…Last night, I officially removed Urban Outfitters (URBN) from the MSW Index and the weekly screens for the first time since January 9, 2004. Yes, just short of two years on this website (we only started to publish our screens on MSW in 2004). I was screening URBN on Richdad.com and Investors.com throughout 2004 before I had my own established community on the web. My screens can be found under the username “piranha526” on both forums.

Over the past few weeks, I have started to get the feeling that URBN was losing strength and was starting to turn. I can’t say that I knew it would slice through the 200-d moving average (a support line it has not sliced for two plus years) but I did see that is was starting to change the way it was trading. This past Saturday (12/10/05), I said this on the MSW Index:

“this stock may be seeing its last days on the MSW Index ($30.28)”

Well, several days later, it was removed at $26.51, still representing a very respectable 164% gain since it was first covered. On Saturday, the stock was still holding a 200%+ gain on MSW from early 2004 and reached a peak gain of 236% when the latest 52-week high was set at $33.77 a few weeks back.

I stuck with the stock in September and October when it challenged the 200-d m.a. but it never sliced the line the way it has this week. The violation of the long term support on above average volume was an instant sell signal with no questions asked. When something as uncharacteristic as this happens in a stock that has been trading above the moving average, you sell and you sell quickly to lock in all profits if you have not done so already. This action tells us plain and clear that the situation has changed and the stock is ready to move in another direction. There is a chance that it can come back but don’t sit and wait to see if it will. Get out, get your profits and wait and move on to another opportunity.

This was what I wrote last night on the daily screen:

URBN – 26.51, last Saturday, I said this: “this stock may be seeing its last days on the MSW Index ($30.28)” and today, this was confirmed. This is the first break below the 200-d m.a. in this type of fashion in years. Sell and lock in profits! Urban is the second stock this week to be removed from the MSW Index.

I will be preparing a case study on URBN, guiding you through all of our analysis over the past two years. The stock made several dozen weekly screens since 2004 (possibly 100+ daily screens) and gave members multiple opportunities to produce profits in this stock. The recent drop may be foreshadowing to a weak holiday retail season. I don’t know if this is why but come back and see what the news is all about in a month or so. The technicals always give you the story before it breaks! The key is to act now and find out later! Watch your other retail positions very closely.
Piranha

…Last night I screened Salesforce.com (CRM) a former member of the MSW weekly screens dating back to August. The stock made three consecutive weekly screens and we liked the potential of the stock as it tried to form a base and breakout to new 52-week highs. We knew that the overall market was starting to head lower but we were still confident in the stock. Eventually, the stock fell more than 10% from our entry area so we were forced to cut the stock from the weekly screens. It went as high as $25 but then corrected back to the 40 week moving average near $18.63. The three weekly screens are listed below with their prices at the close of each week while it was covered on MSW:

8/06/05: CRM 23.68
8/13/05: CRM 23.53
8/20/05: CRM 20.48

The stock has not make another weekly screen since it was cut back in late August. It has made several daily screens since it started to make new 52-week highs once again in the mid $20 range in October. Other than a few daily screens, the stock has not made its way back onto the MSW index but that is okay. It made another daily screen last night and this is what was said:

“CRM – 35.63, the stock was a former weekly screen member and was first covered at $23 but then was cut when it gave us a 10% loss at $20. We had the right stock sat the wrong time. The stock is now up over 78% since we took a loss. This happens in life and the market and I am fine with it. Nine consecutive up-weeks from $22 to $35.”

Sometimes you may select the right stock but then find out that your timing was off. Sometimes you may get back in at a higher level like we did with LMS but sometimes you may miss the move altogether due to any number of reasons. In the case of CRM, we did not get back in and the stock has gone onto gain almost 80% since we took a small loss. I am proud of the small loss because at the time, I did not know if the stock would continue down and I wasn’t going to break key sell rules and find out the hard way.

A quote from Martin Zweig should sum up this theory of cutting losses the best:
“A loss never bothers me after I take it. I forget it overnight. But being wrong – not taking the loss – that is what does damage to the pocketbook and to the soul. Of all the speculative blunders there are few greater than trying to average a losing game. Always sell what shows you a loss and keep what shows you a profit.”

We sold and it was the right thing to do at the time. We could have gotten back in when it jumped above $25 and moved to new 52-week highs but other stocks had our attention once October rolled around (stocks such as LMS, AAPL, GMXR, SSAG & CTRN). Don’t get frustrated if you sometimes find the right stock but get in at the wrong time, this will happen over and over throughout your trading career because timing is quite possibly the toughest aspect to investing. Currently at $36, CRM is too extended to be on our radar for the MSW Index but it has made a great run, a run that we anticipated in August but jumped in two months too early.
Piranha

…Listed below are the appearances Lamson and Sessions (LMS) has made on the MSW weekly screens, now titled the MSW Index. As you can see, LMS has made a total of 13 weekly screens since August 2005. The stock was removed during the month of September to protect against further losses as it slid lower. As September started to fade, the stock picked up steam and gained strength so we added it back to the weekly screens and have kept it there ever since. From October 1, 2005 until November 5, 2005, the stock only moved $1.50 or 8%. It wasn’t until late November when the stock started to make the advance that we had been anticipating since early August. The patient investor has been rewarded very handsomely if they kept their cool and only sold on major red flags, similar to the ones in September. Since October, the stock has not flashed any sell signals and has been positive across the board.

Notice how we originally covered the stock at prices between $13 and $15 in August and then removed the stock from the screen, only to bring it back at higher levels in October. Let this serve as an important lesson that you can buy stocks at one level, only to be forced to sell and then buy them again later at a higher level to make the anticipated profit. We did not think twice about bringing the stock back onto the screens above $18 because our original analysis was still the same. In August, we were off a bit with our timing but had the right stock. We protected ourselves when it dropped and grabbed it again when it showed strength. It is so important to play the odds while investing because it is the only way you can continually succeed in the market.

Last night (12/12/05), the stock closed at $30.80, a 103% gain from the original weekly screen on August 13, 2005. Using the later weekly screen entry point of $18.32, the stock has still made a 68% gain since October 1, 2005 (this comes in less than three months). We confirmed the rally on October 22, 2005 when the stock closed at $18.19, giving us a gain of 69% during this stretch. I noted on the most recent weekly screen to start protecting profits in this stock as it becomes extended. The area of $28 will provide some support and can be used as a sell point or you can start to cash in partial profits at current levels.

If you originally bought 100 shares at $15.16 ($1,516.00) and sold for a 10% loss ($151.60) and then repurchased 100 shares at $18.32 9 ($1832.00) and sold last night at the close ($30.80 or $3,080.00), you would have realized a gain of $1,096 but would have a win/loss track record of 50%. One winning trade and one losing trade but a profit above 50% on the original stake invested (NOTE: taxes and commission have not been included in the calculations). This is how you play the odds and what I mean by saying “cutting losses short” and “letting winners run”. Many times this scenario will happen with different stocks but in this case it happened with the same stock. Below is the record of the stock on our weekly screens, showing you how any member of MSW had numerous chances to capitalize on the recent advance in LMS.

MSW Weekly Screen Appearances:
8/13/05: 15.16
8/20/05: 13.96
8/27/05: 14.40

10/01/05: 18.32
10/08/05: 19.83
10/15/05: 18.13
10/22/05: 18.19
10/29/05: 20.00
11/05/05: 19.88
11/12/05: 21.35
11/19/05: 22.24
12/02/05: 27.41
12/09/05: 30.14

12/12/05 – $30.80

Piranha