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%)



Sunday, April 12, 2009

The S&P600, Russell 2000, And S&P400 Produce Very Strong Gains On Higher Volume Above The 50 Day Volume Average; Leading Indexes Continue To Lag Badly

Stocks ended the holiday-short week on a very positive note but by now everyone knows this. If you guys do not have a real-time stock market intraday tracker for the general market, I really recommend that you use a delayed candlestick version like the one on finviz. These intraday candlestick charts are the highest quality I believe on the web. Now, obviously, if you have any kind of real-time platform you have access to nice intraday charts but for those out there using a delayed broker that do not like the charts they provide or for those just learning about the stock market, these intraday charts of the DJIA, SP 500, and Nasdaq are a must to get to know.

Why? Well a lot of individuals do not realize that how an index trades intraday is actually and extremely valuable way of knowing what the pros are doing. We already know if we have a day where the indexes close higher on higher volume that that is good while when we have an index close at the LOD with volume higher that is bad. However, this EOD analysis while very important and a must for me to make a smart decision about the trend of the market is in fact only a start sometimes. Other times, it is open and shut like the market opens, barely rallies, starts to selloff, and closes flat to slightly higher or lower. No big deal.

However, other times, like on March 25th for the Nasdaq the intraday action can tell me a lot more than it can most. During that day (I do not have the data in front of me) the market was rallying but lagging stocks like banks, real estate, and other clear beaten up weaklings were making the way higher. But before the session could end stocks took a dump lower and appeared that they would close at the LOD. However during the last hour and especially I believe the last 5 to 10 minutes stocks took off with not only all stocks gaining but leading stocks taking the reigns for the first clear time of the rally attempt. This showed up as an amazing intraday move.

Since then, Nasdaq only, we have seen some great tight session with strong closings that I believe all inexperienced and experienced should get used to spotting if we are going to have an uptrend work. Now some of these indexes do not have volume data on some providers so I have to go look at Telechart's SP 400 and SP 600 to determine the rally. At the same time I need to use Daily Graphs to get a gauge on the IBD leading indexes. The bottom line from all of this is that it is very important to know when the market is moving up with volume during uptrends.

Like I was saying, some examples from the Nasdaq include 3/10, 3/12, 3/17, 3/18, 3/23, definitely 3/25, 3/26, 4/1, 4/2, and now 4/7. These closings and intraday reversals have helped put the Nasdaq on top as far as top markets are concerned.

Other indexes have had nice sessions on the daily and weekly patterns the past five weeks but by far the Nasdaq has taken over. The nicest indexes on Friday that I have been waiting since the rally started to see them get going are the SP 400 and SP 600. It has been a long time since I have seen these indexes put in those kind of moves.

Sadly the indexes that continue to lag are the IBD 100 and IBD 85-85. The really sad part is that this deep into the rally, by now, these leading indexes should be leading the market higher.

I will be going over more of how to read charts for subtle clues on if the market is going higher and of going lower.......


PART ONE (10:30):

PART TWO (8:00):

Friday, April 03, 2009

Stock Market Indexes Put In Another Very Bullish Session On Much Higher Volume But Leaders Continue To Lag BADLY

It was another great day for the stock market which took off on the back of an excellent session in both Asia and Europe. The best part of the rally is that volume was, once again, very large on the rally. This means that the March pattern of higher volume on the rallies and lower volume on the pullbacks. This is the exact kind of pattern is what you want in a market that you are going long in.

Despite all the fireworks in the stock market, I still have one major issue that I just can't ignore. That is leading stocks. I am very happy and excited watching the Nasdaq rally in an exciting manner of higher volume on the rallies and lower volume on the pullbacks. Along with this action a lot of charts are starting to setup in nice patterns. But that is the problem in and of itself; the patterns are just nice.

There simply is not enough "near-perfect" to "perfect" setups (study my 'past big winners' to review what one would look like) to get me excited. Especially when you combine that with the leading stocks lagging the entire uptrend. The Nasdaq composite is up 26% this month off the lows, even outperforming the WORLD LEADING Shanghai Composite in China which is up 17% in March from its lows. Since the Oct/Nov lows it is the leading index but the Nasdaq has been right behind it, in world markets.

While that is definitely exciting about the Nasdaq some great detailed research shows a little disturbing pattern developing. It is clear to me that despite the vast amount of nice charts that I have been showing subscribers in my videos and post in the 'new longs' section, that these stocks are not leading the Nasdaq higher. So even with the Nasdaq having new highs dominating new lows, there is not too many stocks making 100% to 200% moves in a month or so (that isn't $10 or less). To find out where the move is coming from you don't need to look any further than six stocks. GOOG, MSFT, CSCO, AAPL, ORCL, and INTC all make up nearly 25% (23.8%) of the entire Nasdaq. These stocks are up 24%, 26%, 33%, 35%, 35%, and 27% respectively. Only GOOG has not kept up with the Nasdaq and it was only off by 2%. The rest of the big fat heavy giants (btw, how high can I jump? Not very high. So would you hire me to play Center on your basketball team?) outpaced the index and tells me that they have been completely leading this market higher.

This is disappointing for individuals like me that can read the market very well (reading it well doesn't mean you will make a fortune ALL the time-remember that) because we know that this means that the rally is in the hands of six stocks and if one has a real bad day the market will have a bad day. This would NOT be bad IF we had those "near-perfect to perfect" chart setups in more than one stock at a time. If I had "hot" stocks setting up, breaking out, and showing me 20% gains IMMEDIATELY (like ALWAYS HAPPENS TO ME in bull markets) I would be ecstatic about this rally. But the opposite is happening.

As this rally goes on, more and more of my "nice" charts are becoming "mediocre." This happens in either one of three ways. Usually when I go long a stock it is setting up in a chart pattern that has historically led to large gains. When this pattern comes with a LOT of green to max-green BOP, a RS line hitting a new high, and a moneystream line hitting a new high, I know that I have a VERY HIGH reward/risk situation. In 1999 and 2003, when the rally started, proving that it had lasting power, "near-perfect to perfect" charts were setting up and breaking out everywhere. This allowed my accounts to grow exponentially in a short amount of time. Those two years make up for over 70% of my gains. How? Because I knew we had "the moment" both years and went fully long on as much margin as I could get my hands on. If you have reviewed my 'past big winners' you know how large the gains were and what you could have made with margin. Obviously, these patterns work, when they show up!

This rally, as it goes along, kept on producing more-and-more great looking charts with sound fundamentals or beautiful charts (not perfect) that had poor fundamentals. This started to get me very excited. Then I started to get more bullish as my longs went from just a handful to 20. But the last two days, with the strength the market has exhibited with the strong volume, has led to the opposite of what should be happening.

Instead, the stocks that I go long going from green to max green BOP (if not already there) are not making it all the way to the max 100 area. Instead they are getting near the max level and then slowly moving lower. During this time price holds and volume pulls back on low volume thus making the once nice setup now just mediocre. Also the recent longs I have taken breaking out to new highs or bouncing off key support on huge volume that do have max green BOP have also shown the similar pattern of staying max green for one or two days and then declining.

One particular long was looking "near-perfect" when I went long. Here we are about a week into the holding and the max green BOP is gone already. Now the max-green BOP could be back tomorrow as it was up over 9% in the after-hours market, according to someone I know. But if it is not max green, it is just going to be a long in my portfolio moving higher that I will need to treat like a CANSLIM long position as it does qualify as a CANSLIM long. Hopefully, though, tomorrow it will be max green again and I can squash my worry.

But besides my longs not moving up 20% in the first two weeks and 100% in the first three months, like they should and always have done in strong uptrends, another problem is with the longs setting up. There are so many on my watchlist right now that I WOULD LOVE to go long if they keep the green/max-green level of BOP, huge accumulation, and tight price action. However, recently, I have noticed some stocks losing their beauty. NAV is just one example I can think of today. There are many more.

We could focus on that negativity but I feel better "hoping" that the market will continue to rally on stronger volume and pullback on lower volume. While that happens I "hope" that more-and-more of the longs that I am watching that are starting to lose a little of their luster can kick-turn it right back around. That would be great and have me feeling much better that the rally can continue for the intermediate term. Stocks like CSTR, PEGA, ANV, and a personal favorite of mine that I am watching and praying can setup and breakout from a long enough base because the price, volume, and BOP action is just too good to be right. This stock begins with the letter C and subscribers in my chat room or even astute readers of my forums know what stock I am talking about. If these four stock can base, breakout with huge volume and max green BOP, and run higher around 20% in a couple of weeks I will then be FOR SURE that we are in a "legitimate" bull market. However, if that doesn't happen, I am preparing myself to get short again.

I currently have 20 longs and 28 shorts. All it will take to cover the shorts is for another rally on very large volume with BOP going green. If that happens, I will be taking my profits. However, all that has to happen for me to cut my losses in my longs is for the market to have a nasty selloff on higher volume with all my green and max-green stocks turning into yellow and red filled charts.

I am ready for this market to do anything and I am positioned in the strongest stocks for a new bull market and have my shorts that are not only rallying but will outpace the market to the downside if we fail the rally. This is the ONLY way to approach the market as the market doesn't care about your opinion and especially doesn't care about mine.

Great luck out there and ALOHA!



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Wednesday, April 01, 2009

Stocks Put In Another Bullish Session With The Nasdaq Having Higher Volume; Leading Stocks Are Still Lagging But Some Stocks Are Looking Real Bullish

Let me first start off by saying that the session in Asia was just amazing with the Nikkei up 4.4% and the Hang Seng index up 7% last night. To go along with that, futures are just popping right now as we go into the morning's opening bell. This is excellent action right now, I have to say.

But what makes this action more exciting to me is that for the first time in a full year (last time was 2001) we have more than just a handful of nice charts out there. To go along with that many of these nice charts are either in leading industry groups or are the leader in their respective group in terms of either price performance or both price performance and fundamentals. The fact that so many charts have green and max green BOP, with the market in an uptrend and China leading, is the most bullish setup we have seen since August 2007 when the Nasdaq made its last run into the October 31st high.

Since then it has been far and wide in looking for winning stocks on the long side. In 2008 we had ONLY PDO and DGLY early on. Then we got XSI (which is now ANCI) and got a quick near 100% gain in a few months with it also setting up in a near-perfect setup in the middle of August giving us a quick 50% gain. That second buy was real nice but even I could not load up due to the fact that so many stocks were acting so poorly. I was too scared and still had the thoughts of the FALC and INXI charts that failed in 2007. So obviously I couldn't load up, even with the near-perfect setup, simply because there was no other leadership to support much less any other stocks with green BOP, strong accumulation, and tight price action.

The best setup, however, came from a stock we are long now for a 40% gain. That stock is AIPC and didn't give just one near-perfect signal but TWO near-perfect signals (6/18/08 8/7/08) that gained buyers a 220% gain and a 185% gain. Just one problem for us at BigWaveTrading; Telechart does not have OTCBB stocks (even if they have great fundamentals and are about to list like AIPC), pink sheets, Canadian, or Chinese stocks. The problem with this is that my price, volume, and BOP that I have used to make a living in the market since 1996 work best on small and mid cap companies. Obviously, that is all that exist in OTCBB markets. So I am sure RIGHT NOW there are a lot of heavily accumulated, max green BOP filled stocks with nice tight price patterns breaking out to new highs just mocking us as we miss them.

Thankfully, AIPC did give another less-than-near-perfect setup/breakout that we were able to take advantage of and now has us a 40% gain. The other thing we can be thankful for is that right now there are a lot of stocks that are trying to setup in mid-summer 2008 patterns like AIPC and XSI (ANCI). If you study my 1999, 2003, and 2004-2007 (heck even 01, 02, and 08 can help) past big winners, you will see that a lot of stocks are beginning to setup in patterns that we have seen before. Nothing EVER changes on wall street. Well one thing does. The players. Besides that, human emotion never changes.

Speaking of human emotions, the Investors Intelligence survey came out and found bulls rose a little to 31% and the bears dropped a little to 38%. The current trend isn't anything to be happy about but the fact that EVEN AFTER this 22% off the March lows newsletter writers are still very bearish as they know "this market is going to top soon." They may be right but if they are wrong there is going to be lot of missed opportunities on their end. Even if they are right, we operate so well that we will be able to take our profits, cut our losses, and get short the proper setups that come along. So we don't have anything to worry about.

But worry is just what the put/call players are doing even after today's rise in the stock market. This is good news because there has been a recent pattern of markets rallying and yet the put/call rises. Normally, options traders get more and more bullish as indexes rally. So when you see divergence, like we saw in 2008, you know it is worthy to pay attention to. Today the put/call rose from .76 to .86. That's great as that says as the market rallies people "just know it is going to fail." Since our longs are growing this is very great news. Also another important number is the AAII bull/bear survey. Despite everyone seeing the rally and the breakouts, people are still hesitant. As we know the AAII number is the "very dumb money" so it pays to watch how they think. How are they thinking? They are mixed. But the good news for those that keep watching their amount of long position in their portfolio rise the public is only bullish by 43% to bearish of 37%. To go along with that 20% don't know what the heck is going on as they are undecided.

So we have the charts starting to show up in multiple industries (only missing the max green BOP charts that last for 50 or more :)), we have sentiment working correctly for us, option players keep getting bearish as the market rises, and we have a lot of people out of the market meaning that the best serious players are left. Fewer of the "REALLY dumb money" players exist after the 50%+ losses a lot of newcomers took and that means a more orderly market. There is really only one thing missing (well two if you are asking for that stocks be perfect with huge accumulation, max green BOP, and a flat base breakout lasting five weeks). Where are the IPOs?

Well the pipeline isn't anything to get excited about but we do have a new IPO pricing today I do believe. CYOU is scheduled to price at the opening range of the $14-$16 area. The best news about this IPO is it is a spinoff from which helped earn me a 2,000% gain from my first small purchase and a 798% return on the MUCH bigger second buy from a MUCH better chart setup. From the first and second purchase to the top of this stock, the ride was only nine months and eight months long respectively. Hopefully, if we are REAL LUCKY (don't count on it) CYOU can setup and breakout and be the next SOHU of 2002-2003.

Right now, it is all about Gold and Silver as 7 of my 20 longs are Gold related. It has been the #1 industry for 6 straight months in Investors Business Daily. What is more amazing that 7 months ago it was DEAD LAST at #197. And the stocks are JUST NOW breaking out. That is pretty rare to see stocks not run for six months yet have their sector lead the whole way. Now those leaders are breaking out and if history and the stock market (which is THE MOST IMPORTANT "if") repeats itself some of those 7 longs should be making us a lot of money in a short time frame.

Don't forget, besides the positions I am long, I also encourage anyone 50 or younger to please go out and to start slowly accumulating Gold or Silver bullion. Just a little bit can go a LONG WAY if something horrible ever would happen, God forbid. Great luck, hopefully our markets can repeat Asia ON HIGHER VOLUME, and I will see you in the Chat Room or Forums. ALOHA!