…It closed today at $29.77, down $1.05 on volume lower than the 50-day average. This would be considered a positive pullback on low volume.

ELOS was a strong stock for MSW in 2004:

139% Gain

Posted 9/22/2004 @ 15.85

Peaked 11/26/2004 @ 37.84

In two months the stock more than doubled as we listed it over 10 times on daily and weekly screens. I did several write ups on this very blog back in November on ELOS as it started to break down and fall into its current base pattern.

ELOS was listed on the daily screen last night but was not near a new 52-week high? I received some questions as to why ELOS made the screen if it wasn’t a buy. On the daily screens, I try to display stocks that can become a buy in the coming days and weeks, I include stocks that may are current buys and stocks that are already trending up. It is up to you, the individual investor to decide what stocks to buy. I can only take you so far before you take the final action.

ELOS is currently building a cup shaped base, the first base since it opened as an IPO in 2004. The fundamentals are excellent with 3-year earnings of 449% and 3-year sales of 302%. The ROE is slightly below par but still good. The PEG ratio sits at 1.17 which is slightly higher than the key 1.0 mark.

This stock would not become a buy until the right side of the base is finished and a downward sloping handle forms on lower volume. I will keep you posted if this stock correctly finished its base. Do not buy prematurely as the majority of stocks that don’t finish their base will continue to fall. A case study will be posted if a handle starts to form and this will be posted BEFORE the possible breakout.

Consider this an ongoing real-time case study.

Piranha

…I love my laptop, a Dell to be specific. I bring this machine everywhere I go and my life depends on it. Whenever I have a problem, I call up technical support and they answerer or fix my problem as quick as possible. I love the product and I love the company but I do not love the stock.

Never love a stock, we have taught you to control emotions!

I never learned to use a MAC so I never had any experience with Apple (good or bad). Recently, my wife and I purchased an iPod and have been downloading songs from iTunes. Excellent products! I love these products and have since seen Apple show up on my screens over the past few months. Should I love the stock? NO. Never love a stock!

Apple (AAPL) first showed up on my weekly screens on 10/24/04 at $47.41. Since this time, Apple has made the daily and weekly screens numerous times. I didn’t post Apple because of news; I posted the stock based on technical and fundamental information. The charts said that AAPL showed the potential to move higher based on the trend.

10/25/04 – 10/29/04: $52.40

11/22/04 – 11/26/04: $64.55

11/29/04 – 12/03/04: $62.68

12/06/04 – 12/10/04: $65.15

01/03/05 – 01/07/05: $69.25

The most recent daily post was on 01/05/05 at $64.50.

Apple has an intraday high of $74.72 and opened for a gap-up at $73.87, giving us a total gain to date of 57%. Not bad for 10 weeks of work, especially in this muddy market environment. I do have to say that AAPL closed near the intraday low – a negative sign.

The lesson of this blog is to pay attention to the charts, not the news. The charts showed us a buy 10 week ago and confirmed this buy several times since late October. Many people went out and bought Apple today based on the great news from yesterday (Apple shattered estimates). I am not saying that AAPL can’t go higher but I know from experience that it may be too late to join the party when the news hits the street and everybody knows, even the “dumb money”. If I was smart money (an institutional investor), I would be selling into strength today. If I was really smart money, I would have most likely sold over the past week or so, based on the general market trend.

Piranha

…I was asked by a member of this community on a message board about TZOO buy points. Here is the question:

When TZOO broke out of its cup with handle in April, what if you missed the pivot point. IF it is above my pivot point by 5% then I feel I am to late to jump in. I hesitate to buy into a stock when it pulls back a little. I know you recommend stocks even after their initial breakout if they have good volume support but what are some spots that you think would have made ideal entry points in TZOO after its initial breakout and why?

Two key buy points presented themselves for TZOO:

The end of June,– Breakout on largest volume of the year. You know I follow the overall trend rather than pure bases as IBD does. I found more opportunities and success with this method. I like to buy on New High breakouts!

Middle of August – Two consecutive breakouts on the largest volume of the year (two consecutive weeks). This volume was confirmed 2 weeks later with even larger volume and then again on the 3rd week from the middle of August with the largest weekly volume ever until the breakout in November.

November was another buy point but a reversal took place and the new shares should have been sold immediately to prevent further loss. Original positions would still be held as they would still be in the overall up-trend.

Since then, a wedge type formation has been forming the past several weeks. I have a case study about DHB that shows a wedge formation in action with a breakout. I am looking for a breakout above $100 on the largest volume ever; this would be another entry point!

NOTE: In traditional bases, a buy 5% above the pivot is no good. I am buying on the trend. A traditional base never formed with TZOO after May of 2004.

Piranha