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John V.
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My methodology is based on William O'Neil's brilliant book "How to Make Money in Stocks" and I'm constantly searching for super-winning stocks. I utilize the CANSLIM strategy popularized by O'Neil and I've added minor modifications to suit my needs. The steps in my process are: 1.... More
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  • A few stocks to look at; a few to avoid 0 comments
    Sep 19, 2011 1:09 AM | about stocks: ALXN, ATHN, CF, CPA, GMCR, MNST, LULU, PCLN, RL

    This week we have set what seems like a new record in the market: four straight up-days in a row!

     

    It seems like months since we've had that kind of move considering how bad the markets have been, and yet it has really only been since August 1st.  I'll definitely take it as I'm not complaining, but it shows how bad things are/were when I'm amazed at a four-day win streak.

     

    In every up-move there are always stocks that breakout to new highs and are the new leaders to watch.  As I looked thru my charts tonight I saw some worth buying or keeping an eye on, and I feel that I also found some that should be avoided as well.  The new leaders are the ones to buy and own because the odds are that we'll make the most money from them in the future.

     

    Before we get to them let's look at the mandatory index charts.  The Nasdaq is the strongest index by far and that makes sense because it is loaded with technology stocks and we live in a technological world.  The S&P 500 is much more of a laggard and that makes sense as it has lots of stocks that the Nasdaq doesn't have.  While the Nasdaq is showing lots of improvement, the S&P has a lot more work to do.

     

     

    The VIX or "Fear" Index is showing elevated fear levels and slowly dropping to reflect a lessening of fear.  This means that market participants are still fearful generally, yet this is also where new bull movements begin as well.

     

    Stocks to consider:

     

    Stocks worth considering are those that are relatively new to our eyes, that are making new highs in price, and are showing positive up-volume that indicates that big Institutional investors like them and are buying the stock.  These below should make the cut and find a home on your watch-lists.

     

    Athena Health (NASDAQ: ATHN) is the first stock that I think makes the new-leaders list.  The price is volatile but lately the stock broke-out to new highs on big up-volume.  That is enough for me and when you see  the chart you'll probably agree.

     

    Next is Alexion Pharmaceuticals (NASDAQ: ALXN).  I don't like Alexion as much as I like Athena, but it has a similar chart-pattern and is also making new highs.  I wish the volume was higher but I still think it is a solid name.

     

    The third stock is Ralph Lauren Corp (NYSE: RL).  Ralph Lauren is Polo, and I like that he is the company founder and also a fashion-genius and good manager as well.  I am always observant of other people and lately I've seen many wearing Polo shirts with a giant horse emblem on it, so I can only assume Polo has found a marker for these new looks.  The stock recently broke to all-time highs so something must be going right over there.

     

    One other to consider is Copa Holdings (NYSE: CPA).  Copa Holdings is actually a very profitable Latin-American airline and I think it is a very interesting stock and story.  However, be aware that the stock is relatively thin and illiquid so one should not buy tons of shares in it because you'll never be able to get out when you want to.  A good rule of thumb is to buy no more than 1% of the monthly average volume.  Thus if the average volume is 100,000 shares then the max one should buy is 1,000 shares.  Despite all that the stock does look interesting.

     

    Lastly, I think Priceline.com (NASDAQ: PCLN) is a stock that appears to have put in what is called a "Double-Bottom" chart pattern.  This can be a powerful pattern though the real test will be whether the stock breaks to new highs or not.  I am not an expert on double-bottoms so I think it would be wise to do more research on this in case it is not.

     

    Stocks to Avoid:

     

    This list of stocks to avoid is much bigger than the stocks to consider and that makes sense since recently it seemed like the economy was on the verge of imploding and taking every stock with it. What is amazing is how many seem to be former leaders whose time is now over.

     

    In alphabetical order, here is CF Industries (NYSE: CF).  CF is the most 50/50 of the bunch.  Yes the stock has moved up into new highs and showed strength when most others were falling, but the volume has not been that great in my opinion and lately the shares have been a little weak.  The way I run my stop-loss trade-triggers is such that I probably would have set it for the low of the most-recent range at about $175, and thus I would have been stopped out of the stock a couple of days ago.  CF could go higher and do great things, or it may not.  I don't know.

     

    The next stock that is  probably one to avoid is similar to CF in that it is 50/50 whether it continues going up or instead fails outright at this point in time.  The stock is Green Mountain Coffee Roasters (NASDAQ: GMCR).  I believe there has been a lot of hidden selling lately as the stock has struggled to break into new highs because high-volume with small price-movement is what gives this away.  GMCR has also been running for a while and is not exactly a new name, so I think it is getting tired and running out of gas here.  I may regret this posting so we'll see what happens.

     

    Another stokc that appeared strong a few weeks ago and now is flashing warnings signs to me is Hansen Natural (NASDAQ: HANS).  The stock looked great until all of a sudden there was some 'big' sell-volume, and since then the stock has risen but on low-volume, thus it appears the demand has disappeared.  I may be wrong on this too so we'll see how it plays out.

     

    One of my favorite stocks that also now looks like an 'avoid' is Lululemon Athletica (NASDAQ: LULU).  It's chart went from looking great to now looking downright awful as there is lots of 'wide and loose' action, and I find it ironic that the resistance levels for it at this time appears to be the exact same level that I sold the stock at right before the crash.  Coincidence?  I don't know but we'll see what happens.

     

    Good luck out there and let's hope that this upward streak continues.

    Stocks: ALXN, ATHN, CF, CPA, GMCR, MNST, LULU, PCLN, RL
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