Sunday, April 19, 2009

Score It Six Weeks In-A-Row For Stock Indexes But I Still Want To Know When Leaders (IBD 100/IBD 85-85 Stocks) Are Going To Lead Us Higher

While I LOVE seeing the SP600, Philly SOX, MID400, Nasdaq, and especially the Shanghai SE Composite lead the way higher, there are two key leading indexes that have missed out, so far, but yet still might, on the rally. That is the IBD100 and IBD85-85 indexes.

These are indexes that are composed of stocks with the best ratings for key fundamentals and technicals. If you look at the rally from late 2002-early March 2003 they didn't do great at first but were still doing better than they are now and that is a concern. However from March 2003-early 2007 the beautiful green/max-green BOP filled stocks, with some being CANSLIM, and the CANSLIM only stocks ROCKED the market producing gains that were well beyond the returns of the overall market and the "regular" favorites of those that do not know how to find NEW EXCITING stocks (you know the MSFT, DELL, CSCO, INTC holders).

So as you can see, if this rally is going to be real, we are going to pullback, hold the lows of March, and then take off higher. If/when that happens, almost every single CANSLIM quality stock that I am watching to get long will then have their 50 day moving averages over the 200 day moving averages. This now sets them up in positions to make a lot of money once they breakout or bounce off a key support. Why? The 50 over the 200 signals that the worst is over and that now you have a stock trending higher without the weight of either itself or the market to bring it down.

Now, I want you to remember, this only qualifies for CANSLIM stocks, when it comes to speculative stocks, I am not looking to go heavily long ANY unless they are LOADED TO THE NINE with max-green BOP, huge accumulation, and great price action (something similar to THLD before Friday's selloff). When these charts show up and breakout, with CANSLIM stocks moving higher, then you know it is safe to go heavy into the speculative names. But until more CANSLIM stocks are like NFLX it might be a while before we can expect to have something like MAMA (now CNIC) move up 230% in 10 days.

By the way, MAMA's 230% gain was only FOUR YEARS AFTER THE MARKET BOTTOM, ONCE AGAIN PROVING THAT YOU NEVER NEED TO NAIL THE BOTTOM FOR BIG RESULTS. EGHT up 300% in one month came a FULL YEAR AFTER the 2002 bottom. IST came ALMOST TWO YEARS after the bottom (350% move). ERS and GIGM with their 550% and 250% gains came in 2005 only three years AFTER the bottom. So get this "I missed the rally BULL SH*T" out of your head!!!!! I have heard it from some and I guess they are BRAND NEW to the market or else 97, 98, 99, 03 would have all proven that you don't need to buy THE bottom to KILL it in the market.

If you have to ask me how do I feel about this market right now, I have to honestly say, OF COURSE, that ANYTHING could happen. However, the chart patterns are setting up like the market wants to conintue to rally. At the same time, I see stocks that looked like they were ready DIE. The good news is that NONE of these stocks are CANSLIM stocks but seeing HOT HOT HOT chart patterns start up in CKSW, MIPS, INFI, and some others only to see them lose the "near-perfection" of their charts is always a bummer.

However, focusing on these cheap stocks like PALM gets you in a lot of trouble. The smarter play is to stick with high quality longs that are of some type of CANSLIM worthy. When I look at the EPS and sales growth in actually quite a few of these CANSLIM stocks I am sort of surprised to see continuous growth in EPS and sales, despite the recession we are in. The sad news is that a lot of the top top top best-of-the-best charts are all in China. None of them are at buy points and buying giving out the list of Chinese stocks I am watching, current subscribers can feel safe in knowing that those reading this will have no clue when we go long a HOT Chinese stock that does what it is supposed to do. Chinese stocks like SINA and SOHU are not what we are watching. Instead I would like everyone to know that I am not fully biased to Chinese stocks. They still have to have the chart, fundies, and market to go with it.

The way the SSEC-X (Shanghai Se Composite) has moved off its lows in November and March it is quite apparant that those indexes are outperforming our top index during that time which was the Nasdaq. From November to now, the Nasdaq has moved 27% while the Shanghai Se has moved an outstanding 47%.

This continues the trend of Chinese stocks being more powerful than US stocks. From 1995-2000 (five years) the Nasdaq was able to rally a very impressive 538%. This length of time and the uptrend allowed breakout/momentum players to constantly move from one stock that was making a climax top to another stock just breaking out. You could then repeat this for the five years and at the end you were extremely wealthy with people like Dan Zanger turning thousands into multi-millions. Sadly, for me, I did not "get it" fully (I started April 1996) until late 1998. Now that blessed me in that I got the 1999 madness. However, as the story of IOM, AMER, and all those semiconductor/internet/software stocks goes down in history, I sadly was not part of most of it. I only got 1999. So the 538% move was impressive but I only got in on the end as I was too young to care about stocks in 1994 (13/14 yrs. old).

Now let's compare the 5 year 538% move to China's best move of 483%. As you can see the USA did 50% better than China during its biggest uptrend (95-00) versus China's biggest uptrend. But how long did it take China to make that 483% gain? Uh...ONLY TWO YEARS AND TWO MONTHS from 2005-2007. So if China would have kept moving up at the same rate it was and lasted as long as the US rally China would have had a gain of 966%. So the USA's five year move of 538% would have been matched during the same length of time by China's 966% move. So you tell me which country is more free and is has the better possibility of growth. I think it is clear China is where it is at and as long as it continues to be where it is at, i will be very happy for a potential further rally.

The most important indexes for me, my entire life have been the Nasdaq, SP600, and SP400. I have always made sure they were leading or moving higher ahead of the market to be bullish. But starting in 2001 the IBD 85-85 index was introduced to follow those stocks in IBD with the market. This is now (along with the IBD 100 introduced in 2003) the most important index to follow. Why? Because the stocks that go on to make the biggest price gains are normally leaders. So now we have an index to strictly track the stocks that historically have well outpaced the market.

These indexes is what made me 100% confident in the 2002 lows and ESPEICALLY the March 2003 Follow-through Day, that things were going to be great. Just like now, back then, more and more charts started to show up with pretty patterns of heavy accumulation and green BOP all over them. The only difference mainly is that back then a LOT more max green BOP charts were existing and basing out in perfect round to flat bases. This time the bases are not only shorter but the max green BOP filled charts aren't out there. It is mainly just green BOP filled charts in the speculative stocks. And as I have said OVER-AND-OVER speculative gems should have both quiet bases and heavy volume rallies with max green BOP the whole way. Study all my past big winners from 2003, IST from 2004, GIGM in 2005, HRZ 2006, and AFSI 2007. Now AFSI, HRZ, and IST were not speculative but the perfection in the charts is what I want you to memorize for a speculative stock.

Right now, we have a lot of nice green BOP and some max-green BOP filled spec. stocks. But until more CANSLIM stocks breakout of ANY kind of postive-yellow, green, or max-green BOP pattern with a tight base on low volume and a breakout on heavy volume, I would avoid going long speculative gems in large amounts.

When BIDU, JRJC, CYOU, CSKI, NTES, SNDA, CMED, LFT, MR, CEO, HRBN, CTRP, YZC, CHL, ASIA, JST, STP, SPIL, COGO, HMIN, CTEL, PWRD, SOHU, WBMD, and SINA finish setting up the bases that they are ALL attempting to build (CTEL is the prettiest BUT THE CHEAPEST), I am sure this market will take off and reap us some great rewards. Chinese CANSLIM quality stocks along with some of America's finest like NFLX, CYBS, BKE, NVEC, SYNA, TNDM, INT, JCOM, and GMCR moving higher will then provide the support and juice we need to take the gains from these great stocks and stick them into stocks like MAMA in 2006 that move up 230% in 10 days or BFUN in 2005 that moved up 300% in 10 day. Speculative stocks will work but ONLY AFTER/WHEN the CANSLIM quality longs are working.

So for now, keep your eye on the LEADING Nasdaq, SP600, SP400 indexes for that moment when the IBD 100 and 1BD 85-85 index start moving ahead of them thus opening up our moment to CRUSH the returns being made by anyone else I know out there BESIDES THOSE THAT HAVE BEEN VERY LUCKY OR THOSE THAT ARE ACTUALLY DARN GOOD AT DAYTRADING. And for those of you daytrading penny stocks to the wonderland, great of you! To each their own and I can only hope that your penny daytrading will give you a 2,300% return in nine months, one day, like buying TASR did for us. You had to work your BUTT OFF but we just went into a coma in nine months and woke up and made our sell.

Right now, things are setting up beautifully but those being rewarded are still those that have basically had their ARSES HANDED TO THEM in 2008. If you are up 10%+ this year, congratulations! Too bad you were down 45% last year on top of your 10% gain this year for a net return of -35%. Good job guys (rolling eyes).

top longs/(shorts) w/ total returns making money today: AIPC 27% ANCI 63% KONG 20% (MCY 18% GGB 53% POT 46% MOS 50% K 19% GTIV 40% CYT 70%)



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