tradingzoom H.Q.

The January Effect

2012-01-30T19:37:00.000-08:00

I wonder how long after tomorrow the talking heads will start talking about the January effect?

INVN - Another Brutal Casualty

2012-01-26T11:09:00.000-08:00

Tanking pre-earnings - not good.

JAZZ, SPPI

2012-01-26T09:34:00.000-08:00

Looks like pharma is falling apart. Not good. CELG is hanging in there but it may have support if it's becoming a new institutional darling darling.

Sunday Night Preview 01/22/12

2012-01-22T09:20:00.000-08:00

Regional banks and semis are leading. While it's hard to find zoomers among regional banks - there are too many of them, and most are thinly traded - KRE is a good proxy for that sector. Also, BAC has emerged as a deep value play in financials. Semis, on the other hand, offer a few good opportunities. INVN has emerged as a new leader (Watchlist 01/07/12 - up 24%); CRUS is not far behind (EOD Alert 01/10/12 - up 9%). (If you want to play it safe, there is always INTC.) Other than that, many zoomers are extended, offering few buying opportunities. As earnings pour in over the next couple of weeks we should see more new leaders emerge. For now: [...]

[Please see the Special for specific stocks.]

Sunday Night Preview 01/15/12

2012-01-15T08:03:00.000-08:00

With 8 fresh breakouts on the Recap but few secondary trading opportunities on the Special it looks like the first squadron of zoomers has just zoomed past us and more may be coming later as earnings roll in. Never fails: when the market is lousy, there seems to be nothing to buy within 100 miles but as soon as things improve, zoomers start popping up seemingly out of nowhere. If a bull market climbs a wall of worry, we've got a pretty tall wall ahead of us. For now it's best to cast your net wide: grab as many good breakouts as you can and let the market do the sorting out: keep whatever goes up, chuck whatever stumbles. Just remember: it is easy to get carried away when everything is jumping up but institutions will use this opportunity to push junk out the door - don't become a bagholder.

Financials seem to be doing well, as evidenced by FAS and BAC; with regional banks outperforming, as evidenced by KRE and SBNY/TCBI. No sustained rally is possible without the financials participating. We are not completely out of the woods yet, BUT:

1) FAS's weekly chart looks especially encouraging in that it is similar to 2008 - 2009;

2) Oversold stocks bounce back pretty fast - BAC, for example, had a fake-out below $5.00 on Dec 19 and hit $7.00 just three weeks later - 40% for a 3 weeks work - not bad.

(Please see the Special for specific stocks.)

Value Vs. Growth

2012-01-11T08:04:00.001-08:00

So many deep value stocks are breaking out of deep bottom bases that I am wondering if value is going to outperform growth for a while. Couple that with the large cap bias - and you get a strong case for buying a large-cap value fund.

Sunday Night Preview 01/08/12

2012-01-07T19:15:00.000-08:00

3 fresh zoomer breakouts (1 made it onto the Recap); 8 zoomers on the Watchlist; 2 more additional new plays on the Special - not all of them will fly, but if this uptrend has legs, the early breakouts usually produce the biggest gains.

Sunday Night Preview 01/01/12

2011-12-31T11:09:00.000-08:00

HAPPY NEW YEAR!

As tempting as it is to read 2012 market predictions, don't put too much value on them: the market will do whatever it wants to do, not what the predictors are saying it will or should so. Right now the market looks like it could go either way, with a slightly upward bias. But since the last week of the year cannot be trusted, we really won't know what's in store until trading returns to normal. All we can do for now, as always, is watch, wait, and be prepared to pounce. Running the Top 10 Dream List is OK - it's not a prediction but merely a shopping list of stocks we would like to buy if/when the conditions are right.

(Please see the Special for specific stocks.)

Market: Current Trend

2011-12-27T06:52:00.001-08:00

As timid as the mkt is, the Dow has made a higher high, the S&P 500 just followed this a.m. The Golden Cross next?

SUNDAY NIGHT PREVIEW 12/25/11

2011-12-24T19:10:00.000-08:00

MERRY CHRISTMAS!

The indexes seem to have a slightly positive (upside) bias but it's hard to tell what the market really wants to do until the volume returns to normal in the new year. Until then we can only watch and wait. - Hence the return of the DreamList. The list keeps changing but the goal is not to try to predict the future but to be ready to pounce if and when a new leg up starts.

The list seems to reflect the market's changing dynamics: while many old names have disappeared through mergers or private equity, new promising technology issues are finally trickling in. If you think of a sector/theme, you'd be hard pressed to come up with some exciting names but a new leg up needs new leaders so the IPO market seems the most promising at the moment.

Other than that, the two odd balls on the Watchlist that may be ripe for a quick run-up even in a small rebound are: [...]

[Please see the Special for specific stocks.]

Sunday Night Preview 12/18/11

2011-12-17T12:47:00.000-08:00

CASH is the best place for now.

The wave of recent breakout failures highlights the market's malaise. On the other hand, despite the extended malaise, the decline - so far - has been moderate. It means that neither bulls nor bears are making much money in this directionless market which is more of a day-trader paradise. Trying to find trends in this market may result in a death by a thousand cuts. It's best to stay in cash and look for odd balls that are so odd they would have little correlation with the averages.

Sunday Night Preview 12/10/11

2011-12-10T09:43:00.001-08:00

We are still in limbo, with tiny signs of improvement.

Plenty of bullish and bearish arguments out there but they are all opinions. It's best to listen to the market itself. IBD has the market in correction. By another methodology, the market retested the low of October 4 but stopped short on November 25: it failed to make a lower low but has not yet made a higher high, with the Dow coming within 27 points on December 7. The 50 DMA is now pointing up, although it is still below the 200 DMA which is still pointing down.

Ultimately, it's the action of individual stocks that will tell us which way things are going. A few zoomers have technically broken out but their action leaves a few question marks which need to be resolved before making a commitment - otherwise you risk ending up with another PII.

[Please see the Special for specific stocks.]

What if Europe's "Inability" to Deal With the Debt Crisis Is Deliberate?

2011-12-09T20:38:00.001-08:00

The market expects a quick fix, a "bazooka." Europe seems unable to deliver. Why? If a Wall Street trader understands the consequences of the euro collapse, sure the EU bureaucrats do. Maybe, just maybe, the EU understands that they need to kick out Greece and other deadbeats and dismantle the euro but currently there is no orderly mechanism to do that, and a disorderly one spells disaster? If that's the case, their goal may be not to come up with a "bazooka" solution but to buy time, avert the worst, and QUIETLY, ORDERLY dismantle the euro monster over time, without disrupting the world markets. Such an approach would seem much more subtle, European, than an all-or-none American frontal assault. If so, basing market bets on the collapse of the euro or a permanent fix might be equally wrong.

SUNDAY NIGHT PREVIEW 12/04/11

2011-12-02T20:01:00.001-08:00

The markets' inability to reach the October lows, coupled with the 11/30 reversal, make the bear case so much weaker but it's too early to call a new uptrend. So here we are: not really a downtrend, not yet an uptrend... Some stocks have improved, but until a stronger trend develops, it's best to expect volatility, practice selectivity and trade small.

[Please see the Special for specific stocks.]

Double Bottom on Financials?

2011-12-02T07:18:00.001-08:00

The financials may have formed a double bottom here, as evidenced by BAC, BCS, C, DB, GS, JPM and MS, and XLF/IYF/KBE. Interestingly, regionals seem to be doing better than money center, as evidenced by KRE vs. KBE.

Only the Unexpected Happens in the Markets

2011-11-30T07:14:00.001-08:00

Just to expand on what I said in the Sunday Night Preview on Saturday, November 26: "Only the unexpected happens in the markets." Today is a perfect example. The Dow is up 400 points on the worlds' central banks announcement. Did anyone expect that? No. The media was full of reports expecting the collapse of Italy, Europe, the euro, and the world, in that order. The market dive reflected investors acting on those "news." I feel sorry for all those shorts trapped because they believed their own fears and mistook media reports for intelligence.

Too Early To Buy

2011-11-29T06:58:00.001-08:00

It is always tempting to start buying after a big up day that signals that the worst is over. But it's too early to get in. Big up days are a signature of declining markets. The fear of losing the golden buying opportunity is somehow strongest at the bottoms. But often these big up days can suck you in just long enough to make you part with your money. The action in many zoomers has been constructive but they need more time to complete sound bases. A handful of exceptions that defy gravity are not enough: the market needs multiple breakouts of institutional quality stocks for a sustained uptrend. It takes more than one big up day to change investor mood.

SUNDAY NIGHT PREVIEW 11/27/11

2011-11-26T12:30:00.001-08:00

There is no shortage of doomsday predictions: what if Italy defaults, what if the euro collapses...? But what if the worst-case scenario does not happen? After all, we did not get into a greater than the Great Depression back in 2008, despite widespread fears to the contrary. What should we expect in the best case scenario?

Only the unexpected happens in the market. By extension, whatever everyone expects does not happen. Many hope for a market capitulation to clear the way for a new leg up. But the market may bottom out in a number of ways. For example: it can stop responding to the bad news. Ultimately, new zoomer breakouts will signal the beginning of a new leg up. But zoomers need time to form sound bases. Hence the DreamList. If you come out of this turmoil relatively unscathed and keep your powder dry you will be in the position to start buying when the crowd is still running scared, expecting the worst. As always, TZ will bring you the fresh breakouts as they occur. Until then, it's best to work on your watchlist.

As the DreamList shows, some zoomers are still airborne but the odds of going long are not in your favor. In fact, only [...]

[Please see Sunday Night Special for specific stocks.]

SUNDAY NIGHT PREVIEW 11/20/11

2011-11-19T17:28:00.001-08:00

All bets are off.

The nascent uptrend is broken. The market will do whatever it wants to do, it's futile to predict. But we can watch and follow. Make our mental bets and be ready. The market can (a) deteriorate or (b) retest the lows.

(a) If the market deteriorates, things can get ugly. The action has been in mid-to large caps - the small caps have been thrown out and abandoned long ago - but even the big guys are wobbling. Up until recently the QQQ/SPY stocks looked OK, but not after the last week. The averages now look eerily similar to May 2008, when the market was just coming out of a bad correction and - wham! - broke wide open, losing 50% by March 2009.

(b) People act on their most recent memories first but the market rarely offers an instant replay. The prevailing negativity bodes well for a contrarian - bullish - opinion. A retest of the low may clear a way for a new leg up.

If things were always clear, investing would be easy. But often they are not - until it's too late. For now it's best to keep your powder dry while focusing on the watchlist - hence the Top 10 DreamList last night; but if you must trade some QID or SDS may be appropriate on the short side for either a retest of the low or a new leg down; and on the long side the stronger the growth the more likely a zoomer to defy gravity. Here's a few candidates (ifthe market deteriorates, they will be the last ones to fall, if it rightsitself, they have the potential to become the next big winners): [...]

[Please see the Special for specific stocks.]

CRITICAL SUPPORT LEVELS

2011-11-18T09:17:00.001-08:00

The crowd is obsessed with critical support levels for the S&P and elsewhere, BUT:

1) Critical support levels are less important for the averages than for individual stocks;

2) The market likes to break critical support levels by a hair just to confuse and scare;

3) Critical support on the way down is critical resistance for short ETFs on the way up but somehow critical resistance for short ETFs is never a big deal.

TOUGH MARKET

2011-11-17T17:19:00.001-08:00

IBD has put the market back in correction. Today was brutal but I think this is more likely a violent shakeout than the beginning of a new leg down. Not a prediction - just a mental bet based on current observations and past experience.

The market got unglued not for any single reason but because of a combination of factors that have put investors on edge. Negativity is rampant. Such an environment bodes well for a contrarian view. A true contrarian opinion is not necessarily zigging each time everyone is zagging but to wait for a truly one-sided opinion to form, and bet against it. When everyone is on one side of the market, there is no one to take the other side, and that's when the market usually turns.

The market is too far away from the bottom. It would take a lot to take out the October 4th low. A retest of the low is more likely.

The tough part about contrarian opinion is timing. You may be right on the ultimate outcome but off on timing. Since the market can remain irrational much longer than you can remain solvent, there is no reason to risk your capital based on an opinion. A better (and safer) course of action is to keep your powder dry while compiling a list of friends going forward. Zoomers that decline the least will be your best bet when the negativity and fear run out.

BASE SHAPES

2011-11-15T09:16:00.001-08:00

On the one hand, odd-shaped bases may be an indication of a weak rally; on the other hand, obsessing over a base's shape may keep you out of a zoomer if its base does not conform to a textbook description. Two ways around this:

1) Volume: good volume validates a base;

2) The newer A stock, the more acceptable an odd base is; it may even be a sign of strength. FIO is a case in point; UBNT may be another one.

SELECTIVITY

2011-11-12T17:48:00.001-08:00

Even if stocks improve, it looks like it's a stock picker's market going forward: small caps are out, mid-to large caps are in, but there are fewer of those to go around. Every zoomer counts.

The carnage has been so widespread that most stocks are climbing out of deep bases, with a handful breaking out to new highs. I'd say a good value fund and a handful of zoomers may be a good way to proceed.

SUNDAY NIGHT PREVIEW 10/30/11

2011-10-30T09:17:00.000-07:00

Whata difference a week makes!

Neverfails: the market improves, and new breakouts start popping up like mushroomsafter a rain. The market went from excessive pessimism to wild enthusiasm in aheartbeat. In fact, out 37 fresh juicy zoomers on the Watchlist, 18 are withoutpivots – and this time not because of weird bases but because many zoomers gotahead of themselves and broke out ahead of earnings. Buying prior to earningsis still risky but since these zoomers are not too far away from their pivots,if the earnings are good it won’t be too late to buy.

Aword of caution: In this euphoria itis easy to lose your head and start buying up every stock that is going up –don’t. Stick with the best zoomers you can get, don’t buy the garbage othersare selling into the strength.

A fewfresh breakouts from the Recap that are not too late to buy/add to: [...]

Please see the Special for specific stock picks.

SOME MARKET OBSERVATIONS AND MENTAL BETS:

2011-10-29T20:48:00.000-07:00

I review hundreds of stocks during earnings and must say: the number of oil and gas stocks is just staggering. I haven't seen so many stocks in one sector since the Internet bubble burst in 2000, and back then it was - you guessed it! - the Internet stocks. Not making any predictions here but if I were to pick a sector that is least likely to rally, it is oil and gas. Doesn't mean that no oil and gas stock will ever go up but as a sector they will likely lag. Wall St. lives off selling into demand. Eventually it kills ANY rally by saturating the market. The oil and gas sector looks saturated.

On the other hand, there is a shortage of new technology stocks. Facebook? - Private. Groupon? - Private. And so on. FIO is one of the new hot ones, and look where it is compared to oil and gas. UBNT is another good one. Now that financial advisors have put their clients' portfolios into energy, it's time for new sectors to shine.

In fact, my mental bet is that this rally is going to be longer and stronger than most imagine. Here's why:

1) Excessive pessimism. Rallies are fueled by skeptics and non-believers throwing in the towel one-by-one to chase the runaway bull.

2) The crowd likes to bash Jim Cramer but the guy is well plugged in: recently he was saying that if it hadn't been for Europe, US stocks would have been higher. Well, the European deal is finally what launched this rally in earnest.

3) The value-oriented Barron's recently compared this market to 1998 when the crowd was scared by the Asian currency crisis and Russian bond default. Once that blew over, the market launched into a 2-year rally.

4) The sky doesn't fall when every Joe Shmoe watching CNBC expects it. Do you really think that Joe Shmoe understands the consequences of a European collapse and Sarkozy and Merkel don't? In fact, only the unexpected happens in the market. Since the crowd has been expecting a double dip recession or worse, a strong rally is more likely.

5) The European fear has put the 9% unemployment on the back burner. And companies are doing quite well, thank you very much, after having jettisoned dead wood and morons. Welcome to the new normal.

6) The almost 0% interest rates and Bernanke's commitment to keep them as is IS an exceptional opportunity. Sooner or later companies will take advantage of it. Historically, a steep yield curve has been good for stocks.

7) Obama has rendered itself irrelevant and the expectation of a Republican landslide may fuel stocks into the next year's election as the realization that the forced socialism experiment has failed sets in.

QUALITY OF BUYING

2011-10-24T08:48:00.000-07:00

Short covering is a necessary part of the bottoming process. For weeks now I have seen stocks popping up from the bottom on what looks like short covering. But short covering is poor quality buying: when it dries up, there is no follow through. For a new uptrend to take hold, the quality of buying must improve - that is, longs must come in.

FXP

2011-10-24T08:44:00.000-07:00

If American disgust with China's accounting fraud has run its course, FXP may be again considered a leading indicator of the US market. FXP's action indicates that the correction is over. Volume is not important on the downside but it would be nice for FXI to show a bit more vigor.

SUNDAY NIGHT PREVIEW 10/23/11

2011-10-23T07:27:00.000-07:00

HUNT FOR NEW ZOOMERS

Giventhe market’s recent strength there are surprisingly few breakouts. Skepticsabound; even IBD is reluctant to accept the uptrend.

Excessivepessimism is usually good because it fuels advances; IBD skepticism may be explainedby the underperformance of its venerable IBD 50 which it uses to gauge themarket. But how to explain the shortage of breakouts?

The rally willfizzle, given the lack of strong new leadership;
It may be value’sterm to shine: if the market has been universally damaged, it may beuniversally climbing from under the rubble – no zoomers for now
The new leadershipis elsewhere; look under the hood.

What todo:

#1 iseasy – stops will shift you into cash.

#2: Avalue fund with a good track record may be a safe bet for now - just don’t goby recent performance as it’s likely to have been tarnished by the decline.

#3:(a) select large caps: the GOOG/INTC pair can offset 100 small caps; (b) themarket is full of “has beens” – oils, materials, industrials, commodities - butshort on new plays: many are still private, like Facebook, Groupon, Sharepost…;the new zoomers are slow in coming. (c) flight to safety: it maybe [...]’s turn to shine: clean breakout, 4%+ yield…

Theseare not predictions but mental bets to be prepared to act if any of thesedevelopments gain momentum.

Severalzoomers on the Watchlist are without pivots: the weird-shaped bases make itdifficult to pinpoint an exact figure, it’s better to go with a strong move upon huge volume.

Aquick recent zoomer rundown:[...]

Please see the Special for specific stock picks.

DIRECTIONLESS MARKET

2011-10-20T12:26:00.000-07:00

Talk about directionless!

Not enough firepower to take the market higher, too far from the recent low to trek all the way back down there. So here we are: stuck in the middle. The low volume suggests it's a bunch of punks duking it out while the big guys sit on the sidelines.

Dangerous!

SUNDAY NIGHT PREVIEW 10/16/11

2011-10-16T07:51:00.000-07:00

Thebenefit of the doubt should go to the upside – until further notice.

Plentyof skepticism out there - even IBD is lamenting a lack of leadership andvolume. Well, the market will do what it is going to do, we can only watch andfollow. We don’t want to act on predictions but we can make mental bets basedon current trends to be ready to pounce if the market proves us right.

Onething is certain: new leadership is not going to come from places everyone expects.Now that “conservative” investors have shifted into energy/commodities/gold onthe assumption that their leadership will last forever it’s time for thosesectors to go into a long-term decline. But two new developments are worthnoting:

Selectlarge caps

Whatdo AAPL, ABT, CMG, EBAY, IBM, INTC, ISRG, JNJ, KO, LLY, MCD, MSFT and VZ havein common, besides reporting this week? They all have fared better than themarket. Their earnings might underwhelm but their durability and dividends maybe attracting the risk-averse crowd. INTC is paying an almost 4% dividend – canyou believe it? A small move in a giant like that can easily offset declines in100 small caps.

Recenttech IPOs

Themarket devastation has been so uniform (with the exceptions noted above) thatit is unreasonable to look for traditional cup-with-handle bases – they are fewand far apart. But a few recent tech IPOs that got out right under the wire(before the market tanked) have formed decent bottom bases. Some, like [...],have impressive rev. and eps. growth; others, like [...], have strong rev. growthbut are still losing money (see the full roster on the Watchlist). If newleadership is to come from new unexpected places, these Turks may be it. Sowhat if some don’t have earnings? Neither did the Internets when they took off whilethe crowd was still chasing large caps. Why can’t these guys take off whilethe crowd is scared, skeptical and sitting in energy/gold?

Acouple of recent breakouts which are not too late to buy/add to: [...]

Please see Sunday Night Special for specific stocks.

CAUTIOSLY OPTIMISTIC...

2011-10-13T12:19:00.000-07:00

...based on what I am seeing. Quite a few good charts forming but due to the recent market devastation - compliments of Greece and Congress - the shapes are not traditional. If you are looking for the old leaders and traditional shapes, you risk missing the boat.

No Longer a Bear, Not Yet a Bull

2011-10-12T10:17:00.000-07:00

Looks like the short funds' (DXD, SDS, QID) uprends have been broken, and the Chinese bear market seams over (FXP) - BUT: the bull market hasn't started, not quite yet. Here we are: in the "neitherland". Hopefully, earnings will resolve the impasse.

Market

2011-10-10T10:10:00.000-07:00

Looks like Sarkozy/Merkel chose a wrong weekend to deal with Europe's problems - I wonder what the volume would have been if it had not been for the Columbus day.

MORE ON THE DREAMLIST (CALIFORNIA DREAMIN')

2011-10-06T07:54:00.000-07:00

Every major bull market was led by different zoomers:

mid-90s: big caps like KO and MSFT;

late 90s: the Internets like YHOO and EBAY;

2003 - 2008: no-name small caps.

Trading small caps was easy: miss this one - there is another one right around the corner. Hundreds to choose from. Even if you'd missed the big runs in HANS or TIE, you could have made 20-50% a clip in no-name runs.

But the 2003 - 2008 party is over. Liquidity has drained from small caps. There are fewer zoomers to choose from. And if you miss one, there may not be another one just around the corner. Had you used large cap valuations, you wouldn't have bought any Internets; had you looked for big tech plays in 2003 - 2008, you'd have missed on hundreds of no-name small cap runs, plus steels and oils. If you think this market will be forgiving and give you plenty of zoomers to choose from, you may miss out on the few good runs it might offer.

TOP 10 DREAMLIST

2011-10-02T09:33:00.000-07:00

Nothing to do in this market except sit and watch. CASH is king.

Nobody knows what the future holds but it's important to keep things in perspective: the market determines investor opinions, not the other way round. The longer the malaise lasts, the more people turn bearish. Extreme bearishness is bullish. Since all corrections and bear markets eventually end it's important to be prepared for when the good times return. Hence the Top 10 DreamList.

- Stocks that decline the least are most likely to be the next leaders.

- Every new bull market is powered by a new crop of leaders.

So the DreamList should comprise new emerging leaders with best stories, technicals and fundamentals. It may change a lot before it's time to act but it's better to have a current one because at all times nobody knows when the good times will return.

"What Am I to Do?"

2011-09-07T09:07:00.000-07:00

The market does not seem to know what to do with itself: when you compare the QQQ/QID or SPY/SDS pairs, one in a pair is supposed to look bullish while the other - bearish by default. But neither in each pair looks like it knows what it it wants to do.

I'd opt for one last shakeout just based on analogy with last year but beyond that it's anybody guess.

Market Malaise

2011-09-06T06:35:00.000-07:00

I am rooting for the other team: the more this malaise lasts, the more zoomers will have the time to build decent bases, and the stronger the upside will be. I'd hate to see a half-hearted rally now on old zoomers only to see it falter in a few weeks.

Please Note:

2011-09-04T18:44:00.000-07:00

The next Recap, Watchlist ans Special are all scheduled for October 2.

Windowdressing

2011-08-31T09:11:00.000-07:00

I wouldn't buy anything today - too much windowdressing one cannot trust. The market should start showing its true colors tomorrow.

Sunday Night Preview 08/28/11

2011-08-26T18:47:00.000-07:00

The market is at the point where if you want to win, you got to root for the other team: the technical damage has been so extensive that any quick recovery is not likely to last; the longer it takes to build a bottom, the more time zoomers will have to build bases, and the stronger the subsequent runs could be. For now, the lack of good bases and runs is almost total.

In fact, only RGR is doing fine.
[...]
Surprisingly the Watchlist has a few tradeable bases, risky as they may be.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 08/14/11

2011-08-13T12:10:00.000-07:00

The stock landscape looks devastated, but:

1) In a downturn, stocks rarely stray too far from the 50 DMA; and

2) There are so few good-looking setups that if a counter-trend to the 50 DMA develops, A LOT of traders would pile into the same stocks because there is nothing else.

There are some good looking zoomers on the Watchlist; [Please see Sunday Night Special for specific stocks.]

The market is fraught with risk; the key is to go with the flow, stick with the best, and not overstay the welcome - IF we get one.

Sunday Night Preview 08/07/11

2011-08-05T07:08:00.000-07:00

All bets are off.

Even if the market overreacted (as it usually does), the extensive technical damage will take time to heal. Relax. CASH is your best bet. The second best thing would be to rebuild your watchlist: stocks that suffer the least would be your best bet going forward. Eventually.

This may also be a good time to revisit zoomer basics. Zoomer trading is based on a blend of fundamental and technical analysis: buying the biggest EPS winners when they break out of sound bases. Technical analysis relies on chart repetition and recognition: the more frequent a chart pattern, the more often it works, the more reliable it is. REPETITION. Market corrections and crashes, as dramatic as they may be, do not occur often, and each is different. There are no reliable patterns to guide your trading during these extremes. You can recognize signs of impending malaise and get out early but you can't trade these extremes like you trade regular zoomers in a regular market. Oh, well - you can't kiss all the girls. Right now is NOT zoomer time. Sure some people are making money - be happy for them. Your turn will come. The market is an equal opportunity mechanism: gives everyone a chance to make money, just not everyone at the same time.

Sunday Night Preview 07/31/11

2011-07-31T08:22:00.000-07:00

This is NOT zoomer time.

In a downturn, 3 out of 4 stocks go down. That means that 1 out of 4 goes up. Right now it’s AMZN, CPSI, CYOU, DTLK, SPPI, STMP, WILN…. But if you look back, the path is lettered with failed zoomers: ESIC, FIO, HITK, HURC, MILL, OCZ, ODFL, PRIM, RAX, RUE, SQNS, SWI, UA, VMW, not to mention FTNT, RVBD and TZOO…

The bottom line: there will always be a stock going up in a downtrend, but unless you daytrade you never know how long an upside will last before somebody big decides to dump; and the winner/loser balance is just not in your favor – what matters is absolute returns, not an occasional run that an investor can brag about online, which is more than offset by 10 small losses elsewhere. That's why the Recap is empty: unless the market improves, chances are great that fresh zoomers will only last a week or two - hardly enough to capture decent gains and not get them canceled out by frequent losses elsewhere.

If the market improves, these would be first in line:

[Please see Sunday Night Special for specific stocks.]

Cup And Shoulders Vs. Head With Handle

2011-07-29T07:05:00.000-07:00

The market is an equal opportunity creature: it gives everyone a chance to make money at some point.

Right now is NOT a chart reading time. Charting is based on recognizing past patterns, so the key to successful pattern recognition is pattern repetition. Each crisis or panic is unique - there are few if any patterns to guide you.

Either trade on your outlooks or stay in cash.

Inverse H&S

2011-07-27T07:03:00.000-07:00

The trick about chart reading is that:

(a) you can see different formations depending on your time frame and view angle;

(b) what looks like A can look like B in a day or so.

Right now the averages look like a multiple H&S, which is bearish, or a C with H, which is bullish. But an inverse H&S is emerging, which is very bullish, and what launched the market up last August.

Sunday Night Preview 07/24/11

2011-07-23T10:41:00.000-07:00

PROCEED WITH CAUTION!!!

1) The indexes look like a cup with handle or a multiple head and shoulders - which means they can go either way;

2) diversion (NAZ up - Dow down) is never good - usually the laggard drags down the leader;

3) diversion in zoomer performance is even more shocking: compare FTNT/RVBD/TZOO to VMW to CNS - this is clearly NOT a quarter to hold through earnings;

4) the default speculation adds to the uncertainty.

If there is a market shock, it is reasonable to expect it to be severe but temporary, which means it makes more sense to be prepared to snatch some bargains in a market dive than to build a position in QID or SDS. TMV may finally turn the corner. Other than that, playing odd balls and earnings reports is the best bet.

[Please see Sunday Night Special for specific stocks.]

FIO Selloff

2011-07-20T11:53:00.000-07:00

What does the FIO selloff mean? Should you hold on to your shares?

FIO has a great story and is profitable but has been under a lot of selling pressure. Selling may mean only two things: somebody has to sell, or somebody knows something the rest of us don't. In either case, we don't know how low the stock will go. Insider selling eventually dries up, but if there is something else going on that we don't know about, it's best to learn about it sitting on the sidelines as nobody knows how low a wounded stock would go. If FIO eventually decides to turn back up, there will be plenty of opportunity to get back in. But for now it's best to remember that your first loss is your best loss.

Thin Market

2011-07-20T10:23:00.000-07:00

The market may remain difficult for a while, trading in a tight range, but like any market it consists of individual stocks that do not go up and down all at the same time, or by the same amount. ANY market will have winners and losers, but in a difficult market winners are few and far apart. On the other hand, once traders see a winner, more of them will pile in as there are few other choices. I'd call this a thin market, in addition to difficult and range-bound.

US Default

2011-07-14T09:06:00.000-07:00

I've been trying to think through different scenarios and what they mean for the market, based on what I know about the political games in Washington - but the end result is the same: I can't anticipate how things will play out. I could just say: I'll follow the market - it will tell me in due course - but the odds are just NOT in favor of ANY big-time trading.

A market selloff can be sudden and brutal, even if temporary, but a market advance is likely to be gradual. If I stay in cash, I may load up on stocks in a "flash crash" - if it happens - or get back into the market if it decides to rally. The bottom line: cash and some QID seem the best way to proceed on this this ice.

How to Determine Who Your Friends Are, Going Forward

2011-07-11T08:54:00.000-07:00

A day like today is good for determining who your friends are, going forward. Zoomers always move more than the market: if the market is down 1.5%, expect a zoomer to be down around 3%. That's normal. But even with the wide swings, zoomers tend to outperform the market. The ones that don't, should be discarded. Case in point: RAX and VMW. Both breakouts underwhelmed. But today they acted weaker than the market on a relative basis: if you look at the percentages, almost all zoomers lost more than the market; but if you watch intraday charts, both RAX and VMW rolled down too more eager than the market. I'd call it "relative weakness" (RW).

Does This Rally Have Legs?

2011-07-07T07:04:00.001-07:00

Many technicians don't trust sharp V-turns; the advance has been on low volume; the indexes are approaching major resistance levels... BUT: many zoomers have taken off good solid bases, and even more stocks are spiking off bottoms as a result of short covering. Short covering usually occurs at the end of a downtrend and often signals a trend reversal. Oversold stocks have a long way to go in an upswing, which may fuel the rally. Besides, worry and skepticism are usually good rally fuel as well.

Not predicting the future - just interpreting the current stock price action beyond the averages' obvious moves.

BEST OF TRADINGZOOM: JUNE

2011-07-01T23:27:00.001-07:00

Not much to write home about: the market has been in correction; the list of winners has shrunk. No wonder: we don't make zoomers, we follow them. When there are none, cash is the place to be. When fresh zoomers start popping up, we catch them. As of June 30, there were 18 airborne zoomers; we've had 14 EOD Alerts, 2 takeoffs from the Watchlist and 5 juicy zoomers from the Special; this week's Recap has 8 names, so did the last week's one. Most of them have not yet made the cut as they are up less than 20% but a few guys defied gravity even in this market:

MDMD up 40% (Watchlist 05/07/11)

ZAGG up 35% (Sunday Night Special 05/15/11)

EGHT up 22% (Recap 06/23/11)

The full list (or whatever is left of it) is here.

Price of Patience

2011-07-01T23:17:00.000-07:00

TZ has been promising to bring fresh zoomers to the members as soon as they ripen. Timing is critical in zoomer trading: you have to be there to catch the new breakouts as they occur so that you can get in early and capture the bulk of the gains. Well, the long-awaited opportunity has arrived: in the past 2 weeks, we have had 14 EOD Alerts, plus 2 breakouts off the Watchlist and 5 more movers off the Special. The Recap had 8 new juicy names this weekend and 8 last week - all top-notch eps winners. Not bad. Enjoy the ride!

Buy - Don't Get Sold To

2011-07-01T08:54:00.000-07:00

The difference is that you buy what YOU want, you are sold what THEY want you to buy. When the market rallies, THEY - the institutions - push all manner of garbage out the door: push up volume, orchestrate breakouts, talk up stocks, upgrade ratings... The arsenal is vast but the bottom line is simple: sell what you need to sell while the going is good. If you get caught up in excitement and buy junk because "it's breaking out," you will end up holding the bag when the music stops.

Garbage in, garbage out.

Should You Trust the Low-Vol. Advance?

2011-06-29T10:42:00.000-07:00

I don't know.

IBD maintains that the market is in correction - so they are not trusting it. But I think it's also useful to look at the action of individual stocks - after all, the averages/indexes are comprised of them. And there's been A LOT of strong action in certain sectors. That's where you should pay close attention to the volume. And that's where a lot of fresh breakouts have occurred this week - all off good bases, on strong volume. How many? 10 EOD Alerts this week - all but one holding up nicely; two off the Watchlist/Special. We'll see...

Hunting for Odd Balls

2011-06-23T18:14:00.000-07:00

*odd ball - a small cap lower priced stock under institutions' radar moving up despite the market's downtrend.

Besides shorting, hunting for odd balls in a correction is about the only worthwhile strategy. It seems to be paying now.

It all started with JVA, followed by ZAGG. Today we had 5 EOD Alerts - 3 new and 2 secondary breakouts - in addition to 3 others yesterday.

Say all you want about this market but you can't ignore the opportunities it is throwing your way.

Now What?

2011-06-23T08:33:00.000-07:00

The market predictably goes up on good news and down on bad news. Since right now it's in correction, the bad news prevails. But I can't help thinking: Now what? The sky is not falling, the world is not defaulting...

Sunday Night Preview 06/19/11

2011-06-18T19:21:00.000-07:00

The good thing about corrections is that they help determine who your friends are going forward:

1) Stocks that decline the least and build new bases;
2) Fresh zoomers completing first bases.

The longer a correction lasts, the stronger the bases, and the more powerful the subsequent run. The unknown: when a correction will end and a new leg up will begin - you just have to sit and wait. The known: ALL corrections end - no matter how hard the media are trying to scare you, the likelihood of a regular correction is overwhelmingly greater than the beginning of another epic great depression.

TZ will bring you fresh zoomers as soon as they ripen. Until then: rebuild your watch list; read a book on investing. If you must trade, look for odd balls, trade small, and do not overstay your welcome: everything you can take out of this market is good.

How do you define an odd ball? They come in all shapes and sizes that defy generalization but you will recognize one when you see it. JVA sure was one. Here is another one:

[Please see Sunday Night Special for specific stocks.]

Bottoming Out

2011-06-15T07:13:00.000-07:00

The market is showing first signs of bottoming out. The technical damage is extensive and will take time to repair, which may mean weeks or months of bottoming; and the indexes have a tradition of undercutting most recent lows by a hair just to run out the last bulls but there is hope.

Sunday Night Preview 06/12/11

2011-06-11T12:15:00.000-07:00

In a declining market, roughly 3 out of 4 stocks go down.

In the current zoomer world, 17 stocks are still up and 43 are down. Of course, if all you have is JVA, RPXC and ZAGG (well, may be SODA also), you are fine but it's not so much finding those winners as the odds of holding only them. Usually, you end up buying more, and the overall result in a correction is negative, sometimes leading to a death by a thousand cuts.

Right now GIB, LQDT and TMS are still rising; CFX looks like the breakout may or may not hold; BPI, CCIX and MNTA - should you hold or get out now while you are still in the green?; CROX, DK, KH, MMSI, PRIM and UTEK look like a good spot to add to. In a rising market, the Recap would have featured JVA and ZAGG and the Special would have focused on the adds / post-breakout buys. But in a correction you just never know which zoomers will fall next. There is a JVA in any correction that defies gravity but you just have to let it pass by.

As much as the media wants to scare the crowd with yet another depression, the charts suggest that a garden-variety correction is more likely, at least at the moment. No reason to be a hero and risk the murky waters. Wait for an easy market with as many odds in your favor as possible. Until then:

[Please see Sunday Night Special for specific stocks.]

Capitulation

2011-06-10T18:29:00.000-07:00

No capitulation in the market (so far, at least) but, interestingly, capitulation in specific stocks seems almost a daily occurrence. Today's victims: RLD, DIOD.

Thanks to the federal rules, everyone now gets the info at the same time. The big guys used to get tipped off early by companies and sell quietly ahead of time but now they have to choice but to dump all at once - hence the gap downs on HUGE vol. Would be interesting to see how those stocks fare post-capitulation.

Sunday Night Preview 06/05/11

2011-06-04T09:30:00.001-07:00

The benefit of the doubt should go to the downside.

Doesn't mean you should start shorting or buy SDS (although you can) because the charts suggest a garden-variety correction rather than the beginning of a new bear market. Even if we are a going to have a double-dip recession, we are not there yet, and whether we will get there is the domain of media speculation at this point, not investing. What it does mean is that it's better to view the glass half-empty than half-full: the Watchlist still has seven good-looking zoomers taxiing on the runway but at this point it is safer to expect them fail one by one rather than take off. (But it's good to have them just in case!)

If you must trade, look for odd balls and risk small amounts that will keep you in the game but won't affect your retirement date. Here are some:

[Please see Sunday Night Special for specific stocks.]

NOT GOOD

2011-06-01T12:42:00.000-07:00

Up until today the correction looked "reluctant." Not after today. And it wasn't just the shear size of the losses after a decent up day but the systematic relentless liquidation that just wouldn't let up. I'd say after a day like this the odds are not in your favor. Better to look for a capitulation.

BEST OF TRADINGZOOM: MAY

2011-06-01T10:46:00.001-07:00

The total list is here.

Boy, have we shrunk! From 46 zoomers in January (most with multiple entry points to boot) to 12 today! And the correction has been pretty mild! Nothing you can do about it. Zoomers like a strong market. No zoomers = weak market, or the other way round, if you prefer, but you just can't have strong zoomers in a weak market. Take it as a market indicator. Good times will return because they always do. We just don't know when. But TZ will bring you fresh zoomers as soon as they ripen.

The long-term winners that survived through may are:

IPGP up 209% (Watchlist 10/30/10)

TIBX up 94% (Sunday Night Specials 08/22/10; 08/29/10)

ULTA up 50% (Watchlist 11/27/10)

Sunday Night Preview 05/29/11

2011-05-28T10:47:00.000-07:00

In a correction, the numbers are not in your favor: too may breakouts fail or stall, causing too many stop losses. But in this "reluctant" correction new zoomers keep breaking out and many breakouts are holding. Even in the best of markets the bulk of gains usually comes from just a handful of zoomers but you never know ahead of time which ones. If you stay in cash, you may miss a big winner than could more than compensate you for the multiple small losses. The decline in the averages has been very smooth and orderly, suggesting there is no panic. If you buy small amounts of fresh breakouts and discard the failures, you will keep your dollar losses small but preserve your chances of riding the next big winner.

[Please see Sunday Night Special for specific stocks.]

The Reluctant Correction

2011-05-28T08:33:00.001-07:00

Can't think of a better way to describe this market.

Almost like the big book on the stock market said: There's got to be a correction, right here! - And the market obliged: - Aha! What do we need to have a correction here? Fear? What shall we be afraid of? Greece? - Na-a-ah... - Egypt? - Na-a-ah... - Lybia? - Na-a-ah... - Greece again? - Na-a-ah... - Hurricanes? - Didn't work... - Inflation? - Too boring... - Let's try oil. Let's just have a correction anyway. What do we need for a correction? More stocks going down than up - OK, got that. The averages going down - Got that. Barely. - How long should we be correcting? Are we done yet? Good enough? Can't we get a decent disaster somewhere? Please?!

PLEASE NOTE:

2011-05-15T16:14:00.000-07:00

The next batch of emails is scheduled as follows:

Recap - May 27

Watchlist – May 28

Sunday Night Special – May 29

Commodities Bubble?

2011-05-14T13:43:00.000-07:00

The US economy seems to be going from bubble to bubble.

For a bubble to form, it must go through several phases.

First, an asset class has to be written off and left for dead. The first Internet stocks were hugely unprofitable and overpriced - no seasoned investor would touch them. Real estate in the late 90s - early 00s was a poor investment because the aging baby boomers were trading down their big houses. Gold in the late 90s was selling below cost, gas was under $1 a gallon - who needed commodities in the new virtual economy when even groceries were going to be sold online?!

Second, when a discarded asset class first rises, nobody believes it. Got to be a fluke! There is no fundamental reason for it to go anywhere! The Internet stocks would not last; nobody expected the real estate boom of the 00s; and oil and commodities were dirty old industries that could not possibly lead for long.

Third, the relentless rise must produce converts one by one who will advance more and more sophisticated theories for the unlikely advance.

Fourth, at the top, the crowd must believe that this time it's different: it's not a bubble. The Internet stocks represented the new economy so the old methods of valuation did not apply; real estate was not the Internet so high home prices were at a permanent plateau, not in a bubble; oil was going to $400 because we were running out of it.

Fifth, the bubble bursts - po-o-of! - when the crowd least expects it. How could it, with all the fundamental reasons explaining why it won't?

Sixth: huge losses and "never again" follow. Late Internet stock investors who believed the propaganda and bought on the way down lost close to 90%; late real estate buyers must account for a good deal of foreclosures and houses under water today.

I fear that now may be the late commodity bulls' turn.

End of Commodities Run

2011-05-14T13:35:00.000-07:00

I think we are at the end of a 7-year commodities bull run. I'll elaborate later but basically there are too many similarities between the commodities bubble and other recent bubbles: the Internet in the late 90s and the real estate on in the 00s.

End of Bull Market?

2011-05-11T19:56:00.000-07:00

1) Oil and commodities sold hard today, presumably because of the growing concern about the economy. Not sure I am buying this explanation. Back in 2004, stocks went into a 10 mos. correction because of the rising oil and steel prices. So: in 2004, rising commodity prices were BAD for the economy; in 2011 falling commodity prices are BAD for the economy. How's that possible?

2) In stock trading, things happen first, an explanation arrives second - compliments of the media and pundits. The simple truth is: commodities went on a multi-year bull run in 2004; it has to end at some point - why not in 2011?

3) Oil/commodity/materials stocks have gained in capitalization, so now as they go, so goes the market. But is the entire market unhappy? No. Consumer staples (XLP), healthcare (XLV), biotech (IBB) and utilities (XLU) are rising; telecom (IYZ), consumer discretionary (XLY), transportation (IYT), and industrials (XLI) are still in an uptrend; tech (XLK) and semis (SOXX) are basing; materials are breaking down (XLB, XME, IYM); and oil (XLE, XOP, IEO and XES) and financials (XLF, IYF) are correcting.

3) XLE cap stands at $9.3B, there is more money riding in other long oil and oil-related funds, while DUG - the best performing short oil and gas ETF - has a cap of only $59M. It's a lo-o-o-ong road from $59M to $9.3B. If one takes a contrarian approach, DUG sure fits the "buy low" mantra.

4) Not making predictions - just thinking out loud: if commodities go into a multi-year decline, they may drag down the averages for a while but that does not necessarily mean that all stocks will decline - there's got to be beneficiaries of low input prices. Otherwise, how would you explain that higher commodity prices mean a strong economy but rising inflation as a result of higher commodity prices threatens the recovery?

FXI/FXP - a New Dance to Watch?

2011-05-09T06:59:00.000-07:00

Since China has largely led the US recovery since 2009, I am still keeping an eye on FXI/FXP. China is no longer leading, most junior China stocks in the US are decimated, but the interesting thing about the FXI/FXP dance is that they take more and and more frequent turns leading.

Sunday Night Preview 05/08/11

2011-05-07T19:37:00.001-07:00

It's frustrating when so many breakouts fail and the Recap comes up empty again. IBD is frustrated too: they put the market back into correction after having changed the outlook for an 11th time this year - a record! Nothing you can do about it. If the market can't make up its mind, neither can you.

Both bullish and bearish scenarios are equally convincing:

Bearish

(1) bull markets last 2 - 2 1/2 years on average - we are right there;
(2) for a second time in a row, leaders led the selloff, not followed it;
(3) the runs after the brutal setbacks are getting progressively shorter;
(4) the powerful but risky V-shaped recovery from the 2009 lows looks very similar to where the market stalled in 2004 for almost 9 months;
(5) the end of QE2 and record-low interest rates looming;
(6) the market needs a theme for a sustainable rise; with oil and agriculture out of the picture for now, there is none.

Bullish

(1) despite the malaise, the market has been making higher highs and higher lows - if it were a stock, that kind of chart formation could be called a rising base;
(2) there is no law that says bull markets must last 2 - 2 1/2 years - gov't intervention has extended the cycles, not eliminated them;
(3) the market does recover after each selloff by refusing to go lower and making new highs;
(4) 3-4 consecutive interest rate hikes kill a bull market - not one, especially when it's up from 0%; many time the market rose with rising interest rates for a while;
(5) the earnings are strong and the stocks are not overvalued;
(6) bull markets don't end when everyone expects them to - there is no "irrational exuberance" here typical for euphoric tops;
(7) for QID/SDS/QID to stage a sustainable rise, the 200 DMA must cross above the 50 DMA.

The bottom line: as usual, when all is said, all we can do is sit and wait, while (hopefully) not being jerked around too much.

[Please see Sunday Night Special for specific stocks.]

Market

2011-05-06T08:57:00.000-07:00

When leaders lead the market down, instead of being the last ones to fall, and then the mediocre averages outperform on the rebound, I am stumped, or better yet, I don't understand this market, and if I don't understand it, I'd better not touch it. Cash for now.

The Obama Stock Market

2011-05-05T17:32:00.000-07:00

I wonder if the 2009 - 2011 stock market will eventually be called "the Obama stock market": a meteoric rise from record lows, unjustified by fundamentals, followed by an equally steep fall from grace.

Oil and the Stock Market

2011-05-05T07:57:00.000-07:00

How things have changed!

In 2004 - 2006 stocks went down each time oil went up because higher oil prices were bad for economic growth. In 2011 stocks go down when oil goes down because both oil and stocks reflect economic expectations.

I wonder if the underlying reason has more to do with market capitalization: as oil stocks gained in market capitalization, they drag the averages down when oil goes down?

BEST OF TRADINGZOOM: APRIL

2011-05-01T09:50:00.000-07:00

The list has certainly shrunk - thanks to the market's malaise - but some longer-term winners are looking good:

BSFT (Watchlist 11/06/10) - up 320%

IPGP (Watchlist 10/30/10) - up 185%

TIBX (Watchlist 08/22/10) - up 107%; the longest running zoomer.

RAX (Watchlist 11/06/10) - up 64%

ULTA (Watchlist 11/27/10) - up 43%

Interestingly, all of these zoomers broke out late last year. Shows once again that you never know which one(s) will become the biggest winners winners at the time of breakout - selectivity and patience is the key.

The only short-term runner, which does not even carry proper zoomer credentials, is REDF - up 51% since 04/19/11 EOD Alert. Go figure.

Earnings Plays

2011-04-28T09:10:00.001-07:00

Many stocks reporting earnings are either popping up 10%+ plus or collapsing. I suspect a strong institutional hand but am also wondering if some of those breakouts are one-day wonders with little follow up when the initial excitement wears off.

Sunday Night Preview 04/24/11

2011-04-22T20:23:00.000-07:00

What a difference a week makes! The Recap went from 0 to 9 names; the Watchlist has 30 good looking earnings plays!

Just remember: the earliest breakouts produce the biggest gains. You snooze, you don't make as much.

Some pockets of strength: shoes, oil and gas services, select large techs.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 04/17/11

2011-04-15T18:41:00.000-07:00

The Recap has come up empty for a second time in the last two months. The market has been difficult. When both QID and DIA look like they can go either way, it means the market can't make up its mind: it sells off, then stubbornly comes back up, then the advance stalls... The frustrating part is that there are enough stocks that keep popping up. You see those and go: "If only I bought this or that one..." But those are the ones you notice, and they are always different. You tend to forget about the ones that stall or fail. But chances are if you keep buying breakouts in a bad market you will get enough stalling and reversal action so that your portfolio on balance will look no better than the averages. Nothing you can do about it. The good times come when you least expect them. Until then you either rack up trading commissions with little else to show for them or sit and wait for an easy market to roll in. TZ will tell you when the good times are back - when multiple breakouts start showing on the lists.

As you see, the Watchlist is dominated by higher-priced mid-to large caps. Not by choice. We simply go where the action is - lower-priced small cap zoomers have dried up, at least for now.

[Please see Sunday Night Special for specific stocks.]

Market

2011-04-11T07:23:00.000-07:00

I hope this market is taking a pause to finish the base because if it is not, I'd say it's developing a bout of sickness.

Sunday Night Preview 04/10/11

2011-04-09T19:03:00.000-07:00

- Roughly half of the stocks worth following are in an uptrend, half are basing.

- The market correction was brief and shallow but the market built a V-shaped base on low volume, which is risky.

- There is no major theme to get excited about except for inflation plays such as [...].

In a word: UNCERTAINTY. CAUTION.

Things could go either way. Again: we have the earnings season and FOMC meeting coming. Not much to do in zoomerland except wait and watch.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 04/03/11

2011-04-03T06:36:00.000-07:00

A TALE OF TWO MARKETS:

If you take a look at these two stocks, you'll go:

UA - Correction? What Correction?

ATML - this market is sick!

And so it is with this market: went down violently only to climb back up quietly; some stocks are falling apart, others are powering higher... Take it or leave it.

One thing is certain for now: I am off sub-$10 zoomer for now. Liquidity has drained out of small guys - as if the wild-eyed traders of the early 2000s have finally given up. Their imagination and extrapolation used to propel low-priced zoomers with half a story and a decent quarter to nose-bleeding levels - not any more. Things are down to earth, or rather back to higher priced mid-and large caps dominated by institutions. It's as if the institutions have won the battle, and many wannabe traders are just handing over the money to them: "Here, you do it, I am out of this."

[Please see Sunday Night Special for specific stocks.]

Market

2011-03-23T12:07:00.000-07:00

I am beginning to wonder if the market went down because somebody cried "Wolf!" and spooked investors who thought a correction was overdue, mainly for technical reasons. Now they are scratching their heads, thinking: "What have we done?"

Of course, sitting in cash and watching the market all day will do this to you. Wouldn't be surprised if other thoughts pop into my head as soon as the market changes its behavior.

Weird Correction

2011-03-22T10:10:00.000-07:00

This is the weirdest correction I've seen in a while:

1) Usually, the leading stocks hold out till the very end, giving investors a glimmer of hope, this time they LED the decline, giving back a month of gains in two days.

2) It's normal for high volume selloffs to be followed by strong rebounds, but the bulls' strength is usually worn off over time as the rebounds get weaker. Not this time: strong selloff - strong rebound.

3) Record low interest rates and strong profitability - this is as good as as it gets for stocks. What is the market going to do after even a 1/2 point increase in interest rates? Scream the end of capitalism again?

4) It's almost like the market has used up all the textbook reasons for worrying and does not know what to do:

a) bull markets typically last 2 years - we just passed the 2 year mark;
b) the averages are back to the pre-crash levels of 2008 - now what?
c) we worried about Egypt - nothing happened, we worried about Libya - nothing's happened; we worried about Japan - nothing's happening - now what?

I don't know what to make of it all.

Sunday Night Preview 03/20/11

2011-03-19T11:48:00.000-07:00

If you look at the action of AH, BSFT, JAZZ, JVA, OPNT, SUP, TITN and WLK, you'll go: Correction? What correction?

On average, 3 out 4 stocks go down in a correction. That means that 1 out 4 goes up, or at least does not collapse. But your chances of staying only in stocks that are going up while avoiding the ones that are going down are not great, so on average longs lose money in a correction.

This correction has been strange. Granted, the market finally made up its mind and told us what it wants to do, but getting there has been strange. To begin with, leading stocks led the initial selloff on February 22-24, not resisted it, as is more typical, but the rest of the market followed kind of reluctantly. That reluctance is still evident in a relatively large number of potential plays.

If you must trade, remember: if the market improves, these leaders could fly high; if it deteriorates - reluctantly or eagerly - they are more likely to reverse one by one.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 03/13/11

2011-03-12T17:24:00.000-08:00

The strange correction continues.

The multiple down days in higher volume that we had is usually enough to break the bulls' backs, yet they keep coming back. Some sectors, notably semis and fiber-optics, have crumbled, but many others have fared well, either finding support at the 50 DMA or bouncing off it. The averages themselves seem reluctant to dip far below the 50 DMA.

Despite a flair for fooling most people most of the time, the market is a simple creature: it has to make up its mind soon. If it crumbles below the 50 DMA, it will take the leaders down with it; if it bounces back, the leaders will bounce back too. Speculate all you want, but all we can do is sit, watch, and be ready. Caution is in order for now, that's why the Friday Recap was empty, despite a strong showing from [...]

Any down market usually has just enough exceptions to entice you back in only to make you part with your money, but in case the market bounces back: [...]

[Please see Sunday Night Special for specific stocks.]

BEST OF TRADINGZOOM: FEBRUARY

2011-03-06T10:23:00.000-08:00

The complete list is HERE.

Never fails: you can never predict at the time of breakout which zoomers will advance the most. The February list (the best zoomers that lasted through February) is full of surprises:

BSFT (Watchlist 11/06/10) up 226%

IPGP (Watchlist 10/30/10) up 135%

JOBS (Sunday Night Special 09/12/10) up 87%

NOR (10/07/10 EOD Alert) up 71%

TIBX (Sunday Night Special 08/29/10) up 70%

GSM (Recap 09/17/10) 68%

TQNT (09/22/10 EOD Alert) up 62%

Sunday Night Preview 03/06/11

2011-03-06T08:22:00.000-08:00

So far the correction is very similar to the one we had last November. We'll see what happens...

Some random thoughts/observations:

(a) The leading stocks led the market down, giving up February gains - BUT: they haven't declined further and are holding up well;

(b) The 200 point swings are wild and brutal - BUT: moves, both up and down, dry up fast. It's almost like something happens and the crowd has to act in a hurry, but once it's acted, it stops and says: I guess that's enough for now, I'll watch and see what happens...

Some recent zoomers still offer decent opportunities. Just remember that the risk/reward balance has shifted: if the flash correction ends, those decent zoomers are likely to become best performers; if it deepens, they will fall as well.

[Please see Sunday Night Special for specific stocks.]

Not Good

2011-03-04T09:33:00.000-08:00

I don't like these 200-point mood swings. they are in stark contrast with the tight trading range of the past several months and an indication of a nervous directionless market living off political news. This kind of market can suck you in and bleed you to death with its frequent mood swings. Best to step aside and wait it out.

Current Investment Themes

2011-02-27T11:12:00.000-08:00

Just thinking out loud: for the market to sustain an advance, it has to have major investment themes that are big enough for institutions.

Oil Derivatives
Oil has been hot thanks to - surprise, surprise! - the Middle East, but I think it is too obvious to have sustaining power. Derivatives from that theme, such as advanced drilling methods, electricity, including electric cars and clean power generation, and infrastructure upgrades may have more sustaining power.

Food
Food inflation looks big. Due to the small number of stocks in that sector the demand for them may overwhelm the supply, pushing up the stock prices.

Fiber-Optics
We are getting increasingly visual in how we communicate: images over words. The amount of data transmitted over the networks - from texting to videos - is exploding; providers need the bandwidth to carry it.

Tablets/Smart Phones/E-Readers
Stocks that support these technologies should do well, although fierce competition may cause rotation among winners.

Sunday Night Preview 02/27/11

2011-02-26T18:01:00.000-08:00

Last week was brutal.

Typically, leading stocks are the last ones to fall, providing false hope for some time. This time they LED the decline, wiping off a month of gains. We'll see if the market recovers once again or decides to go into a correction. A lot of voices, IBD included, are getting louder, saying that the bull market is getting old, and that historically one doesn't last much longer. On the other hand:

(a) we've never had 0% interest rates for so long before - clever Bernanke does not see inflation, so there is none; and

(b) corporations have cut out home equity induced fat and are reporting record profits.

Things just don't get much better for stocks. If the market can't rally under almost perfect conditions, what is it going to do when inflation heats up and Bernanke starts raising rates?

Anyway, one can speculate forever, the market will just do what it wants to do. The best we can do is have mental bets for various scenarios and be ready to implement them. The good thing about these shakeouts (Flash corrections? - Why not? We've had a flash crash!) is that they help determine who your friends are, going forward. As the market advances and more and more zoomers break out, we tend to grow complacent and our portfolios tend to grow fat. Now may be the time to trim that fat. Stocks that cracked can be discarded; stocks that bounced back are your best bets that should be bought back, kept, or even added to.

Here are a few good bounces: [...]

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 02/20/11

2011-02-18T18:32:00.000-08:00

As exciting as the action in zoomers like TDSC or ENSG was, it is often an indication of a market top: excessive enthusiasm. Friday was triple-witching options expiration - so not really indicative of what the market wants. If this is not a top for the market, it may be at least for some overextended zoomers. In any event, buying excessive gap-ups generates a lot of excitement but rarely produces over-sized returns (unless you get in early or the day before); and you risk buying at the top. Best to watch those high-flyers: if it's not a top, they will tell you soon enough - but usually not before a period of consolidation, after which it may be safer to buy.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 02/13/11

2011-02-12T19:48:00.000-08:00

Several earnings plays on this weekend's Watchlist [...] are without bracketed pivots due to the strong market: usually, many zoomers complete their bases by the time they are ready to release earnings, and a positive earnings report pushes a zoomer above the pivot. Even if a zoomer has had a pre-earnings runup it usually forms a tradeable launching pad before the earnings. Not in this market. Many zoomers have moved past their potential pivots prior to the earnings. Unfortunately, that is not a guarantee against an unpleasant surprise. These moves are not a confirmation but speculation that all is well. The risk is still there so it's safer to wait for the earnings but since the stock is already above a potential pivot, it is hard to establish a useful benchmark.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 02/06/11

2011-02-05T18:28:00.000-08:00

This is as good as it gets. Enjoy it. Not that many new zoomers breaking out but the ones that have are airborne and gaining altitude.

[Please see Sunday Night Special for specific stocks.]

BEST OF TRADINGZOOM: JANUARY

2011-02-03T07:35:00.001-08:00

The complete list is HERE. January was less spectacular than December but still pretty solid. 10 good zoomers ended their run, 5 - with 50%+ gains:

AFOP (Sunday Night Special 10/24/10) up 65% if sold on January 19
BSFT (Watchlist 11/06/10) up 124% if stopped out on January 26
BSQR (Watchlist 09/18/10) up 173% if sold January 18
RVBD (EOD Alert 08/27/10) up 72% if stopped out on January 25
TMRK (Watchlist 10/30/10) up 74% - bought out on January 28.

But the party did not end, although it was close. The uptrend resumed after a major hiccup and as a result 17 zoomers made it through January with gains of 20%+.

The front runners:

JOBS (Sunday Night Special 09/12/10) up 69%
NOR (10/07/10 EOD Alert) up 60%
FXEN (Watchlist 11/20/10) up 51%
TQNT (09/22/10 EOD Alert) up 50%
IPGP (Watchlist 10/30/10) up 42%

EGYPT

2011-01-29T19:53:00.000-08:00

I was there a couple of years ago and the almost universal hateful looks we got when we ventured out on the streets of Alexandria on our own was unnerving. The place is a dump, a lot of poverty (they were cutting goat and bull throats in the streets for some peaceful Islamic holiday that day), which Egyptians associate with Mubarak and, and by tradition, with the US. Wouldn't surprise me if Mubarak falls and the peaceful freedom loving Muslim Brotherhood establishes a Western democracy there (giving the brilliant Obama more parallels with the good meaning Carter) but the big issue for the stocks is the Suez Canal. May or may not get shut down - depends on how things play out and how long investor attention stays on Egypt. So far, the euro has not collapsed, the EU has not dissolved, Portugal and Greece have not fallen, the global warming has not frozen out the US Northeast - but we've got to have a new apocalyptic fear every now and then to stay properly depressed.

Sunday Night Preview 01/30/11

2011-01-29T19:21:00.000-08:00

No new zoomers on the Watchlist this week. That's new. Although there are 8 earnings plays and many zoomers are in mid-flight, this is not a good time to fall asleep at the wheel given the Friday selloff. There are two possiblities:

a) The Muslim Brotherhood in Egypt will topple the US market; or

b) This is another brutal hiccup.

The market will tell. Stay tuned.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 01/23/11

2011-01-21T23:54:00.000-08:00

If you look at the daily charts of the NASDAQ, S&P 500, the NYSE Composite and the DJIA - in that order - you'll see progressive deterioration; with the Dow being the only one that still looks decent. The deterioration does not look good: it is much easier to prop up the Dow through DIA, where the money is spread among 30 stocks, than the NASDAQ or the S&P 500 through the Qs or SPY, where the money is spread across 100 or 500 stocks. If that's the case, the Dow may be the last one to crack.

On the other hand, what if the market signals a long-awaited shift to large caps? Large caps as a group have fared better so far, and it does not take that many of them to push up the indexes.

Fortunately, we don't need to act on opinions or predictions. The market will tell us sooner rather than later what it wants to do. You just need to be prepared for any scenario and go with the flow. The market goes into a correction - you are in cash; things return to normal - you buy fresh earnings breakouts, the focus shifts to large caps - you definitely have the cash to buy them.

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 01/16/11

2011-01-15T12:46:00.000-08:00

Well, looks like the leaders finally lifted up the averages - as it should be in a strong market. Interestingly, not that many zoomers on the Watchlist (or the Recap):

(a) the earnings season hasn't really got going yet, and
(b) many zoomers are airborne - i.e. in the middle of making you money.

Enjoy the ride!

[Please see Sunday Night Special for specific stocks.]

Sunday Night Preview 01/09/11

2011-01-09T07:12:00.000-08:00

Haven't done a preview for some time, this is the first one this year.

There is an interesting divergence between the indexes and zoomers: indexes struggling, zoomers powering higher. The earnings season is upon us, so hopefully good earnings will trump the widespread market decline expectations. We’ll see…

[...]

Some interesting stories/themes:

Commodities / alternative Investments

Commodities / alternative investments are getting more popular with the crowd but I think the real beneficiaries are going to be companies that trade in them professionally AGAINST the crowd - not that many public companies in that space.

LNG (liquefied natural gas)

LNG may be emerging as a new theme: there is a glut of natgas in the US, it is considered clean energy, and it makes sense to export it. Companies that profit from it may benefit.

Fat Pill

Finish the sentence: the birth control pill - Syntex, Viagra - Pfizer, obesity - ...

It may be worth holding a small amount. If the FDA shoots down the fat pill, the dollar loss is small, if OREX's drug gets approved - the upside may be huge.

[Please see Sunday Night Special for specific stocks.]