Strong Stock Charts

Today’s screen features quality stocks with increasing institutional fund sponsorship and charts with trends moving higher (trading above key moving averages as well). Not many interesting stock charts exist in this market but I can say that these look strong when compared to peers.

The stocks also meet the requirements below:

  • Earnings per Share (EPS) Rating: Increasing quarter over quarter
  • Relative Price Strength (RS) Rating: 60+
  • % of the number of mutual funds owning for current quarter vs. prior quarter: Increased by 10% or more
  • Stocks trading at new 52-week high or within 15% of 52-week high
  • 50-Day Average Volume was greater than or equal to 100% (Friday’s market)

Stock charts listed in alphabetical order:

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Basic Materials (Oil) Stocks Making New Highs

Only thirteen stocks made my new highs screen based on specific criteria as described in this post. Of the thirteen stocks, half were from the oil and gas industry which tells me that it’s a short term leader during any up-trends in the recent market downturn. Steel and iron, specialty chemicals and synthetics were also among the few stocks making new highs on strong looking charts (when compared to recent beaten down leaders).

Each of these industry groups fall under a broader sector labeled “basic materials”. It couldn’t be clearer as to where the smart money was throwing funds today as volume spiked across these industries and especially among the stocks making new highs.

I understand that recent market leaders such as AAPL, BIDU and JASO (up more than 12%) were also higher today but they are still far from new 52-week highs and some are still under key moving averages such as the 50-day.

Basic Materials: Independent Oil and Gas, Specialty Chemicals, Steel and Iron and Synthetics flexed their muscle today and the stocks below were among the few making new 52-week highs. Making new highs after the recent market downturn speaks volumes for the relative strength of these stocks. Several of them are extended from ideal entry points but do not leave these off any near term watch lists on the long side.

Trade the trends – one of the simplest methods to make money in this world. I am not calling for a bull market but these stocks have support from the smart money and I have no problem jumping aboard even if it only last a short while.

Stocks hitting New Highs Monday on Strong Volume:

  • MTL – 111.60, Mechel Steel Group was up 10.60% on volume 97% larger than the daily average
  • EOG – 98.43, EOG Resources was up 4.58% on volume 112% larger than the daily average
  • SWN – 61.87, Southwestern Energy was up 6.54% on volume 63% larger than the daily average
  • RRC – 59.61, Range Resources was up 4.82% on volume 19% larger than the daily average
  • NEU – 60.97, Newmarket Corp. was up 3.90% on volume 341% larger than the daily average
  • KWK – 32.03, Quicksilver Resources was up 7.48% on volume 21% larger than the daily average
  • CCC – 18.09, Calgon Carbon was up 8.13% on volume 148% larger than the average
  • WMS – 39.85, WMS Industries was up 3.45% on volume 65% larger than the daily average

Study the charts as they are among the best looking in today’s market. It’s hard to buy new highs, especially in this weak market environment but if you must buy long, think about these candidates.





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Should we Accumulate Shares?

The stocks below represent current leaders that may be presenting opportunities near the two major moving averages. The first list presents stocks at or near their 200-d moving averages (they are also trading below their 50-d moving averages).

The second list contains some of the largest gainers of 2007, the leaders just about every stock blog has been covering over the past 6-12 months. These stocks are trading at or near their 50-d moving averages with further room to correct as their 200-d moving averages are considerably lower than their current trading range.

The bull may have another leg and if it does, these stocks should present some of the best risk-to-reward ratios moving forward. Don’t question the setups! Take the trades, accumulate shares and only sell if the setup fails and reaches your maximum risk.


Stocks Approaching the 200-d Moving Average:

  • SNCR – 30.04, down for the fifth consecutive week as the IPO leader from 2007 approaches the 200-d moving average for the first time. Support in this area is a buying opportunity (accumulation). Give it some time to base and catch support
  • SLB – 91.04, look for the stock to correct down to the 200-d moving average and build a base for the first time since the up-trend started in early 2007 at $60 (it successfully completed the $60-$100 run).
  • GRMN – 82.32, the former high flyer is down $40 as it approaches the 200-d m.a. for the first time since early 2007. A base here is a great accumulation opportunity.
  • STLD – 46.80, allow the stock to correct and gather support just below the 200-d m.a. and then add shares (this strategy has offered solid risk/reward over the past couple of years).
  • CELG – 62.28, the stock is currently setting up its fourth 200-d moving average base over the past two years. Set the risk/reward and pounce.
  • PCU – 103.00, look for support to build above the 200-d m.a. which is also near the psychologically important triple digit threshold. What an amazing run!
  • NVDA – 30.03, allow the stock to correct further towards the 200-d m.a. and wait for support to form before setting up and ideal accumulation point.


Stocks Hugging the 50-d Moving Average:

  • AAPL – 153.76, the stock sliced the 50-d moving average yesterday on above average volume and has along way to go before reaching the 200-d m.a. (below $125)
  • GOOG – 632.07, the stock has shed more than $100 over the past few days as it looks to find the first level of support at the 50-d m.a. The 200-d m.a. currently sits near $520. I wouldn’t be surprised if it corrected down towards the 200-d m.a.
  • BIDU – 301.50, this stock has been hit very hard over the past five days as it has lost more than $125 from its peak high. Baidu is currently sitting at the 50-d m.a. with its 200-d m.a. just above $183.
  • RIMM – 102.60, Three days of hard drops as the stock now sits at the 50-d m.a. for the first time since August (and June before that). The 200-d m.a. is currently below $70.
  • EDU – 68.40, the Chinese leader is touching its 50-d m.a. for the first time since late summer with its 200-d m.a. down near $52.
  • JASO – 48.67, the stock made a large reversal up near $72 which sent it into the current correction back down near the 50-d m.a. Volume has increased immensely.
  • BX – 22.26, the stock took a hard 8.32% hit yesterday and continues to struggle near the 50-d m.a. It is still above the prior support of $21.30. I still like the stock long term but some concern has crept in.


The Final MSW Index Results

I was doing some research last night and was reviewing the final MSW Index before closing the site for a new format. The MSW site closed in March and my final weekly analysis was done on 3/3/07. The MSW Index included a total of 21 stocks at the time with six of the stocks still around from 2006. Many new names were on the index with several of them highlighted here on the chrisperruna blog in 2007.

Click the Image below for the March 3, 2007 MSW Index PDF

Anyway, I was impressed with the results of the stocks listed on that final Index as I calculated their current gains/losses to date and their overall gains from the original date of coverage. Of the 21 stocks left on that final screen, seventeen of them are currently showing a gain with four of them in the red. Of the four in the red, I actually highlighted one of them as a short on this blog and would have removed it from the index had I continued to run the MSW subscription service (KNOT). Another of the red stocks is LVS which has also been cut to hold/sell in my book and was a superstar on the index in 2006. DTLK was the sole loser in this bunch as the position never worked.

The average gain of the seventeen stocks is 19% with the largest three month total going to ISE at 47%. JSDA was a close second at 46% and you must consider that the stock is far from the highs set in April. Overall, the top gainer from the initial coverage is ICE at 103% from its starting price of $73.69. The average gain from the initial coverage of each stock is 30%, about 5% higher than my target goal in my expectancy calculations.

Of the stocks that are currently up, JLL was my poorest analysis as I labeled it a sell on 3/3/07 when it was trading at $104.32. I initially started coverage when the stock was trading at $82.90 and liked what I saw but the action in March ruffled my feathers. This turned out to be the wrong call as the stock closed at $119.59 yesterday for a 15% gain since March and a total gain of 44% since the initial coverage.

Take a look at the MSW Index link above to see what I was researching at the time and then take a look at the chart in the image below to see how these stocks have performed over the past three months. I know we are in a strong up-trending market so results like these are not difficult to obtain but the win/loss percentage is still impressive for 21 stocks that have not been touched in three months. I don’t know what the MSW Index would look like today but I can assure you that several of these names would still be on the list.


As you know, I have been buying and researching new stocks such as:

How to Create a Successful Stock Watch List

Follow these steps and you can create a powerful stock watch list in the matter of minutes to an hour each night. I work longer than that but it can be done in less time if need be. This watch list will generate opportunities for trend buying, swing trading and even shorter-term trading. I guess the occasional buy and hold investor could even benefit from this very simple procedure if they purchase at the right time.

I encourage all investors in all time frames to evaluate stocks for investment using both fundamental and technical analysis. A day trader and even a swing trader can get away with avoiding fundamental analysis but I highly recommend both methods of analysis for intermediate and longer term trend traders. Both tools are equally important in making serious decisions with your hard earned CASH!

If you wish to invest in stocks, treat it like a business, NOT A HOBBY. You need rules and you need to follow these rules or money WILL be LOST. Once proven rules have been established, they cannot be broke or you will lose money. Everyone loses money in investing but we must learn to cut losses quick and allow gains to develop. Small losses are acceptable because they teach us lessons that allow us to win big. Think of losses as part of doing business and focus on the long term success of the system and not each individual trade. As long as you have a positive expectancy, the winners and losers will equal out over time to make you consistently profitable.

Now to the watch list method:

  • Determine if overall market is in a specific trend (up, down or sideways).
  • Use a computerized screener to find stocks with superior fundamentals
  • Evaluate sister stocks or stocks within the same industry group (strength travels in groups so the probability of success rises when buying into a strong industry).
  • Study the technical aspects of the charts for each possible opportunity

Simple Fundamental Screener Criteria:
The criteria listed in this section can be used together or arranged in a variety of ways to generate multiple lists containing all possible opportunities. Get a feel for specific screens and determine which are the most successful during certain market conditions.

  • Increasing Earnings (current, past: quarterly, yearly and future estimates)
  • Increasing Sales (current, past: quarterly, yearly and future estimates)
  • Stocks making New Highs
  • Stocks within 15% of New Highs
  • Stocks within 10% of the 200-day moving average
  • Increasing Return on Equity (ROE)
  • Price/Earnings Growth (PEG) – Less than 1 is preferable
  • Accumulation/Distribution ratio
  • Up/Down Volume over past several months
  • Increasing Institutional Sponsorship

Simple Technical Analysis Scans (with your own eyes):

  • Study the one year weekly chart (preferably candlesticks)
  • Study the six month daily chart (preferably candlesticks)
  • Look for increasing accumulation days (stock up on above average volume)
  • Evaluate the Point & Figure chart for support and resistance levels
  • Look for basic chart patterns such as flat bases, cup bases, saucer bases, triangle breakouts, obvious trends along a moving average, etc…

That is all one needs to develop a quality list of opportunities night in and night out. Trading opportunities will appear once you see a particular stock make multiple screens on a consistent basis. This is the basic foundation I use to pinpoint my opportunities in the market and the general guidelines I used while running MSW.

I use the custom screen wizard from Daily Graphs (Investor’s Business Daily sister company) for my fundamental analysis because I love young growth stocks but many tools exist on the web. Some are free and some cost a pretty penny to use. My screener costs $45 per month which is nothing to me but maybe too much for others.

Please leave a comment on what screener you use and why. Leave a link to the screener that you use to give the site or business credit. I am very curious to hear what other trader use. As great as the wizard is for me, I am always looking to find something better.