with silver showing hesitancy after a very strong advance, maybe gold and silver will also take a breather.

As far as breakout stocks go, I’m laying off any new purchases for the moment. In fact, I dumped my last two stocks Friday, RAX and DE. DE I lost money on, RAX I made a small profit in. This market showed initial success and money making opportunities with a few notable breakouts in such names as OPEN, BIDU, TZOO, LULU, RAX and others. Now, however, this market looks awful again.

All corrections lead to base building, which is a good thing. It’s best to keep an eye on top quality stocks and wait for a new uptrend in the future.

More Stocks Potentially Readying For a Breakout

Here are some stocks that are consolidating but have not broken out yet. Each one

Is getting very close to their respective buy pivot points, or path of least resistance as Jesse Livermore referred to break out levels.

ACOM (potential cup with handle)
APKT (cup)
ARMH (cup)
ASML (square box)
CMI (cup, potentially cup with handle)
CPX (cup with handle)
CXO (flat base)
DECK (cup)
DOV (cup, potentially cup with handle)
ILMN (cup, potentially cup with handle)
NFLX (late stage cup)
POT (double bottom or cup)
VSEA (slight V shaped cup base)

Each of the stocks above meets a strict search criteria that conforms with most of the elements of IBD’s CANSLIM. Not all the stocks listed above are in the top industry groups, which is something to consider, but not a deal breaker. Also, some stocks don’t have the 17% ROE, but each stock has top not fundamentals and has at least 25% EPS growth in the most recent quarter.

CMI, CPX, CXO, DOV & DECK have sales growth in the most recent quarter that is between 20 and 25% instead of the over 25% I’d prefer, but most of these are projected to have this quality next quarter. DECK, unfortunately, is projected to have negative EPS growth next quarter. I usually shine a stock if this is the case, especially when you have other high growth stocks to select from.

I’ve put charts below of those I think look the most agreeable. They are daily charts and the green arrow shows the pivot point. Note that sometimes the arrow is not at the origin of the handle. When a day’s action in the handle moves above the original pivot (previous high of the handle) but eases back down on low volume, that day’s high becomes the new buy point, but the length of the handle does not change. Five days or longer is the proper time for a handle to form, so keep an eye on the stocks as they continue to develop.

 

 

Gold Breaks Out

Pardon noting this a day late. Gold broke out of its consolidation Tuesday and followed that move up today with a small gain. Previously, gold attempted new highs, only to pull back and continue consolidating.
Tuesday’s move higher was a clear cut break out. Gold finished at the top of its range in a big, convincing mover to fresh highs. It looks to me like it wants to get moving. How high can it go is anyone’s guess, but $1,500 looks reasonable. For quite a while now, long before this break out, many analysts have suggested it will go to $2,000. This doesn’t seem so outlandish anymore.

I just keep up with price and volume action to gauge whether or not to keep a stock or commodity, but round numbers are psychological levels that often act as magnets when a stock or commodity is on a momentum move.
I’d aggressively buy gold on any slight pullbacks right now, with a reasonable stop in place.

Some Healthy Pullbacks

The stock market continues to tack higher. Despite the markets moving higher today, several leading growth stocks pulled back. IBD noted this at the end of the trading session. Most pulled back on mild to low volume, which is generally constructive.


In fact, it’s more than constructive, it may offer you a buying opportunity if you missed the initial break outs.

Here are some stocks that already were or pulled back into a buy zone (within 5% of the pivot point):
BIDU
CAVM
DE
HS
JOYG
RAX
SOHU
TTMI
UA

For the record, I bought two of these, DE and RAX. DE is a slow mover but I felt its low volume dip wasn’t a sign of caution and that it would challenge $100 again soon.

On RAX, after a very strong break out, today’s pullback to its 8 EMA seemed a good opportunity to pick up a market leader at a slight discount.

I am keeping these purchases on short leashes as you’d always rather see a break out that never looks back rather than stocks that revisit buy points or come close. Nonetheless, it’s perfectly valid to buy pullbacks as many stocks will pull back slightly then take off again.

Take a look at these stocks on IBD’s website, www.investors.com, and you’ll see they are top notch stocks that just broke out of sound basing patterns. As a footnote, I bought TTMI and HS, but then sold them by the end of the day because I didn’t like their action during the break out. TTMI finished under its buy point in something of a downside reversal.

With HS, I just decided I wanted a top notch stock that is projected to actually show growth next year. HS is projected by Wall Street analysts to have zero EPS growth. Sometimes I change my mind like this. While I’m a just get in the game sort of trader, with so many stocks to choose from, it’s ok to be choosey.

Charts of DE and RAX are below. The arrow shows where the price action fell into support on their respective 8 EMA's. For Deer, it was a low volume dip (suggesting the big money wasn't selling) even though the stock finished at the bottom of the day's range. For RAX, I liked how the stock finished in the middle of the range. Generally finishing in the upper half of a stock's range shows support.
 

Knowing How to Use IBD to Make Money

The Investor’s Business Daily is an excellent source of top notch stocks. It will help you identify stocks that are about to break out and make you money. However, you have to know how to use IBD properly.
Below are some instances I’m sharing with you in how I disregarded and how I listened to the IBD, and how I both made quick money – and how I missed out on making a lot of quick money.
Even though IBD has solid rules in place, there is still wiggle room and situations that are open for interpretation. So as you read columns in the paper, just know the reporter’s or editor’s view is what you are reading, and it isn’t always a crystal ball.
A case in point is the current uptrend. The market had just sold off over 7% and was in the process of rebounding. During the turnaround ascent, which we are still in, stocks quickly began breaking out. TZOO is perhaps the most dramatic example. I didn’t even consider it at the time because we were not in a market uptrend, but were in an IBD designated “market in correction” phase. Therefore, I did not buy the stock.
The date was March 22 when TZOO broke out and the S&P500 was just below its 50 day moving average. The next day, BIDU broke out; the day after, OPEN broke out. These were each high quality stocks I very much wanted to get in if the market resumed an uptrend.
I have found it very profitable to only trade break outs when IBD determines if we are in an uptrend, and unprofitable when IBD determines we are in a market correction. Their methodology is sound and time-tested.
This time, however, with top rated stocks breaking out of sound bases on strong volume all over the place, I had to act, despite the fact that IBD still wasn’t calling the market an uptrend. They were noting the break outs, but without turning that all-clear switch of “market in uptrend” on.
I bought OPEN the day it broke out and also got a position in BIDU. I didn’t want to push my luck and chase TZOO (too bad) because I had been burned in January and February buying stocks3% or more beyond their buy points.
Three days later I decided to take profit in OPEN, and I sold BIDU at no gain/no loss because IBD still hadn’t pulled the trigger and I felt they knew something that I didn’t. I didn’t want to push my luck. I was able to double my option in OPEN on that strong little break out, so I was happy.
However, this same day LULU broke out, but finished just below its buy point. In a normal uptrend, I’d had bought it because LULU is a top notch stock that I’ve been watching a long, long time. But again, IBD scared me out of this one.

It wasn’t until two days later – the night of our stock group meeting – that IBD decided to retroactively put the market in an uptrend based on the prior Thursday’s action on the NASDAQ in particular.
So while I ignored IBD and jumped on one of my favorite stocks, I also dumped it out of fear, and I missed out on TZOO and LULU, just to name a couple of stocks.
Since their breakouts in the rally that IBD didn’t call, here is how much each of these top quality stocks are up:
BIDU: 8.6%

LULU: 6.5%

OPEN: 13.3%

TZOO: 42.9%

 

 
 

 
The lesson here is to go with what you know, not what someone else knows. If you see it, you like and you have conviction behind your thoughts, act on it.
 
So while IBD was late to the party and the train had already left the station for some top quality stocks, there are still stocks worth watching for break outs in. I will post those shortly.

8 Stocks Inches Away From Open Sky

The stock market has raced off its recent lows to challenge its recent highs and in doing so, several leading stocks have done the same. After running a scan a couple days ago of stocks that meet IBD's growth criteria, I came up with a list of stocks worthy of keeping an eye on.

Below are charts of eight of these stocks that are teasing their recent highs. Not all these stocks are in leading industry groups nor do they all have the 17% ROE IBD likes to see, but you can't always get the super model either. Don't aim for perfection, aim for what is practical.

If this market is for real (IBD was hesitant in calling the current environment a market uptrend, so bear that in mind), several of these stocks could bust out of their consolidations and shoot right past their buy points without so much as kiss goodbye.

The daily charts of these stocks are all below. Do your research. I don't plan to buy all of them, only the ones that really catch my eye on a legit break out. Once again, thanks to http://www.freestockcharts.com/ for the charts, which you can use to get real, free time data. I am not paid to say this. I just like them very much.

Gold Ready to Blow the Lid Off?

Gold has been trading in a relatively tight range near its all time high. Look to the left of the chart of the gold ETF, GLD, and you will notice gold challenged its high three distinct times, each time it pulled back, and after the third time it turned tail and went into a new correction.

Gold went on to shape a cup shaped base and then attempted to break out. Again, it teased us and pulled back, causing me grief as I purchased the pretend break out. After a dip, it again, for roughly the fifth time, attempted to go higher but could not.

All the while, silver, gold's shiny sister, broke out and cruised higher. See an earlier post I made recently on silver. It broke to new highs and would have been very profitable if you bought it. I am not including silver's chart here so as not to confuse the issue of gold.

Now, after five distinct attempts at surging to new all time highs, gold is bobbing above it's 21 day EMA (the blue trend line). It appears to want to go higher. I'm already in it, but you could wait for confirmation to see if it breaks out for real this time.

We'll see if it joins silver in a run up to new highs.

Same List as Yesterday Still Applies

Well, almost all apply. I wasn't thrilled with SOHU's movement. It broke out then reversed 2.8% for the day, below the buy point, very negative action. However, it could still right itself. I'd just look elsewhere for now.

RAX blew out of the starting gates and ran up 8.3% for the day. This puts it 5.5% above it's buy point. Ouch, that was fast. If you snagged it, good for you. You are looking solid. It could offer a second chance to buy if it pulls back, but it may just keep going. You had to be quick on this one as it bolted above the buy point at the opening bell.

I'm upset I missed this one. I didn't start looking at the market until 8:30, and RAX was further along than I felt comfortable buying, especially given my recent experiences buy stocks more than 3% past their buy points in the past rally attempt. So I'm a little gun shy at the moment. I want to stick these stocks as close to their buy points as possible to guarde against unwelcome surprises.

BIDU is still in buy range, although the day's action wasn't very strong.

CMG looks ready to shoot higher, keep an eye on this one. Chart is below. See how close we are to the most recent high, the left side of the base. I was tempted to buy this one today in anticipation of a break out, but that would break my (IBD's really) rules, so I held off.

NFLX is another stock itching to break out. Keep in mind this has had a long run and is in a late stage base. However, it has been a true market leader, so I expect it to go higher if the market does.

Watch These IBD Style Stocks

As I emailed yesterday to my IBD Meetup Group, IBD had not called the current market an uptrend, yet a number of stocks were breaking out, demonstrating a return to risk appetite.

Today, IBD recognized this trend and changed their outlook to market in uptrend. Among the reasons were those mentioned above as well as a high volume move by the Nasdaq Thursday.

I rarely buy breakouts without IBD confirmation that the market is in an uptrend, but given the strength, I jumped on OPEN and made a quick profit. It's out of buy range now but could pull back a little. I also bought BIDU, sold it at no profit no loss as at the time I didn't want to push my luck without the market being in a technical uptrend. I was afraid the market might pull back at any moment.

The market may still pull back, but it shows resilience. Therefore, I have put together a watch list of stocks that meet IBD criteria. These stocks not only show tremendous growth, but they are consolidating and readying for a move higher. A couple have already broken out such as OPEN and BIDU.

Stocks consolidating:
BIDU
CMG
DAR
DE
LULU
NFLX
OPEN
PCLN
RAX
SLW
SOHU
SOLR
WLT

This Baker's Dozen list of stocks are showing very positive movement. BIDU, OPEN, LULU and PCLN have all broken out. Only OPEN is technically out of the 5% chase range.

Some of the stocks above look like they are itching to move higher or break out like BIDU, PCLN (looks like $500 is a near certainty), CMG (got shaken out of this before, but it's resilient), RAX and SOHU. SOHU is a stock that broke above its buy point but closed below it today. While not ideal action, it can still lead to a positive move higher. In fact, LULU did just that Monday and finished 4.6% over its buy point.

Take care because the market is near resistance levels. It could power through these, or just as likely pull back.

Silver Consolidating - Preparing to Move Higher?

A quick look at silver's daily and weekly chart (weekly of the silver etf, SLV, shown below) shows it is clearly consolidating in a cup-like basing pattern.

Commodities exhibit the same characteristics in their technical action as stocks. I have purchased commodity etf's in the past on break outs of bases, and I'm considering doing it again with SLV or GLD if they move higher and clear their recent highs, or if they form handles to their cups.

There are a number of fundamental drivers behind both gold and silver's big moves lately, and these haven't changed much. Combine that with their chart action and you have a potential formula for success.

NOG Breaks Out Monday, Reverses Tuesday

It’s not often I buy a stock on the AMEX, but you may have noticed that some oil groups have done well lately, but not all. When looking at IBD’s industry groups, which breaks down the groups into more specific plays, and which makes better sense than using the broader groups others use, you will see Oil & Gas US Exploration and Production is one of the top groups lately.


One super stock, GPOR, broke out recently, just as the turmoil in Egypt starting hitting critical mass. I missed it. So, I kept an eye on Northern Oil & Gas, Inc (NOG). A significant part of a stock’s move is determined by its industry group, so it’s always best to buy leading stocks that come from hot groups, particularly groups with other top notch stocks in terms of fundamental strength and product or service the company sells.

NOG broke out Monday, I bought it, then it slammed into reverse during today’s sell-off. This happens sometimes with breakout stocks. How do you know when they need to be dumped? Stick with your sell rules – if it falls 8% below your buy point, wave goodbye and move on. This hasn’t happened yet with NOG.

Today’s action put NOG just below the buy point and volume came in slightly below the break out’s volume. Not a sell signal yet, but a signal that raises concern, especially given the 4.5% drop in price.

Will certain oil stocks continue to be hot? Who knows. Just use price and volume action as your clue. At this point, I’m suddenly not as hot on the group.

DE in Buying Range: But Earnings Due This Week

Agriculture powerhouse Deere & Co. (DE) recently broke out of a 3-week’s tight pattern and is still in buying range. DE offers solid fundamentals as farmers have extra cash and a reason to buy new farming equipment.


The entire agriculture complex has been moving of late with food commodity prices soaring for a number of reasons from shortages in some countries to world growth rebounding.

DE has naturally been a beneficiary of this as farmers need equipment to take advantage of the situation and get as much out of it as they can, as soon as they can. As noted above, farmers have quite a bit of free cash sitting around that many analysts have noted is being put to use in new purchases.

DE’s bottom line shows this as its recent earnings and sales have soared.

DE is not some new hot shot company that could grow several hundred times over in a short period of time. With the conditions currently right for it, however, DE is seeing and is likely to continue to see excellent near-term growth.

DE is currently about 3.7% above its most recent buy point. On the weekly chart below, you can see where it pushed higher from three tight weekly closes in a row. The daily chart shows volume coming in on that day’s push higher above the 3 week’s tight buy point, showing conviction in the move.

Keep in mind, DE reports earnings Wednesday. While it has beat earnings expectations 7 quarters in a row, it is worth noting that Jim Cramer, host of CNBC’s Mad Money, pointed out the stock itself has not done well after earnings reports, selling off more than it has rallied.

Technically speaking, DE’s chart shows a steady move higher. When it has pulled back, it hasn’t been much. Also, when it’s pushed higher, the moves haven’t been huge either. This is a classic steady-eddie that just grinds higher.

I did buy some recently and made money on it and got out. I also bought some more last week, but may take my so far small profits and wait, as Cramer suggests, until after the report to consider getting back it, if I do at all. I like to concentrate my money on the stocks that show a potential for going higher, faster.

 

PCLN in Buying Range

Priceline broke out of a flat base over four weeks ago and promptly traded sideways. This sideways action was exceptionally tight, with only a 6% difference between the top of the pattern and the bottom, and constituted a new, smaller base.


This behavior is constructive and constituted a base-one-base pattern, which can be very powerful consolidations. They indicate big institutional money isn’t selling, but rather supporting the stock in a tight range, storing up energy for another move higher.

Sure enough, PCLN broke out of this pattern last Wednesday and is only about 2.8% above the buy point. I bought PCLN upon its earlier break out, almost five weeks ago. I purchased a call option in it, and thanks to the strange dynamics of time decay, I’m actually down in the option even though I was right in thinking PCLN would go higher.

If you consider taking a stab at PCLN, which is in buy range, know that it’s earnings report is next week. Many traders prefer a nice cushion in a stock before earnings. I’m not always so cautious as I believe a break out on strong volume from a sound basing pattern of a fundamentally strong stock is confirmation enough.

I do confess, it’s always nice to have good amount of profit in a stock going in to earnings.

The chart images are provided by www.freestockcharts.com, which is a great resource. It provides real time data. For researching and planning my stock purchases, I use IBD’s Market Smith package, but they do not let me post their charts online. The arrows on the charts designate PCLN’s breakouts.

CMG: Breaking Out?

First off, pardon the long interruption in postings. I'm still determining the usefullness of posting ideas from the IBD meetup group.

Today, CMG is in the spotlight. It beat earnings yesterday and was up 8% after horus. I wanted to buy this stock, hoping for some kind of brief pullback since being up 8% from yesterday's close would put it well above it's buy point of $262.88 of a cup without handle.

What I got was something I did not expect at all.

I set my alarm clock, got up 35 minute ago as I write tihs and set up my stock charts and screens and anticipated a launch out of its chart and.... CMG was down about 4%!!

So what happened? I quickly checked news reports and saw an analyst had actually downgraded CMG.

This is a good real world, real time scenario of a truly unique event. What does one do?

I toggled my screen to a 5 minute chart to watch the real time price action from http://www.freestockcharts.com/ and waited. As I did this, I opened my E-Trade account to get some pricing on the stock as well and time an entry if CMG reversed.

First five minutes, CMG still down....next five minutes, it went positive, finishing the 5 minute chart just below its buy point. Then the 3rd 5 minute bar showed a spike above the buy point and a quick dash back below it. Volume was already clocking in at over 1.5 million shares, demonstrating volume was there.

So, I decided the market had made up its mind and is kicking the analyst asside, at least for now. Therefore, I jumped in and bought some CMG around $262.92, right near the buy point.

You can watch this play out today right now. I will attempt to post a 5 minute chart from 7:14am.... as usual, this is not a recommendation to buy, just pointing out that CMG is currently breaking out and is still within an IBD style buy range.

Other stocks I'll cover shortly include: Priceline (PCLN), John Deere (DE) and Netflix (NFLX).

Five Minute is Above, Daily is Below