Big Moves

Some big movers from yesterday:

AATI,Advanced Analogic Technologies Inc (Google  Yahoo  Earnings  Chart) 
ACTU,Actuate Corporation (Google  Yahoo  Earnings  Chart) 
AG,Agco Corp (Google  Yahoo  Earnings  Chart) 
AMED,Amedisys Inc (Google  Yahoo  Earnings  Chart) 
ATHR,Atheros Communications Inc (Google  Yahoo  Earnings  Chart) 
CFSG,China Fire & Security Group` Inc (Google  Yahoo  Earnings  Chart) 
CPHD,Cepheid (Google  Yahoo  Earnings  Chart) 
ELMG,Ems Technologies Inc (Google  Yahoo  Earnings  Chart) 
FELE,Franklin Electric Co Inc (Google  Yahoo  Earnings  Chart) 
ININ,Interactive Intelligence (Google  Yahoo  Earnings  Chart) 
IVC,Invacare Corp (Google  Yahoo  Earnings  Chart) 
LPX,Louisiana-Pacific Corp (Google  Yahoo  Earnings  Chart) 
LUNA,Luna Innovations Inc (Google  Yahoo  Earnings  Chart) 
PWRD,Perfect World Co Ltd (Google  Yahoo  Earnings  Chart) 
SEPR,Sepracor Inc (Google  Yahoo  Earnings  Chart) 
SKS,Saks Holdings Inc (Google  Yahoo  Earnings  Chart) 
SNWL,Sonicwall Incorporated (Google  Yahoo  Earnings  Chart) 
SSRX,3Sbio Inc Ads (Google  Yahoo  Earnings  Chart) 
TXRH,Texas Roadhouse Inc Cl A (Google  Yahoo  Earnings  Chart) 
UA,Under Armour Inc (Google  Yahoo  Earnings  Chart) 
WATG,Wonder Auto Technology Inc (Google  Yahoo  Earnings  Chart) 
XRA,Exeter Resource Corporation (Google  Yahoo  Earnings  Chart) 


Out of this AATI ACTU AG AMED ATHR ELMG SNWL SSRX TXRH UA , have recent catalyst. This being earnings season in many of these cases the catalyst is earnings.

Methods and Philosophy Blog:
Trading Big Moves

Market weakness creates opportunities in IBD 100

As the overall market consolidated for some weeks, many stocks in IBD 100 pulled back. Now some of them are breaking out. Now those who are following the one month weakness to time entry in IBD 100 system which I talked about couple of times last month would find many attractive breakouts.

CRNT,Ceragon Networks Ltd (Google Yahoo Earnings Chart)
CTRP,Ctrip.com International (Google Yahoo Earnings Chart)
CYNO,Cynosure Inc (Google Yahoo Earnings Chart)
FMCN,Focus Media Holding Ltd ADR (Google Yahoo Earnings Chart)
FSTR,L.B. Foster Co Cl A (Google Yahoo Earnings Chart)
GRMN,Garmin Ltd (Google Yahoo Earnings Chart)
SNHY,Sun Hydraulics Corp (Google Yahoo Earnings Chart)
SYNA,Synaptics Inc (Google Yahoo Earnings Chart)
TDG,TransDigm Group Inc (Google Yahoo Earnings Chart)

These stocks have a 4% breakout plus month price growth of less than 10%.
You get best results for IBD 100, IBD 200 or Double Trouble system after a overall market weakness. Overall market weakness acts as a drag on high performing momentum stocks, where they have orderly pullback, once the market starts rallying again, they rebound. For playing the swing, that is the sweet spot for low risk entry.

Do you know him- the worlds richest person

With the Mumbai Sensex crossing 20000 level yesterday, Mukesh Ambani for the time being is the richest person in the world.

Billionaire Mukesh Ambani on Monday became the richest person in the world, surpassing American software czar Bill Gates, Mexican business tycoon Carlos Slim Helu and famous investment guru Warren Buffett, courtesy the bull run in the stock market.

Following a strong share price rally today in his three group companies - India's most valued firm Reliance Industries , Reliance Petroleum and Reliance Industrial Infrastructure Ltd - the net worth of Mukesh Ambani rose to $63.2 billion (Rs 2,49,108 crore).

In comparison, the net worth of both Gates and Slim is estimated to be slightly lower at around $62.29 billion each, with Slim leading among the two by a narrow margin.

Earnings trends

At the beginning of every earnings season, bears put forth the argument, earnings are going to be bad, for over 20 quarters they have been wrong. See the current earnings trends from Zacks.

So far, 37% of the S&P 500 firms have reported (185 companies). The results have been better than most have feared, and over the past few days the results have been getting better. The median year-over-year growth rate has climbed sharply. We are now back in double digits, which if maintained would make this the 21st straight quarter of double-digit growth. Just last week, the median growth rate stood at 7.14%, the surprise ratio at 2.1:1 and a median surprise of 2.90%. Well, in just a few days, the median growth has jumped to 10.6%, and the surprise ratio to 2.56:1. The median surprise has declined slightly to 2.70%, but that is still a very healthy level. While the surprise ratio is still below the 3:1 that we have come to expect, it is not that far away anymore.

Every sector now has more positive than negative surprises. Energy is now in the lead with 25.8% median year over year growth. That, however, should fade since the unreported firms in the sector have a median expected growth rate of -7.3%. Both Energy and Telecom, which holds the number two slot on the leader board, have had relatively few companies report.

Health Care might be having the most impressive earnings season overall, with a median growth rate of 18.7%, a surprise ratio of 4.67:1 and a median surprise of 3.30%.

The Little Book That Makes You Rich

CXO Advisory group has done a chapter by chapter summary of The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing, Louis Navellier. I am currently reading this book. The CXO summary is excellent. While on that blog check out their other stuff. It is one of the best source for proven strategies and insight in to latest research.

In his 2007 book The Little Book That Makes You Rich: A Proven Market-Beating Formula for Growth Investing, Louis Navellier, Chairman of the Board, Chief Executive Officer and Chief Investment Officer of Navellier & Associates, Inc., outlines his systematic approach to investing in timely growth stocks. This approach derives from his analysis-based belief that the market does not efficiently incorporate key indicators of growth into stock prices. Here is a chapter-by-chapter review of some of the key points in this book, along with some links to relevant research summaries:

Bottom Performing Stocks in S&P

ABK,Ambac Financial Group (Google  Yahoo  Earnings  Chart) 
BC,Brunswick Corp (Google  Yahoo  Earnings  Chart) 
CC,Circuit Cty Strs Inc (Google  Yahoo  Earnings  Chart) 
CFC,Countrywide Financial (Google  Yahoo  Earnings  Chart) 
CIT,Cit Group Cl A (Google  Yahoo  Earnings  Chart) 
COH,Coach Inc (Google  Yahoo  Earnings  Chart) 
CTX,Centex Corp (Google  Yahoo  Earnings  Chart) 
DDS,Dillard's Inc (Google  Yahoo  Earnings  Chart) 
DHI,D.R. Horton Inc (Google  Yahoo  Earnings  Chart) 
ETFC,E Trade Financial Corp (Google  Yahoo  Earnings  Chart) 
FHN,First Horizon Natl (Google  Yahoo  Earnings  Chart) 
FITB,Fifth Third Bancorp (Google  Yahoo  Earnings  Chart) 
HAR,Harman Internat Ind Inc (Google  Yahoo  Earnings  Chart) 
JNY,Jones Apparel Group Inc (Google  Yahoo  Earnings  Chart) 
KBH,Kb Home (Google  Yahoo  Earnings  Chart) 
KG,King Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart) 
LEN,Lennar Corp Cl A (Google  Yahoo  Earnings  Chart) 
MCO,Moody's Corporation (Google  Yahoo  Earnings  Chart) 
MTG,Mgic Investments Corp (Google  Yahoo  Earnings  Chart) 
ODP,Office Depot Inc (Google  Yahoo  Earnings  Chart) 
PHM,Pulte Homes Inc (Google  Yahoo  Earnings  Chart) 
RSH,Radioshack Corp (Google  Yahoo  Earnings  Chart) 
SOV,Sovereign Bancorp Inc (Google  Yahoo  Earnings  Chart) 
TER,Teradyne Inc (Google  Yahoo  Earnings  Chart) 
THC,Tenet Healthcare Corp (Google  Yahoo  Earnings  Chart) 
TSN,Tyson Foods Inc (Google  Yahoo  Earnings  Chart) 
WM,Washington Mutual Inc (Google  Yahoo  Earnings  Chart) 

Top performing stocks in S&P

That looks like a very good breakout on WFR after long consolidation. It is a play on alternative energy sector.

AAPL,Apple Inc (Google Yahoo Earnings Chart)
AMZN,Amazon.Com Inc (Google Yahoo Earnings Chart)
APOL,Apollo Group Inc Cl A (Google Yahoo Earnings Chart)
BIIB,Biogen Idec Inc (Google Yahoo Earnings Chart)
BTU,Peabody Energy (Google Yahoo Earnings Chart)
CIEN,Ciena Corporation (Google Yahoo Earnings Chart)
CNX,Consol Energy Inc (Google Yahoo Earnings Chart)
EMC,Emc Corp (Google Yahoo Earnings Chart)
FCX,Freeport Mcmoran C&G B (Google Yahoo Earnings Chart)
FLR,Fluor Corp (New) (Google Yahoo Earnings Chart)
GOOG,Google (Google Yahoo Earnings Chart)
JNS,Janus Capital Group Inc (Google Yahoo Earnings Chart)
LUK,Leucadia National Corp (Google Yahoo Earnings Chart)
MON,Monsanto Co (Google Yahoo Earnings Chart)
MUR,Murphy Oil Corp (Google Yahoo Earnings Chart)
NOV,National Oilwell Varco Inc (Google Yahoo Earnings Chart)
OXY,Occidental Petro Cp (Google Yahoo Earnings Chart)
TAP,Molson Coors Brewing Co (Google Yahoo Earnings Chart)
TSO,Tesoro Corp (Google Yahoo Earnings Chart)
WAT,Waters Corp (Google Yahoo Earnings Chart)
WFR,Memc Electronic Material (Google Yahoo Earnings Chart)
YHOO,Yahoo! Inc (Google Yahoo Earnings Chart)

Top and Bottom Sectors

Top Sectors
Agricultural Chemicals
Major Integrated Oil & Gas
Independent Oil & Gas
Steel & Iron
Copper
Industrial Metals & Minerals
Gold
Silver
Nonmetallic Mineral Mining
Farm Products
Beverages-Soft Drinks
Music & Video Stores
Education & Training Services
Technical Services
Personal Computers
Data Storage Devices
Computer Peripherals
Scientific & Technical Instr
Wireless Communications
Telecom Services-Foreign
Internet Information Providers

Bottom Sectors
Sporting Goods
Confectioners
Regional-Mid Atlantic Banks
Regional-Southeast Banks
Regional-Pacific Banks
Savings & Loans
Credit Services
Surety & Title Insurance
Mortgage Investment
Health Care Plans
Hospitals
Residential Construction
Cement
General Building Materials
Catv Systems
Home Improvement Stores
Home Furnishing Stores
Sporting Goods Stores
Apparel Stores
Building Materials Wholesale
Computer Based Systems
Information Technology Service
Semiconductor-Memory Chips
Semiconductor-Equipment & Mate

It is all about techs

The market is at interesting crossroads. The correction in progress is leading to lot of stocks breaking down. While at the same time there is clear and visible rotation in to technology stocks and growth stocks. Good earnings are being handsomely rewarded. The question is , can a narrow focused rally continue. Yes, in the past such rallies have persisted much longer than anyone anticipated.

The shorter term picture looks risky because of daily gyrations and lot of selling in numbers of stocks with individual issues or those which had peaked in their earnings. So short term how much selling is still their is the question. Yesterday the market reversed again after a dose of morning selling. That strength has to persist in to broader reversal. Today the market has a catalyst in the form of MSFT earnings to take us higher.

The weakness of 5-6 days has set us up for a possible bounce. The FOMC meeting will be eagerly watched and market participants will try and position themselves ahead of that event. Given current conditions a rally in to that period or post that period is likely scenario.

But till the market tips its hand preserving capital is important, because any more selling at this stage sets us for accelerated selling in many names. So overall many of my short term indicators or Market Monitor are at stage where they look risky for market, but longer term indicators are still in positive territory.

I very much see the same thing as Wishing Wealth sees:

The GMI rose to 5 (of 6) and the GMI-R to 90%. There were 189 new highs and 165 new lows in my universe of 4,000 stocks. But my very short term indicators look horrendous with only 13% being positive. A close of the QQQQ below 52 would be a serious break in support. If the bounce in the QQQQ from MSFT's rise does not keep the QQQQ up on Friday, I will become very defensive. Something about this market really bothers me. Can techs continue to resist the downward momentum in the other stocks? Or will another reduction in interest rates by the Fed next week bring them all back? I still think the best place to be right now is mainly in cash.

Trouble Brewing

Market has not been acting well. It is extremely tough environment to trade in . Unless you are in it for very short term trades and earnings trade, most things are not working.

We are possibly heading in to trouble. The Episodic Pivots on bearish side are fast rising today with several stocks falling more than 8%. As of now there are around 90 EP's on bearish side.

The stocks up 25% in month ratio is about to turn. This does not look good. Often it signals downturn. Stocks down 50% plus in month is rising.

The action does not feel and look good. So better to protect capital and fight this battle another day.

IBD 200 Anticipation

This is a list I pulled out of IBD 200 of select stocks with less than 10% growth on month time frame. If you look at all these stocks chart, bulk of them are having a very orderly pullback or consolidation. So even though the market looks shaky and volatile, leading stocks are holding up very well. So I am not negative on market. To make me negative I need to see 65 days ratio deteriorating rapidly.

ABB ABX AIRM AMTD AMX ANDE ARD ATNI BBL BHP BLUD BPHX CADA CAM CEDC CELG CHTT CIR CLB CMED CMTL CPLA CYNO DIOD DNR DWSN ESI FCN FCX FLIR FTI FTK GME GRMN GTLS HEI HK HPQ IDXX IVGN
========
LAYN LECO LKQX LWSN MBT MDR MEAS MR MT MUR NBG NOK NOV PCLN PCU POT RIG RIO ROP RRC SINA SNCR SNDA SSRX STRA TDG TGB TISI TKC TMB TNH VMI WGOV WMS XTO

Out of these if you use 65 days 10% or less filter you get

AMTD AMX ANDE CIR ESI GTLS HPQ LECO LWSN NBG RIG ROP TDG TGB TMB TNH WGOV XTO

Now breakouts on these is going to get in to possible long duration rally with low risk. You can further reduce this list by float, earnings growth rate and trends, forward guidance, P/E, margin, ROE, chart patterns, etc to just get handful candidates. Track them intra day and enter.

If you are feeling overwhelmed, you have to use slower filters. Be more selective, increase your breakout threshold volume from 100000 to 300000. The more pre planning you do , less surprised and overwhelmed you will be.

Roller Coaster

Market keeps swinging from one end to another. Yesterday market looked strong. Today it was very weak till mid day and then the futures started rallying and market recovered bulk of the losses.

Both bulls and bears lack conviction and a rumor of Fed discount rate cut had the panicky shorts covering in hurry. But overall the breakouts on downside exceeded the breakout on upside.

Stocks down 8% or more on high volume

ABK,Ambac Financial Group (Google Yahoo Earnings Chart)
ALTR,Altera Corp (Google Yahoo Earnings Chart)
AMIS,Amis Holdings (Google Yahoo Earnings Chart)
AMZN,Amazon.Com Inc (Google Yahoo Earnings Chart)
ANAD,Anadigics Inc (Google Yahoo Earnings Chart)
BCR,C.R. Bard Inc (Google Yahoo Earnings Chart)
BRCM,Broadcom Corp Cl A (Google Yahoo Earnings Chart)
CAVM,Cavium Networks Inc (Google Yahoo Earnings Chart)
CFC,Countrywide Financial (Google Yahoo Earnings Chart)
CTS,Cts Corp (Google Yahoo Earnings Chart)
DDUP,Data Domain Inc (Google Yahoo Earnings Chart)
DSTI,Daystar Technologies Inc (Google Yahoo Earnings Chart)
EFII,Electronics For Imaging (Google Yahoo Earnings Chart)
ELON,Echelon Corporation (Google Yahoo Earnings Chart)
FFIV,F5 Networks Inc (Google Yahoo Earnings Chart)
HAFC,Hanmi Financial Corp (Google Yahoo Earnings Chart)
HYTM,Hythiam Inc (Google Yahoo Earnings Chart)
IMB,Indymac Bancorp Inc (Google Yahoo Earnings Chart)
INFN,Infinera Corporation (Google Yahoo Earnings Chart)
JNPR,Juniper Networks (Google Yahoo Earnings Chart)
LDK,LDK Solar Co Ltd (Google Yahoo Earnings Chart)
MELI,Mercadolibre Inc. (Google Yahoo Earnings Chart)
NVTL,Novatel Wireless Inc (Google Yahoo Earnings Chart)
PLT,Plantronics Inc (Google Yahoo Earnings Chart)
PNRA,Panera Bread Co Cl A (Google Yahoo Earnings Chart)
RES,RPC Inc (Google Yahoo Earnings Chart)
RFMD,Rf Micro Devices Inc (Google Yahoo Earnings Chart)
RVBD,Riverbed Technologies Inc (Google Yahoo Earnings Chart)
SCA,Security Capital Assurance Ltd (Google Yahoo Earnings Chart)
SIFY,Sify Ltd Adr (Google Yahoo Earnings Chart)
SMDI,Sirenza Microdevices (Google Yahoo Earnings Chart)
SUPX,Supertex Inc (Google Yahoo Earnings Chart)
SVVS,SAVVIS Inc (Google Yahoo Earnings Chart)
SWIR,Sierra Wireless Inc (Google Yahoo Earnings Chart)
VLCM,Volcom Inc (Google Yahoo Earnings Chart)
WIRE,Encore Wire Corp (Google Yahoo Earnings Chart)
WSFG,WSB Financial Group Inc (Google Yahoo Earnings Chart)
WWY,William Wrigley Jr Co (Google Yahoo Earnings Chart)

The upside breakouts were dominated by earnings related breakouts. The 65 days ratio continues to be bullish and till that turns, it is still better to keep bullish options open.

Select stocks up on high volume
ANO,Anooraq Resources Corp (Google Yahoo Earnings Chart)
ARCI,Appliance Recycling Centers of America Inc (Google Yahoo Earnings Chart)
ASIA,Asiainfo Holdings Inc (Google Yahoo Earnings Chart)
ATAC,Aftermarket Tech Corp (Google Yahoo Earnings Chart)
ATRM,Aetrium Inc (Google Yahoo Earnings Chart)
BTJ,Bolt Technology Corp (Google Yahoo Earnings Chart)
CEC,Cec Entertainment Inc (Google Yahoo Earnings Chart)
CIA,Citizens Inc (Google Yahoo Earnings Chart)
CME,Cme Group Inc (Google Yahoo Earnings Chart)
CRI,Carter Holdings Inc (Google Yahoo Earnings Chart)
CYD,China Yuchai Int Ltd (Google Yahoo Earnings Chart)
EEFT,Euronet Worldwide Inc (Google Yahoo Earnings Chart)
EJ,E-House China Holdings Limit (Google Yahoo Earnings Chart)
EXAS,Exact Sciences (Google Yahoo Earnings Chart)
FLML,Flamel Technologies Sa (Google Yahoo Earnings Chart)
FRPT,Force Protection Inc (Google Yahoo Earnings Chart)
ICE,Intercontinental Exchange Inc (Google Yahoo Earnings Chart)
ISRG,Intuitive Surgical Inc (Google Yahoo Earnings Chart)
ITI,Iteris Inc (Google Yahoo Earnings Chart)
KMT,Kennametal Inc (Google Yahoo Earnings Chart)
LUNA,Luna Innovations Inc (Google Yahoo Earnings Chart)
NRMX,Neurochem (Google Yahoo Earnings Chart)
PCAR,Paccar Inc (Google Yahoo Earnings Chart)
PFWD,Phase Forward Inc. (Google Yahoo Earnings Chart)
PKX,Posco (Google Yahoo Earnings Chart)
QLGC,QLogic Corp (Google Yahoo Earnings Chart)
SCON,Superconductor Tech (Google Yahoo Earnings Chart)
TMTA,Transmeta Corporation (Google Yahoo Earnings Chart)
TVIN,TVI Corporation (Google Yahoo Earnings Chart)
VOCS,Vocus Inc (Google Yahoo Earnings Chart)

Earnings chart pattern

ITI and EDAC have the ideal earnings trade characters. Look at the charts of these two. Look at volume prior to breakout. No one and his dog was following these stocks or had any vague interest in them. The Kaboom reaction is because of surprise.

On a widely followed stock or a stock with high volume or if the earnings is 2 nd , 3 rd, or 4 th triple digit earnings, or if the company has pre announced earnings, the game is different. Here in these neglected stocks everyone gets the information at the same time.

Techs Dominate

Large cap technology is where the action is currently. Along with it recent earnings plays like ISRG, MICC, RIMM, GOOG, etc. have been leading the market higher. The leadership is narrower. The stocks up 100% plus is hovering around 400. This number has peaked over a year ago when there were over 1400 stocks up 100% plus. Since then all rallies have struggled to break 500 mark.

The large cap earnings will be out of picture by middle of next week and then smaller companies earnings will dominate. In current environment large cap companies with growth and earnings acceleration are getting handsomely rewarded. Which is a good environment for IBD style earnings and price momentum plays.

Choppy action , lead by narrower set of stocks is vulnerable to failure, but as long as it works, traders will trade it.

Market Monitor

After Friday's down action, the Asian markets and European markets were down coming in to today morning. In the pre market indexes were down and many were worried about follow through selling, but the indexes spent the day recovering and ended in positive territory. Volume was light.

The leading stocks recovered from Friday's losses. Housing stocks were up ahead of the earnings season start for the group. Gold stocks dominated the downside action.

The McClellan Summation Index needs to turn up, in last few days it has turned down.

First correction post August

After the August bottom post July dip in the indexes, the market rallied powerfully. The rally was straight up rally with no pause and no major correction. At the start of the rally there was major skepticism. Same set of arguments which are currently being blamed for Friday's action were being blamed for that correction.

The mass media and the favorite pundits of mass media tend to exaggerate problem. Prime example of that is Stephen Roach of Morgan Stanley, who was extensively quoted by Barron's in this week issue. Now this particular gentleman has called for a recession in 2002, 2003 he predicted world economy is headed for correction due to SARS (Severe Acute Respiratory Syndrome or bird flue), in 2004 he predicted economic 'Armageddon' , in 2005 he predicted China would slowdown, in 2006 he predicted markets could reverse course in a flash, and in 2007 he is still at it predicting doom and gloom. Should investors pay attention to such hard boiled bears who have been at it for years.

Mass Media has a well documented bearish bias. In newspaper and TV business, and trading blogs pessimism sells more than optimism. So while there are imbalances in the economy, the actual truth might be just 20% of the exaggerated stuff dished out by bears.

After over 5 years of bull market, even if there is a small bearish phases, that will not be the end of the world. One has to be ready for the next upturn, instead of casting your lot with market is going to go down 50% crowd. As last rally demonstrated, the corrections can lead to powerful rallies.

Extraordinary momentum conditions resolve in a correction

In the last 15 days or so the readings on short term momentum indicators like stocks up 50% or more in a month and stocks up 25% plus in a month were at elevated level. In many instances the readings were at highest levels seen in many years since the rally started in 2002. Such high momentum phases either resolve in orderly pullback or high volatility zone. Yesterday the high momentum phase resolved in to high volatility.

Based on previous experience I was expecting a 300 plus kind of down day for sometime. The thing with Market Monitor kind of anticipatory mechanism is it tells you a zone where it is likely to occur but precise date is difficult to pinpoint. This time the readings stayed elevated for longer time in this instance, in normal rallies there is backing and filling, where a high momentum phase is followed by quick shakeout of a day or two followed by more strength.Since 10 th October, I have been anticipating a dip of some magnitude. because the Market Monitor indicated such a dip.

Wednesday, October 10, 2007

Caution Time

The stocks up 50% in a month is at record, I have not seen reading like these for long time. What it means is many stocks which have run up a lot till date are prone to correction. Some of the shipping stocks look due for correction. The China stocks are just too difficult to game, but now lower quality stocks are breaking out. So even though for short term trading they are good, but holding them for long term is risky .

If you notice, IBD has turned cautious on market. For last couple of days it has been emphasizing not chasing strength and wait for pullback to 10 week average. It has also ben pointing out that now lower quality stocks are breaking out.

In the past many times at such elevated readings many stocks which have run up a lot 30% plus in a month, churn at their recent high on high volume and suddenly gap down or have a shakeout move of multiple points. If you look at many shipping stocks, you would see very high volume with no price gains.

If you look at scans also, most of the scans have few candidates with one month price growth below 10%. It is always difficult to nail such dips with precision. We are in such zone, based on my past experience. So from a trading perspective what it means in my book is moving stops closer and a bit cautious on buying new breaks till such dip takes place. Trades with shorter time horizon is currently my preferred option.

However the market since July- August has been in a different high volatility phase. So circumstances are not normal. With 65 days ratio still in positive, I would expect a bounce in a day or two. If the 65 days ratio starts deteriorating fast then we will have put in a top. At this stage my judgment is we will probably have a mixed market with some stocks going down and technology and commodity sector still holding on to gain and select stocks out of those sector rallying.

When such corrections happen , lot of people are caught by surprise, they get excited or confused. My mailbox is full of people anxiously asking what next. Having previously gone through similar bewilderment and anxiety, I developed Market Monitor as a filter for my kind of trading style.

If you have seen the behavior of market as indicated by Market Monitor , you know you can react to such things calmly and with a plan. Since the 50 % reading became elevated, I have had very light commitments and have been cautious in committing to ideas and as a result managed to keep almost all the profits accumulated previously. When trading momentum systems like Double Trouble, IBD 200 and Modified Double Trouble, it is more profitable to anticipate such periods.

If your trading horizons are longer, accordingly, you need to look at developing some sort of anticipatory mechanism. Markets, methods and mindset all the three need to be aligned to trade profitably.

Resilient market

Yesterday again demonstrated the market's resilience. Negative open in the morning did not deter the market from ending in green. Few days of corrections is setting up number of stocks for further up move.

If you look at the IBD 200, which represents stocks with earnings as well as price momentum, you will see number of stocks with good bases:

IBD 200 Basing Stocks

Stocks from IBD 200 which have less than 10% growth on month time frame and are currently forming a base.

AMOV AMX AMZN ANGO ARD ATNI ATW BLUD BPHX CADA CEDC CELG CHTT CIR CMED CRNT EBAY EBIX FCN FCX FLS GPRO GRMN GRP HAL HEI HPQ HURC ILMN IRIS IVGN JNPR KCI LAYN MEAS MT NBG NGS NHWK OMCL
========
ORCL OTEX OXPS PCLN PCP RATE RIG SCRX SII SNCR SNDA STRA TNH VIVO VMSI WFT WGOV

The IBD 200

Today is Thursday the IBD 200 day. I have made a detail post at Trading Goddess blog using today's breakouts to detail how one of the ways you can trade it.

It is one of the ways to trade it. There are several other ways you can try. Anticipating entries works great on this list also.


Related Posts:
How to beat the market for $1.25 per week
How to beat the market for $1.25 per week- Part2
How to beat the market for $1.25 per week- Part3
How to Improve IBD200 Part 1

Market Monitor

Market rebounded from 2 days weakness. For last seven trading days the market has essentially remained at same level. During that time some stocks which were overextended have corrected. New stocks have been breaking out and taking on fresh leadership.

If you look at the Market Monitor closely, you will notice how the overextended phase slowly is getting worked out in to slow momentum pause. Look at the 50 plus numbers, down to 21 from high of 36. The stocks up 25% plus is down to 155 from high of 288. No one expected the market to go up straight. Such high momentum levels are not sustainable for long under normal market conditions.

When such momentum phase slows down, most important thing is to keep your perspective. In the last 5 days , you would have seen several people calling for crash, some anticipating melt down due to option expiration, some getting scared due to October 87 anniversary, some touting macro economic pet theories hoping for down move. There is never a shortage of people calling for 50% drop in the market. In the absence of a well thought out framework, any of these things sound appealing. But if you have a methodology, you can shut off all such market noise.

If you saw when in July Market Monitor indicated start of a down move, there were enough bulls wishing for rebound. There were people saying buy the dips little realizing a fundamental change in market characteristics. Market Monitor signaled the end of bullish phase and start of bearish phase on 7/26/2007.

Whatever framework you use for deciding on market direction should be logical and well thought out based on research. Otherwise you get tempted to react to market's everyday moves with emotions. Before you start listening to anyone who claims market is going to go down 50%in a year, look at market history to see how many times that has happened, what is the probability of that. Such idiotic predictions and market noise is constant feature of market. Methodology helps shut out such noise.

At current level as long as the 65 days ratio is positive with 1311/560 readings, all corrections are buy opportunities. When the market starts deteriorating it will show in Market Monitor in several indicators.

Market Monitor

The overheated market continues to correct. Nothing in the numbers on Market Monitor show that this rally is in trouble. Even minor corrections in market look scary, but with 79/135 breakout ratio this is just a mild selling pressure.

If you read the IBD's , 'The Big Picture', it puts things in perspective:

Record oil prices and rocky earnings reports sent stocks lower Tuesday, although intense institutional selling wasn't evident.

The NYSE composite dropped 0.9%, the S&P 500 0.7% and the Dow 0.5%. The Nasdaq fell 0.6%.

Volume was narrowly lower across the board. Had trading been higher, the indexes would have logged another distribution day.

A buildup of higher-volume selling in the major indexes can signal a market top.

Despite the recent selling, there are scant signs that institutional investors are dumping shares, especially leading stocks.

It has been nearly seven weeks since the follow-through that confirmed the current rally. Historically, that's premature for an uptrend to roll over.

Also, while leading stocks have given back some gains, severe sell-offs and other sell signals remain isolated among them.

This is just much needed phase in market where the 50% plus numbers had gone to extremes and now we are witnessing cooling down of momentum. Dip buyers will be active at some stage.

Market Roundup

The market continues to pullback. The 50 % plus in month readings on Market Monitor continue to be elevated and that probably indicates more selling pressure or sideways move for sometime. Till now it is a orderly pullback. We are yet to see 300 plus down day.

Yesterday the bullish to bearish breakout ration was 115/202 , indicating buyers were still active in the market. It is still caution time for those holding positions which have moved 30 plus in last one month, especially if such move is in stocks up 100% plus. Being selective with new buys is the key in this market.

With three days of weakness, dip buyers should show up soon. This market has a history of bouncing back from such weaknesses.

Omph and the bottomline

The Trading Goddess has asked me to contribute regularly to her blog. So I thought why not talk about sexy girls and bottom line.
So if you want to add some oomph to your trading , head over to Trading Goddess blog.

IBD 100 Stocks to watch

Last weeks dip has resulted in more stocks pulling back or consolidating near high. So this week there is more choice.
AFSI,AmTrust Financial Services Inc. (Google Yahoo Earnings Chart)
AMZN,Amazon.Com Inc (Google Yahoo Earnings Chart)
ANSS,Ansys Inc (Google Yahoo Earnings Chart)
ATW,Atwood Oceanics Inc (Google Yahoo Earnings Chart)
CELG,Celgene Corp (Google Yahoo Earnings Chart)
CMED,China Medical Technologies Inc (Google Yahoo Earnings Chart)
CRNT,Ceragon Networks Ltd (Google Yahoo Earnings Chart)
CTRP,Ctrip.com International (Google Yahoo Earnings Chart)
FSTR,L.B. Foster Co Cl A (Google Yahoo Earnings Chart)
HDNG,Hardinge Inc (Google Yahoo Earnings Chart)
HMSY,Hms Holdings Corp (Google Yahoo Earnings Chart)
LAYN,Layne Christensen Co (Google Yahoo Earnings Chart)
MR,Mindray Medical Intl Ltd (Google Yahoo Earnings Chart)
NVDA,NVIDIA Corporation (Google Yahoo Earnings Chart)
OMCL,Omnicell Inc (Google Yahoo Earnings Chart)
PCLN,Priceline.com Inc (Google Yahoo Earnings Chart)
SII,Smith Internat Inc (Google Yahoo Earnings Chart)
SLB,Schlumberger Ltd (Google Yahoo Earnings Chart)
VSEA,Varian Semiconductor Equipment Associates Inc (Google Yahoo Earnings Chart)


Related Post: Using minor weakness to time IBD 100 entry

Trading Earnings

Like this person I learned more about the earnings trade after looking in detail at Dan Zanger method, where he tries to buy concentrated position post earnings. In such cases event risk is out and you have clear catalyst which lasts till next earnings season.

Why I have begun to concentrate on owning stocks that gap up to new highs on massive volume due to earnings Part I

Why I have begun to concentrate on owning stocks that gap up to new highs on massive volume due to earnings Part II

The person who wrote this blog wrote to me after I wrote series of post on my blog and we exchanged couple of emails. He sums up the method he uses to trade earnings. His approach focuses heavily on high volume gap ups post earnings.

Related posts :
How To Trade Earnings
How to trade earnings Part2
How to trade earnings Part3
Earnings and Bulkowski
Improving odds in earnings breakout
Earnings Season- Time to be very careful...
Earnings and Dan Zanger
Earning Surprise System for $1495
Trading Earnings Breakouts
Earnings Acceleration- Long Term Impact
Trading Earnings Breakout -Part1
Trading Earnings Breakouts -Part2
Trading Earnings Breakouts -Part3

Update: As requested by many traders, I have put the previous earnings spreadsheet back.

4 Stocks to watch from IBD 100

With yesterday's action, slowly more and more stocks will start coming in the pullback scan. Here is the list for today:
AFSI,AmTrust Financial Services Inc. (Google Yahoo Earnings Chart)
AMZN,Amazon.Com Inc (Google Yahoo Earnings Chart)
ANSS,Ansys Inc (Google Yahoo Earnings Chart)
CEDC,Central European Dist (Google Yahoo Earnings Chart)
CELG,Celgene Corp (Google Yahoo Earnings Chart)
CRNT,Ceragon Networks Ltd (Google Yahoo Earnings Chart)
DWSN,Dawson Geophysical Co (Google Yahoo Earnings Chart)
HMSY,Hms Holdings Corp (Google Yahoo Earnings Chart)
LAYN,Layne Christensen Co (Google Yahoo Earnings Chart)
NVDA,NVIDIA Corporation (Google Yahoo Earnings Chart)
OMCL,Omnicell Inc (Google Yahoo Earnings Chart)
SII,Smith Internat Inc (Google Yahoo Earnings Chart)
SLB,Schlumberger Ltd (Google Yahoo Earnings Chart)
VSEA,Varian Semiconductor Equipment Associates Inc (Google Yahoo Earnings Chart)
WFR,Memc Electronic Material (Google Yahoo Earnings Chart)


Out of these CEDC, OMCL, SII, SLB are four to watch.

Related Post: Using minor weakness to time IBD 100 entry

No surprise in the dip

When market reach momentum extreme , traders and investors sometime get emotional and overconfident. But such parabolic straight up moves in large number of stocks are not sustainable for long period. Recognizing when market is entering such territory is important. Part of the move is very profitable, but if you don't get out in time or enter a momentum stock late in cycle, you have no safe exit.

There was no surprise in yesterdays action. The signs of something like this happening were everywhere:

1. By mid morning the Stocks up 50% in a month reading on Market Monitor reached 48, that is the highest reading in last 4 years I have seen. When momentum reaches extreme it always resolves in some dramatic action. It was in red territory for last 4 days .
2. Overconfidence. Signs were everywhere. When I start getting emails about windfall trading profits, I am always nervous. In addition when I start getting emails from those who missed out on rally, you know their pain is too much.
   
3. String of trades with 25% plus profits in few days or week .

The Market Monitor essentially gives you warning ahead of the time. Every time the Market Monitor readings reach extreme, the market looks easiest to trade. Most traders confidence is high due to number of successful trade and then if you are not prepared you end up giving up lot of built up profit.
This is what I wrote about in Members Only area on Wednesday .

Wednesday, October 10, 2007

Caution Time

The stocks up 50% in a month is at record, I have not seen reading like these for long time. What it means is many stocks which have run up a lot till date are prone to correction. Some of the shipping stocks look due for correction. The China stocks are just too difficult to game, but now lower quality stocks are breaking out. So even though for short term trading they are good, but holding them for long term is risky .

If you notice, IBD has turned cautious on market. For last couple of days it has been emphasizing not chasing strength and wait for pullback to 10 week average. It has also ben pointing out that now lower quality stocks are breaking out.

In the past many times at such elevated readings many stocks which have run up a lot 30% plus in a month, churn at their recent high on high volume and suddenly gap down or have a shakeout move of multiple points. If you look at many shipping stocks, you would see very high volume with no price gains.

If you look at scans also, most of the scans have few candidates with one month price growth below 10%. It is always difficult to nail such dips with precision. We are in such zone, based on my past experience. So from a trading perspective what it means in my book is moving stops closer and a bit cautious on buying new breaks till such dip takes place. Trades with shorter time horizon is currently my preferred option.

While the action was ugly, in number terms it was not such a bad day with downside breakouts below 300. Most probably today's action will resolve in to greater volatility period. Normally it takes 2-3 days to get clear picture. In most such sell offs I get back in to market after 2-3 days . All such dips are buy opportunities as long as 65 days ratio is positive. So while the action was ugly, it is good as it released the pressure in overheated market.

4 stocks to watch from IBD 100

As a swing trader looking for small swings, your approach is slightly different from a investor looking at IBD 100. You time frames are much smaller and you are looking at string of 8-20% moves to capture in short time frame.

Lets look at the IBD 100 list today. I sorted it by one month weakness and looked at stocks with less than 10% growth in last one month.
100 * (C1 - C22) / C22

You get 12 stocks.

AFSI,AmTrust Financial Services Inc. (Google Yahoo Earnings Chart)
CEDC,Central European Dist (Google Yahoo Earnings Chart)
CRNT,Ceragon Networks Ltd (Google Yahoo Earnings Chart)
DRC,Dresser-Rand Group Inc (Google Yahoo Earnings Chart)
DWSN,Dawson Geophysical Co (Google Yahoo Earnings Chart)
GRMN,Garmin Ltd (Google Yahoo Earnings Chart)
HDNG,Hardinge Inc (Google Yahoo Earnings Chart)
NVDA,NVIDIA Corporation (Google Yahoo Earnings Chart)
OII,Oceaneering Internat (Google Yahoo Earnings Chart)
SII,Smith Internat Inc (Google Yahoo Earnings Chart)
SLB,Schlumberger Ltd (Google Yahoo Earnings Chart)
VSEA,Varian Semiconductor Equipment Associates Inc (Google Yahoo Earnings Chart)


Out of this eliminate stocks up more than 2% which gives us 6 stocks.

AFSI,AmTrust Financial Services Inc. (Google Yahoo Earnings Chart)
CEDC,Central European Dist (Google Yahoo Earnings Chart)
DRC,Dresser-Rand Group Inc (Google Yahoo Earnings Chart)
GRMN,Garmin Ltd (Google Yahoo Earnings Chart)
NVDA,NVIDIA Corporation (Google Yahoo Earnings Chart)
VSEA,Varian Semiconductor Equipment Associates Inc (Google Yahoo Earnings Chart)


Now out of these I eliminated GRMN and DRC because they had down gap recently. That gives you 4 stocks to anticipate breakouts on for today.

AFSI,AmTrust Financial Services Inc. (Google Yahoo Earnings Chart)
CEDC,Central European Dist (Google Yahoo Earnings Chart)
NVDA,NVIDIA Corporation (Google Yahoo Earnings Chart)
VSEA,Varian Semiconductor Equipment Associates Inc (Google Yahoo Earnings Chart)


So this is the list I will watch for high volume breakout of 2% plus. Any such breakout gives you a low risk entry in to a trending stock with good fundamental. The swing might give you anywhere from 5 to 20% . While the investors look for the perfect patterns and cup and handle or pullback to 10 week MA, for a swing, you are just looking for minor weakness.You can anticipate breakout. You are focusing on very small set of stocks. Any high volume breakout on these kind of stocks anyway gets the IBD crowd excited, leading often to follow through in next 5 to 10 days.

Now if you use same logic and take 10 day weakness instead of one month weakness , you will get lot more candidates to work with. In such cases your profit objectives may be much smaller of 5 to 10%.

Now this is what I call window washing strategy.

Later: Window Washing and Trading

Related Post: Using minor weakness to time IBD 100 entry

IBD 100 and minor weakness

Now if you look at today's 2% breakout list, you will find 32 breakouts in total. Out of that the breakouts where the 10 day price growth is less than 10% are:

ANSS,Ansys Inc (Google Yahoo Earnings Chart)
BBL,BHP Billiton Plc Ads (Google Yahoo Earnings Chart)
BHP,BHP Billiton Ltd (Google Yahoo Earnings Chart)
BW,Brush Engineered (Google Yahoo Earnings Chart)
CAM,Cameron International Corp (Google Yahoo Earnings Chart)
CELG,Celgene Corp (Google Yahoo Earnings Chart)
CF,CF Industries Holdings Inc (Google Yahoo Earnings Chart)
CNH,Cnh Global Nv (Google Yahoo Earnings Chart)
DRC,Dresser-Rand Group Inc (Google Yahoo Earnings Chart)
FTI,Fmc Technologies (Google Yahoo Earnings Chart)
GME,Gamestop Corp (Google Yahoo Earnings Chart)
HDB,HDFC Bank Limited (Google Yahoo Earnings Chart)
PCU,Southern Copper Corp (Google Yahoo Earnings Chart)
POT,Potash Cp Saskatchewan (Google Yahoo Earnings Chart)
RIO,Companhia Vale Do Rio Doce (Google Yahoo Earnings Chart)
SII,Smith Internat Inc (Google Yahoo Earnings Chart)
SNP,China Petro & Chem Ads (Google Yahoo Earnings Chart)
SYNA,Synaptics Inc (Google Yahoo Earnings Chart)
TEX,Terex Corp (Google Yahoo Earnings Chart)
VSEC,Vse Corp (Google Yahoo Earnings Chart)
WMS,Wms Industries Inc (Google Yahoo Earnings Chart)


When you create your anticipation list for next day, you should select one with negative bar or low range day out of the stocks meeting 10 day weakness filter. That further narrows down the number of stocks to watch.

Related Post: Using minor weakness to time IBD 100 entry

Relentless Rally

• When the momentum gets going, it feeds on itself. After the correction in July-August time frame, the market has bounced back. At first the rally was hesitant and now for past 4 weeks or so it has been one of the best rally to make profit in many months.
• One characteristic of recent action has been weak opens followed by late buying. Which indicates the big institutions at play.
• How market reacts to news also shows you the characteristic of market. All news, good or bad is good news for this market.
  
• Those who were late to realize the start of the new up leg have been left on sideline. Most stocks have run up straight with not much pullback. Swing trades have been working well in such environment and catching 10 to 20% swing in many stocks in few weeks has proved very profitable.
• Some of the day traders I have been in touch with are having best days in last 4-5 years in terms of return. A market where range is high with so many stocks up 3 dollars plus is dream market for short term traders.
• In recent days the IBD Big Picture has turned slightly cautious and is advising waiting for pullback in leading stocks to get in to them, rather than chasing them. For your money the IBD The Big Picture market analysis is the best. It will keep you on right side of the market in most market circumstances. Six weeks ago, it started pounding the table, saying buy now, this is the time to be aggressive.
  
• When a rally like this gets going at some stage there will be a dip. My dip indicators have started flashing warning signs on stocks which have ran up a lot. Besides that in last two days my email indicator has also perked up. I have been getting many emails from trader friends and some unknown readers, telling how easy it has been to make money. Second set of emails have also started coming in from those who missed the action and now realizing the mistake of being cautious, or listening to wrong kind of pundits, or having no defined methods. Any dip at this stage will be likely to be of short duration.
  
• While bears wish for crashes and sudden plunges everyday, momentum does not die suddenly. It takes a long time for it to cool down. If funds are buying, their distribution is slow process. The Market Monitor continues to show a expanding bull market. New sectors and new leaders continue to breakout and that is a healthy sign.
  

Three problems and profitability

The three most common problems when it comes to trading profitably are:

1. Ignorance
2. Inhibitors
3. Inertia

Ignorance problems can be solved by acquiring knowledge. These are easiest problems to fix. If I don't understand something, I need a strategy to overcome my ignorance. It might be reading, attending courses/training program, researching .

For example many users of Telechart do not know how to use many functionality. That is easily fixable problem.Same is true of say IBD methodology. Many people are ignorant of how say EPS or RS rating is calculated. Or I want to lose weight but I don't know how.

If you overcome your ignorance problem, you might encounter next set of problem.

Inhibitors are things which inhibit us from acting on our knowledge. I know IBD 200 works and how it works and it can be profitable, but I do not have time to input the 200 stocks. Or I know how I can make money trading Double Trouble, but i do not have software to do this for me.
I want to lose weight , but my job commitments do not give me time to go to gym.

All inhibitors kind of problem require innovation . A little innovation and resourcefulness can solve most inhibitors kind of issues. If A route or scan does not work, you find B route or plan B. When faced with constrains, you have to innovate.

If you are motivated enough trader, you will find solving the ignorance and inhibitors problem is not very difficult. The third set of problem is the most difficult to solve.

Inertia is lack of action on what we know and inability to act on overcoming inhibitors. Inertia makes most people stick to their current orbit of success or performance. You can spend years living suboptimal life and wasting your potential if inertia is your problem.

Inertia problems have one simple solution. A kick in the ass.

IBD 100 possible breakouts to buy

Now using the logic I talked about in my last post , lets look at the set of possible buyable breakouts based on yesterday's action.
On the IBD 100 list I applied a 2% breakout condition like this:
( 100 * (C - C1) / C1) >= 2 AND V >= 1000 AND V > V1
Which looks for a 2% move on higher volume and sets a minimum volume condition of 100000.

That gives me following stocks:

AMZN FMCN GLNG GRMN ISRG MTW NILE SNDA SSRX SYNA TBSI VDSI

AMZN,Amazon.Com Inc (Google Yahoo Earnings Chart)
FMCN,Focus Media Holding Ltd ADR (Google Yahoo Earnings Chart)
GLNG,Golar Lng Limited (Google Yahoo Earnings Chart)
GRMN,Garmin Ltd (Google Yahoo Earnings Chart)
ISRG,Intuitive Surgical Inc (Google Yahoo Earnings Chart)
MTW,Manitowoc Co Inc (Google Yahoo Earnings Chart)
NILE,Blue Nile (Google Yahoo Earnings Chart)
SNDA,Shanda Interactive Ent Ltd (Google Yahoo Earnings Chart)
SSRX,3Sbio Inc Ads (Google Yahoo Earnings Chart)
SYNA,Synaptics Inc (Google Yahoo Earnings Chart)
TBSI,TBS International Limited Class A (Google Yahoo Earnings Chart)
VDSI,Vasco Data Security Intl (Google Yahoo Earnings Chart)


Now to narrow down the stock to buy, out of these are two possible filters I can use:

One month growth less than 10% :
(100 * (C1 - C22) / C22)<=10 Or 10 days growth less than 10% (100 * (C1 - C11) / C11)<=10 Using these two filters we get: AMZN FMCN GLNG GRMN ISRG MTW NILE SNDA SSRX SYNA TBSI VDSI One month weakness: AMZN, ISRG, SYNA, GRMN 10 days weakness: SNDA, MTW, AMZN, SYNA, GRMN, NILE. Now if you had done your homework and sorted the list by the filter a day before, you would anyway be anticipating breakouts on all these stocks and could have entered in anticipation or as soon as the stock started moving on stock like NILE. So for aggressive traders looking to capture such moves using the weakness filter and pre deciding which stocks to buy gives you an edge. I often hear IBD 100 does not work or IBD 200 does not work or IBD approach itself does not work, well if you know how to make things work, you can make any approach work. As a trader you make money if you can make an idea or concept work. I will have more on this later.

Related post: Using minor weakness to time IBD 100 entry

Later: Three Problems and Profitability

Using Minor Weakness to Time IBD 100 Entries

A reader has emailed asking how can he get better results with IBD 100. In his experience he ends up buying a stock in IBD 100 after it is added and many time finds it reverses on him. This is most common experience of some of the new users of IBD 100. Many give up in frustration. To use a list like IBD 100 to trade one must understand the logic and methodology used in selecting those stocks.

IBD 100 uses IBD's proprietary EPS and RS strength rating to arrive at top 100 stocks. What it means is these stocks currently are amongst top 2-3% stocks in terms of their earnings growth trends and price growth trends. IBD also uses a price cutoffs of 12 dollar plus. The list is published weekly so there is a 7 days lag by the time changes get reflected.

As the list is based on relative strength and in fact relative strength is what determines which stock will come in the list. So for example a stock rated 99 on EPS does not become a member of IBD 100 unless it has top 3% relative strength, this means the stocks have run a lot by the time they appear in the list. That is not a problem, because you want to buy what is favored by market. The other reason to buy from the list is because it is very popular and as a result breakouts in this list work very well and have follow through. So for short term swing trades one can use it very effectively.

To do that you have to use a month or a 10 day weakness filter. A stocks which is up 10% plus in a month from the list or run up more than 10% in ten days may not be the best buy. It has a high probability of reverting or pulling back or consolidating. For example CRNT which appeared in the list at top last week was up more than 10% in ten days before last Monday, those who bought on that day suffered nasty reversal in few days.

To avoid such stocks I use two kinds of filters on a list like this:
(100 * (C1 - C22) / C22)<=10 and/ or (100 * (C1 - c11) / c11)<=10 What the filter does is finds stocks amongst this list which have had a small consolidation or pullback in last 20 or 10 days. Now when these stocks have a breakout of 2 % or more on higher volume if you enter you catch a possible start of new uptrend, it allows you to put stop at a logical consolidation area. The reason the weakness is good is because one is trying to trade a swing in a strongly trending stock as indicated by relative strength. While one wants to get in to a trending stock, one does not want to enter during trend period but enter during trend pause. That way if our entry is successful we will catch start of a new swing in trend.

Objective of swing trading is to try and trade only the trending period and avoid the non trend period. A 2% or more breakout after 10 % or less weakness indicates probable start of new swing. If our entry is successful we would have a profitable trade.

Problem with entering mid trend (when one month price growth is more than 10%) is that your entry might be too late in swing, it might turn in to non trending period. The other reason to do it is , if you study relative strength, you will find long term relative strength (1 year or more) is good , but short term relative strength (of a month) ofter leads to reversal. So stock tend to mean revert on smaller time frames.

In short we want to enter a trading vehicle moving at 100 miles per hour (which is what the IBD100 is), but we want to enter it when it slows down a bit , before accelerating again. Now all this is for those who want to use it as swing trading vehicle,. In my experience it is best for capturing such 10 or 20% swings. If you are very short term trader looking for smaller swing, one can use 5 day 2% or less price growth filter.For best results one must anticipate the breakouts in the list after applying the weakness filter.

Sector trends

Top sectors
MG113,Agricultural Chemicals
MG125,Oil & Gas Equip & Services
MG130,-Metals & Mining-
MG131,Steel & Iron
MG132,Copper
MG134,Industrial Metals & Minerals
MG135,Gold
MG137,Nonmetallic Mineral Mining
MG347,Beverages-Brewers
MG431,Life Insurance
MG442,Reit-Office
MG443,Reit-Healthcare Facilities
MG447,Reit-Retail
MG517,Diagnostic Substances
MG636,Heavy Construction
MG712,Resorts & Casinos
MG744,Music & Video Stores
MG768,Technical Services
MG821,Multimedia & Graphics Software
MG824,Security Software & Services
MG846,Telecom Services-Foreign
MG850,-Internet-
MG851,Internet Service Providers
MG852,Internet Information Providers

Bottom Sectors
MG126,Oil & Gas Pipelines
MG317,Sporting Goods
MG325,Paper & Paper Products
MG333,Recreational Vehicles
MG344,Meat Products
MG414,Regional-Southeast Banks
MG434,Surety & Title Insurance
MG448,Mortgage Investment
MG525,Hospitals
MG528,Medical Practitionersi
MG631,Residential Construction
MG722,Marketing Services
MG733,Drug Stores
MG736,Home Improvement Stores
MG738,Auto Parts Stores
MG752,Building Materials Wholesale
MG759,Wholesale - Other
MG764,Consumer Services
MG765,Staffing & Outsourcing Service
MG775,Trucking
MG825,Information Technology Service
MG832,Semiconductor-Memory Chips
MG836,Printed Circuit Boards
MG843,Processing Systems & Products

Modified IBD 200

With the market in rally mode, there are several opportunities for those following the IBD 200 kind of approach which focuses only on top 200 stocks. To understand how to use this list see my previous posts.

Related Posts:
How to beat the market for $1.25 per week
How to beat the market for $1.25 per week- Part2
How to beat the market for $1.25 per week- Part3
How to Improve IBD200 Part 1
Top 200 stocks for IBD 200 traders

Stockbee Top 200 Stocks List

ACGY,Acergy S.A. Ads (Google Yahoo Earnings Chart)
ACO,Amcol International Corp (Google Yahoo Earnings Chart)
ADSK,Autodesk Inc (Google Yahoo Earnings Chart)
AKS,Ak Steel Holding Corp (Google Yahoo Earnings Chart)
AL,Alcan Inc. (Google Yahoo Earnings Chart)
ALKS,Alkermes Inc (Google Yahoo Earnings Chart)
ALXN,Alexion Pharmaceuticals (Google Yahoo Earnings Chart)
AME,Ametek Inc (Google Yahoo Earnings Chart)
AMLN,Amylin Pharmaceuticals (Google Yahoo Earnings Chart)
AMV,Alternative Asset Management Acquisition Corp (Google Yahoo Earnings Chart)
ANGO,Angiodynamics (Google Yahoo Earnings Chart)
ANSS,Ansys Inc (Google Yahoo Earnings Chart)
APD,Air Products & Chemicals (Google Yahoo Earnings Chart)
APH,Amphenol Corp (Google Yahoo Earnings Chart)
APKT,Acme Packet Inc (Google Yahoo Earnings Chart)
APLX,Applix Inc (Google Yahoo Earnings Chart)
APOL,Apollo Group Inc Cl A (Google Yahoo Earnings Chart)
ARD,Arena Resources Inc (Google Yahoo Earnings Chart)
ARJ,Arch Chemicals Inc (Google Yahoo Earnings Chart)
ARTC,Arthrocare Corp (Google Yahoo Earnings Chart)
ASF,Administaff Inc (Google Yahoo Earnings Chart)
ATAC,Aftermarket Tech Corp (Google Yahoo Earnings Chart)
ATW,Atwood Oceanics Inc (Google Yahoo Earnings Chart)
AVCI,Avici Systems (Google Yahoo Earnings Chart)
AWR,American States Water Co (Google Yahoo Earnings Chart)
AXE,Anixter International (Google Yahoo Earnings Chart)
BBI,Blockbuster Inc (Google Yahoo Earnings Chart)
BCSI,Blue Coat Systems Inc (Google Yahoo Earnings Chart)
BFS,Saul Centers Inc (Google Yahoo Earnings Chart)
BHI,Baker Hughes Inc (Google Yahoo Earnings Chart)
BIIB,Biogen Idec Inc (Google Yahoo Earnings Chart)
BIOS,BioScrip Inc (Google Yahoo Earnings Chart)
BOBJ,Business Objects S A (Google Yahoo Earnings Chart)
BOOM,Dynamic Materials Corp (Google Yahoo Earnings Chart)
BPHX,Bluephoenix Solutions Ltd (Google Yahoo Earnings Chart)
BRCM,Broadcom Corp Cl A (Google Yahoo Earnings Chart)
BRP,Brasil Telecom Partic Sa (Google Yahoo Earnings Chart)
BWTR,Basin Water Inc (Google Yahoo Earnings Chart)
CAF,Morgan Stanley China A Share Fund` Inc (Google Yahoo Earnings Chart)
CBH,Commerce Bancorp Inc Nj (Google Yahoo Earnings Chart)
CCC,Calgon Carbon Corp (Google Yahoo Earnings Chart)
CCMP,Cabot Microelectronics (Google Yahoo Earnings Chart)
CIA,Citizens Inc (Google Yahoo Earnings Chart)
CKFR,Checkfree Corporation (Google Yahoo Earnings Chart)
CNQ,Canadian Natural Res Ltd (Google Yahoo Earnings Chart)
CREE,Cree Incorporated (Google Yahoo Earnings Chart)
CRZO,Carrizo Oil & Gas Inc (Google Yahoo Earnings Chart)
CSCO,Cisco Systems Inc (Google Yahoo Earnings Chart)
CTXS,Citrix Systems Inc (Google Yahoo Earnings Chart)
CVD,Covance Inc (Google Yahoo Earnings Chart)
CVLT,Commvault Systems Inc (Google Yahoo Earnings Chart)
CW,Curtiss Wright Corp (Google Yahoo Earnings Chart)
DADE,Dade Behring Holdings Inc (Google Yahoo Earnings Chart)
DCEL,Dobson Communications A (Google Yahoo Earnings Chart)
DCI,Donaldson Co Inc (Google Yahoo Earnings Chart)
DE,Deere & Co (Google Yahoo Earnings Chart)
DJO,DJO Inc (Google Yahoo Earnings Chart)
DKS,Dick's Sporting Goods (Google Yahoo Earnings Chart)
DO,Diamond Offshre Drilling (Google Yahoo Earnings Chart)
DV,Devry Inc (Google Yahoo Earnings Chart)
DVA,Davita Inc (Google Yahoo Earnings Chart)
DW,Drew Industries Inc (Google Yahoo Earnings Chart)
DWSN,Dawson Geophysical Co (Google Yahoo Earnings Chart)
EGLE,Eagle Bulk Shipping Inc (Google Yahoo Earnings Chart)
EGOV,Nic Inc (Google Yahoo Earnings Chart)
ELON,Echelon Corporation (Google Yahoo Earnings Chart)
EMR,Emerson Electric Co (Google Yahoo Earnings Chart)
ENR,Energizer Holdings (Google Yahoo Earnings Chart)
ERES,Eresearch Tech (Google Yahoo Earnings Chart)
ESEA,Euroseas Ltd (Google Yahoo Earnings Chart)
ESIO,Electro Scientific Ind (Google Yahoo Earnings Chart)
EWC,iShares MSCI Canada Index Fund ETF (Google Yahoo Earnings Chart)
EWT,iShares MSCI Taiwan Index Fund ETF (Google Yahoo Earnings Chart)
EXPD,Expeditors International of Washington Inc (Google Yahoo Earnings Chart)
FARO,Faro Technologies Inc (Google Yahoo Earnings Chart)
FAST,Fastenal Company (Google Yahoo Earnings Chart)
FCEL,Fuelcell Energy Inc (Google Yahoo Earnings Chart)
FCN,Fti Consulting Inc (Google Yahoo Earnings Chart)
FDRY,Foundry Networks Inc (Google Yahoo Earnings Chart)
FLS,Flowserve Corp (Google Yahoo Earnings Chart)
FLWS,1-800-Flowers.Com Inc A (Google Yahoo Earnings Chart)
FRM,Furmanite Corp (Google Yahoo Earnings Chart)
FRO,Frontline Ltd Adr (Google Yahoo Earnings Chart)
GEOY,Geoeye Inc (Google Yahoo Earnings Chart)
GES,Guess? Incorporated (Google Yahoo Earnings Chart)
GGL,Goodman Global Inc (Google Yahoo Earnings Chart)
GIFI,Gulf Island Fabrication (Google Yahoo Earnings Chart)
GIVN,Given Imaging Ltd (Google Yahoo Earnings Chart)
GKSR,G&K Services Inc Cl A (Google Yahoo Earnings Chart)
GME,Gamestop Corp (Google Yahoo Earnings Chart)
GMST,Gemstar-tv Guide Intl (Google Yahoo Earnings Chart)
GNK,Genco Shipping & Trading Ltd (Google Yahoo Earnings Chart)
GNTX,Gentex Corp (Google Yahoo Earnings Chart)
GOOG,Google (Google Yahoo Earnings Chart)
GPRO,Gen Probe Inc (Google Yahoo Earnings Chart)
GR,Goodrich Corp (Google Yahoo Earnings Chart)
GRMN,Garmin Ltd (Google Yahoo Earnings Chart)
GTRC,Guitar Center Inc (Google Yahoo Earnings Chart)
HHD,HealthShares Diagnostic ETF (Google Yahoo Earnings Chart)
HLIT,Harmonic Inc (Google Yahoo Earnings Chart)
HLT,Hilton Hotels Corp (Google Yahoo Earnings Chart)
HNR,Harvest Natural Resources Inc (Google Yahoo Earnings Chart)
HOKU,Hoku Scientific Inc (Google Yahoo Earnings Chart)
HSIC,Henry Schein Inc (Google Yahoo Earnings Chart)
HTCH,Hutchinson Technolgy Inc (Google Yahoo Earnings Chart)
HUN,Huntsman (Google Yahoo Earnings Chart)
ICA,Empresas ICA Sociedad Controladora SA de CV (Google Yahoo Earnings Chart)
IGTE,Igate Corporaion (Google Yahoo Earnings Chart)
IOM,Iomega Corp (Google Yahoo Earnings Chart)
IRIS,Iris International Inc (Google Yahoo Earnings Chart)
ISRG,Intuitive Surgical Inc (Google Yahoo Earnings Chart)
ITRI,Itron Inc (Google Yahoo Earnings Chart)
IVC,Invacare Corp (Google Yahoo Earnings Chart)
IVGN,Invitrogen Corporation (Google Yahoo Earnings Chart)
IXYS,Ixys Corporation (Google Yahoo Earnings Chart)
JDAS,Jda Software Group Inc (Google Yahoo Earnings Chart)
JNPR,Juniper Networks (Google Yahoo Earnings Chart)
KAMN,Kaman Corp (Google Yahoo Earnings Chart)
KEF,Korea Equity Fund (Google Yahoo Earnings Chart)
KEYS,Keystone Automotive Ind (Google Yahoo Earnings Chart)
KMGB,Kmg Chemicals Inc. (Google Yahoo Earnings Chart)
KOP,Koppers Holdings (Google Yahoo Earnings Chart)
KYPH,Kyphon Inc (Google Yahoo Earnings Chart)
LDSH,Ladish Co Inc (Google Yahoo Earnings Chart)
LNN,Lindsay Manufacturing Co (Google Yahoo Earnings Chart)
LOCM,Local.Com Corp (Google Yahoo Earnings Chart)
LWAY,Lifeway Foods Inc (Google Yahoo Earnings Chart)
LYO,Lyondell Chemical Co (Google Yahoo Earnings Chart)
LYTS,Lsi Industries Inc (Google Yahoo Earnings Chart)
MATK,Martek Biosciences Corp (Google Yahoo Earnings Chart)
MCRS,Micros System Inc (Google Yahoo Earnings Chart)
MDCI,Medical Action Ind Inc (Google Yahoo Earnings Chart)
MEAS,Measurement Specialities (Google Yahoo Earnings Chart)
MFC,Manulife Financial Corp (Google Yahoo Earnings Chart)
MFE,McAfee Inc (Google Yahoo Earnings Chart)
MHS,Medco Health Solutions (Google Yahoo Earnings Chart)
MIND,Mitcham Industries Inc (Google Yahoo Earnings Chart)
NHWK,NightHawk Radiology Holdings Inc (Google Yahoo Earnings Chart)
NOK,Nokia Corp Ads (Google Yahoo Earnings Chart)
NSIT,Insight Enterprises Inc (Google Yahoo Earnings Chart)
NSTK,Nastech Pharmaceuticals (Google Yahoo Earnings Chart)
NTLS,NTELOS Holdings Corp (Google Yahoo Earnings Chart)
NUAN,Nuance Communications Inc (Google Yahoo Earnings Chart)
NVDA,NVIDIA Corporation (Google Yahoo Earnings Chart)
NVTL,Novatel Wireless Inc (Google Yahoo Earnings Chart)
OI,Owens Illinois Inc (Google Yahoo Earnings Chart)
OII,Oceaneering Internat (Google Yahoo Earnings Chart)
ONNN,On Semiconductor Corp (Google Yahoo Earnings Chart)
ONXX,Onyx Pharmaceuticals Inc (Google Yahoo Earnings Chart)
PAS,Pepsiamericas Inc (Google Yahoo Earnings Chart)
PLMD,Polymedica Corp (Google Yahoo Earnings Chart)
PRKR,Parkervision Inc (Google Yahoo Earnings Chart)
PSMT,Pricesmart Inc (Google Yahoo Earnings Chart)
PTIE,Pain Therapeutics Inc (Google Yahoo Earnings Chart)
PVD,Administradora Fp Prov (Google Yahoo Earnings Chart)
PX,Praxair Inc (Google Yahoo Earnings Chart)
QLD,ProShares Ultra QQQ ETF (Google Yahoo Earnings Chart)
RADS,Radiant Systems Inc (Google Yahoo Earnings Chart)
RBA,Ritchie Bros Auctioneers (Google Yahoo Earnings Chart)
RCI,Rogers Commun B Non-Votg (Google Yahoo Earnings Chart)
RGR,Sturm Ruger & Co Inc (Google Yahoo Earnings Chart)
RIG,Transocean Inc (Google Yahoo Earnings Chart)
ROL,Rollins Inc (Google Yahoo Earnings Chart)
RSCR,Res-Care Inc (Google Yahoo Earnings Chart)
RZ,Raser Technologies Inc (Google Yahoo Earnings Chart)
SAP,Sap Ag Ads (Google Yahoo Earnings Chart)
SBS,Companhia De Saneamento B (Google Yahoo Earnings Chart)
SCRX,Sciele Pharma Inc (Google Yahoo Earnings Chart)
SCUR,Secure Computing Cp (Google Yahoo Earnings Chart)
SII,Smith Internat Inc (Google Yahoo Earnings Chart)
SINA,Sina Corp (Google Yahoo Earnings Chart)
SLB,Schlumberger Ltd (Google Yahoo Earnings Chart)
SMSC,Standard Microsystems Cp (Google Yahoo Earnings Chart)
SPIL,Siliconware Precision Industries Company Ltd ADS (Google Yahoo Earnings Chart)
SRDX,Surmodics Inc (Google Yahoo Earnings Chart)
SRX,SRA International Inc (Google Yahoo Earnings Chart)
SSYS,Stratasys Inc (Google Yahoo Earnings Chart)
STKL,Sunopta Inc (Google Yahoo Earnings Chart)
STRA,Strayer Education Inc (Google Yahoo Earnings Chart)
SWHC,Smith & Wesson Hldg Corp (Google Yahoo Earnings Chart)
SWKS,Skyworks Solutions Inc (Google Yahoo Earnings Chart)
SYNA,Synaptics Inc (Google Yahoo Earnings Chart)
TDG,TransDigm Group Inc (Google Yahoo Earnings Chart)
TECUA,Tecumseh Products Cl A (Google Yahoo Earnings Chart)
THI,Tim Hortons Inc (Google Yahoo Earnings Chart)
TKF,Turkish Invest Fd (Google Yahoo Earnings Chart)
TNE,Tele Norte Leste Partic (Google Yahoo Earnings Chart)
TNH,Terra Nitrogen Co L.P. (Google Yahoo Earnings Chart)
TNS,Tns Inc (Google Yahoo Earnings Chart)
TRA,Terra Industries Inc (Google Yahoo Earnings Chart)
TRST,Trustco Bank Corp Ny (Google Yahoo Earnings Chart)
TUNE,Microtune Inc (Google Yahoo Earnings Chart)
TUP,Tupperware Brands Corp (Google Yahoo Earnings Chart)
TWN,Taiwan Fund Inc (Google Yahoo Earnings Chart)
TWTC,Time Warner Telecom Inc (Google Yahoo Earnings Chart)
UAUA,UAL Corp (Google Yahoo Earnings Chart)
UFCS,United Fire & Casualty (Google Yahoo Earnings Chart)
UMBF,Umb Financial Corp (Google Yahoo Earnings Chart)
URS,Urs Corp (Google Yahoo Earnings Chart)
USO,United States Oil Fund ETF (Google Yahoo Earnings Chart)
VMI,Valmont Industries Inc (Google Yahoo Earnings Chart)
VRSN,Verisign Inc (Google Yahoo Earnings Chart)
VRTX,Vertex Pharmaceuticals (Google Yahoo Earnings Chart)
WBD,Wimm Bill Dann Foods Ojsc (Google Yahoo Earnings Chart)
WDC,Western Digital Corp (Google Yahoo Earnings Chart)
WFT,Weatherford International Ltd (Google Yahoo Earnings Chart)
WHQ,W-h Energy Services Inc (Google Yahoo Earnings Chart)
WIND,Wind River Systems Inc (Google Yahoo Earnings Chart)
WLSC,Williams Scotsman International Inc (Google Yahoo Earnings Chart)
WNG,Washington Group Intl (Google Yahoo Earnings Chart)
XMSR,Xm Satellite Radio Hldgs (Google Yahoo Earnings Chart)
ZUMZ,Zumiez Inc (Google Yahoo Earnings Chart)


Now if you look at these stocks as of today and apply a breakout scan like I mentioned in my previous posts and also apply a one month or 10 day weakness filter, you can narrow your set of breakouts to handful breakouts to buy.

Applying those rules one gets a short list of 20 breakout. Friday was a unusual day with 3 times more breakouts than normal, but on average day you will get 3-5 breakouts.

ASF,Administaff Inc (Google Yahoo Earnings Chart)
AVCI,Avici Systems (Google Yahoo Earnings Chart)
BOBJ,Business Objects S A (Google Yahoo Earnings Chart)
BPHX,Bluephoenix Solutions Ltd (Google Yahoo Earnings Chart)
CAF,Morgan Stanley China A Share Fund` Inc (Google Yahoo Earnings Chart)
CIA,Citizens Inc (Google Yahoo Earnings Chart)
DV,Devry Inc (Google Yahoo Earnings Chart)
DW,Drew Industries Inc (Google Yahoo Earnings Chart)
ELON,Echelon Corporation (Google Yahoo Earnings Chart)
EXPD,Expeditors International of Washington Inc (Google Yahoo Earnings Chart)
FRM,Furmanite Corp (Google Yahoo Earnings Chart)
GIVN,Given Imaging Ltd (Google Yahoo Earnings Chart)
IXYS,Ixys Corporation (Google Yahoo Earnings Chart)
JDAS,Jda Software Group Inc (Google Yahoo Earnings Chart)
NUAN,Nuance Communications Inc (Google Yahoo Earnings Chart)
PSMT,Pricesmart Inc (Google Yahoo Earnings Chart)
QLD,ProShares Ultra QQQ ETF (Google Yahoo Earnings Chart)
RZ,Raser Technologies Inc (Google Yahoo Earnings Chart)
TKF,Turkish Invest Fd (Google Yahoo Earnings Chart)
VMI,Valmont Industries Inc (Google Yahoo Earnings Chart)

Text Version for Download
ACGY ACO ADSK AKS AL ALKS ALXN AME AMLN AMV ANGO ANSS APD APH APKT APLX APOL ARD ARJ ARTC ASF ATAC ATW AVCI AWR AXE BBI BCSI BFS BHI BIIB BIOS BOBJ BOOM BPHX BRCM BRP BWTR CAF CBH
========
CCC CCMP CIA CKFR CNQ CREE CRZO CSCO CTXS CVD CVLT CW DADE DCEL DCI DE DJO DKS DO DV DVA DW DWSN EGLE EGOV ELON EMR ENR ERES ESEA ESIO EWC EWT EXPD FARO FAST FCEL FCN FDRY FLS
========
FLWS FRM FRO GEOY GES GGL GIFI GIVN GKSR GME GMST GNK GNTX GOOG GPRO GR GRMN GTRC HHD HLIT HLT HNR HOKU HSIC HTCH HUN ICA IGTE IOM IRIS ISRG ITRI IVC IVGN IXYS JDAS JNPR KAMN KEF KEYS
========
KMGB KOP KYPH LDSH LNN LOCM LWAY LYO LYTS MATK MCRS MDCI MEAS MFC MFE MHS MIND NHWK NOK NSIT NSTK NTLS NUAN NVDA NVTL OI OII ONNN ONXX PAS PLMD PRKR PSMT PTIE PVD PX QLD RADS RBA RCI
========
RGR RIG ROL RSCR RZ SAP SBS SCRX SCUR SII SINA SLB SMSC SPIL SRDX SRX SSYS STKL STRA SWHC SWKS SYNA TDG TECUA THI TKF TNE TNH TNS TRA TRST TUNE TUP TWN TWTC UAUA UFCS UMBF URS USO
========
VMI VRSN VRTX WBD WDC WFT WHQ WIND WLSC WNG XMSR ZUMZ

The IBD 200 method is the simplest and most powerful method for those who are really serious about making money. Every now and then I get emails from readers who have embraced the method and are enjoying the fruits of it. Most are surprised by the results they get.

Here is an edited email (to remove personal references) from someone which came two days ago:

Would you send me info on your members only section? I've been in the investment business since 1985 . As a 25 yr old rookie I was indoctrinated into the "analysts know all" cult.
Almost. I never quite fully believed and was always attempting to make sense of the markets and find a simple, logical and consistent discipline to help myself and my clients.
Since '03 In my own trading account I've averaged 25-30% . I found your blog in Early May' 07. Since June 07 I've been using the IBD 200 and stockcharts.com with a 2% break out screen and averaging nearly 10% per month. Thank you for that one.

This is not the first of this kind of email I got on this method, as I have said since I first put up the post I have got over 3000 emails from readers on their experience of using this approach. Those who have understood and adopted it in to their trading have had significant improvement in returns. If you just apply the method on original IBD 200 list without modification, you will still get very good results.

Investor's Business Daily method for calling market turns

Investor's Business Daily has a well defined method for calling turns in market. It is based on research. It has a sound logic behind it. Plus if you are regular and careful reader of IBD, the Big Picture offers you a running commentary on market action.

The IBD method for calling market turns is based on behavior of big institutions. It uses price and volume as a proxy to gauge the behavior of big institutions. It defines follow through day as a day on which there was 1% rise in a major index on higher volume than the prior day.In recent book this has been updated to 1.7% or more.

Every new uptrend starts the same way: a big gain in the market on higher volume than the prior day, occurring after the third day from the moment that at least one major index starts coming off its lows.

That's known as a follow-through, and it has confirmed every new bull phase in the stock market. The most recent time we saw this occur was Aug. 29, when the Nasdaq surged 2.5% on slightly higher volume than the prior day.

Since then, the market has acted exactly like a new uptrend should.

To be sure, the market wasn't exactly ablaze in the days right after the follow-through. The indexes were sluggish and few stocks broke out in the early part of September.

But on Sept. 18, the market got a big shot in the arm, as the Fed cut interest rates by 50 basis points. The indexes rallied fervently on strong volume.

So when the market starts going down , IBD system first looks for a attempted rally which is defines as a day which ends higher than previous day. After such day it looks for a 1% plus day on high volume. Such a follow through day should occur within 4 to 10 days of attempted rally day.

In recent market turn , it called 29 th August as major bottom and start of a new rally phase. Since then it has been pounding the table saying , it is time to buy, it is time to buy stocks with best fundamentals. It has been constantly telling new leaders break out in first 4-13 weeks of start of new bull market.

There are many other tools I am aware of which give you similar kind of working methods to call market turns. All these methods are reactive, they react and interpret market behavior and form a opinion on next likely direction. You can research them on past data to see how they have behaved. As a trader or investor that kind of methodical approach gives you a distinct edge over no methods and experts subjective and unproven predictions like market is going to go down 50% this year or any other number or we don't understand why this market is going up.

As I have said before methods trump markets. If one is focused on making money and wants to seriously and aggressively make money, one can develop ones own method to predict market turns. If you read William O'Neil bio, he researched and came up with his own method based on some of the information commonly available. The only difference between him and many others is he is a methodical, research oriented person, who measured everything, formed hypothesis and came out with workable solutions.

Now contrast that to Barron's, have you ever seen a rally which it liked. Week after week it is, we don't understand why this market is rallying, speculators are going wild, there is need for new calculator, and so on. In the absence of methodology it just dishes out well written poetic stuff, which appeals to certain section of wall street. It is not a publication at its current form designed for active traders or even for investors.

If you are active and aggressive trader, you should constantly look for methodologies as against opinionated bearishness or bullishness. You may not exactly follow that method, but you can use that as a template to develop your own method. If you have method, and follow it regularly profit is an outcome.

Housing Cover Indicator

That Sinking feeling

McClellan Summation Index and the turn

In the past I have talked of the McClellan Summation Index and how it is useful in indicating major turns. See the Index during the turn.

By adding up all of the daily values of the McClellan Oscillator, one can produce an indicator known as the McClellan Summation Index. It is the basis for intermediate and long term interpretation of the stock market's direction and power. When properly calculated and calibrated, it is neutral at the +1000 level. It generally moves between 0 and +2000. When outside these levels, the Summation Index indicates that an unusual condition is taking place in the market. As with the Oscillator, the Summation Index offers many different pieces of information in order to interpret the market's action.

Among the most significant indications given by the Summation Index are the identification of the end of a bear market and the confirmation of a new bull market. Bear markets typically end with the Summation Index below -1200. A strong rise from such a level can signal initiation of a new bull market. This is confirmed when the Summation Index rises well above +2000. Past examples of such a confirmation have resulted in bull markets lasting at least 13 months, with the average ones lasting 22-24 months.

The book 'Patterns for Profits' offers detailed analysis of the logic and thinking behind McClellan Summation Index and if you are serious about your trading, I highly recommend this book.

Patterns for Profit

This is the original book written by Sherman and Marian McClellan in 1970, introducing the McClellan Oscillator and Summation Index to the world. The McClellans were encouraged by the late P.N. Haurlan, publisher of the Trade Levels Report newsletter, to share their findings with others and this 54-page booklet was the result. It covers the calculation and interpretation of these indicators, as well as the meaning of the chart patterns which they form.

Comes with 40 years of chart history comparing the McClellan Oscillator and Summation Index to the DJIA.

You can read more about the index here.


Later: The Investor's Business Daily method for calling market turns
Barron's as against Investor's Business Daily or Why methodology trumps opinionated bearishness

How the Market Monitor signaled the turn

July 27 th 2007- The Market Monitor signaled market is turning bearish.

August 16th 2007- Market had less than 200 stocks up 25% or more in 65 day time frame on intra day basis, indicating possible bullish turn in market.

September 18 th 2007 - Market Monitor indicated start of a new bull phase. The start of new bull phase was confirmed indicating time to go long aggressively.

Stockbee Market Monitor


Since the turn market had a roaring rally. The breadth has improved dramatically if you see the August 15 th figure, from 304 stocks up 25% we have gone up to 1418, a five fold increase.

Stocks up 25% or more in a month has gone up more than 12 times from 19 to 240. It has been one of the best periods for trading.

How to trade Earnings

Its back. The money making period is back. Regular readers by now know how earnings period provides profitable opportunities. To profit from this opportunity you need a well thought out methodology.

You can see my past posts on earnings where I have detailed most of the methods.

Related posts :
How To Trade Earnings
How to trade earnings Part2
How to trade earnings Part3
Earnings and Bulkowski
Improving odds in earnings breakout
Earnings Season- Time to be very careful...
Earnings and Dan Zanger
Earning Surprise System for $1495
Trading Earnings Breakouts
Earnings Acceleration- Long Term Impact
Trading Earnings Breakout -Part1
Trading Earnings Breakouts -Part2
Trading Earnings Breakouts -Part3

Update: As requested by many traders, I have put the previous earnings spreadsheet back.

Momentum on bullish side dies a slow death

The market was flat yesterday, if you look at the market averages. However on the market monitor we see 132:57 breakout ratio. So buyers are active in the market. The weakness is in stocks which had run up a lot and in stock with individual news. Market is soon going to turn its attention to earnings and pre earning warnings or announcements.

The market on all parameters is showing steadily improving breadth. It is a bull market. It is having minor dip. But the trend is firmly bullish. If the market spend 3-7 days at around 100 breakouts on upside with occasional down day, it will set it up nicely for a next up leg. Market do not oblige us that way, but if we see 50% plus going down to around or below 10, it will indicate the overextended stocks are cooling down.

Everything in Market Monitor shows a healthy and solid bull market. Remember market momentum on bullish side dies a slow death. Tops take a long time to form once momentum starts building. So any turn in market is not going to be sudden. It will show up first in the Market Monitor numbers first.

In all the methods highlighted under Methods and Philosophy, currently there are more opportunities than most traders can handle. Key task is to prioritize the opportunities. To be bullish in bull market is right strategy till the market signals otherwise.

Barry Ritholtz Does Not Seem to Understand the Purpose of "Core Inflation"

Brad DeLong, Professor of Economics at U.C Berkeley exposes the theoretical weakness in central arguments perpetuated by bears. Economics is a science, what passes on TV and regretfully in publications like Wall Street Journal and Barron's is not based on scientific studies and is personal belief of the person making those assertions. You should read the comments on that post and how the discussion has degenerated in to bashing Fed and changing the core argument because of inability to refute it.


Barry Ritholtz Does Not Seem to Understand the Purpose of "Core Inflation"

The Federal Reserve's mandate to maintain price stability requires that whenever significant inflation threatens it is supposed to hit the economy on the head with a brick: raise interest rates, and so discourage investment spending, lower capacity utilization, raise unemployment, and so create excess supply. The Federal Reserve would rather not do this unless it has no other option. If the rise in inflation is thought to be (a) transitory and thus (b) self-limiting, the Fed would prefer to let sleeping dogs lie rather than hit the economy on the head with a brick.

The Fed cannot, however, just say "we regard this rise in inflation as (a) transitory and thus (b) self-limiting, and so are going to let sleeping dogs lie." A Fed that does that quickly loses its credibility as an inflation-fighter, and a modern central bank with no inflation-fighting credibility is in a world of hurt.

However, when increases in inflation are confined to (i) energy and (ii) food prices, odds are that the increase is transitory and will be self-limiting. Hence the concept of "core inflation." If the Federal Reserve concludes that the current rise in inflation is transitory and self-limiting, it can point to the core inflation number as a principled excuse for not hitting the economy on the head with a brick.

The Fed uses the concept of core inflation not because it doesn't recognize that food and energy prices are not rising, but because it doesn't want to hit the economy on the head with a brick when it isn't necessary just because it has to demonstrate that it is one tough mujer.

If any of the bears are so confident of the science behind their logic, they should be willing to submit a research papers to well known economics research publications, propose a alternative coherent theory and be willing to defend their logic based on science and statistics rather than rhetoric flourish and 50000 posts which reiterate same "belief". Personal beliefs and wrong understanding of concept is not science, even though publications like Wall Street Journal and Business Week for whatever reason allow such pseudo science without challenging it.

Any such research paper if it proves established and documented economic science and theory as wrong will win a Nobel Prize.

Bears Prepare for Fox Business News

A Dash of Insight has a "leaked " transcript of what the popular bloggers and bearish pundits are planing for the Fox Channel.

The document purports to be a transcript of a secret meeting of Bearish market pundits, preparing for the launch of the new Fox Business Network on October 15th. The participants include "Bear Leader," a widely-publicized market commentator, and a group of trainees--cubs, if you will. One of the trainees thought he was signing up to be a turtle, not a cub, and he turned over his recording of the meeting. Since the recording was made without the consent of other participants, it lacks any legal status.

START TRANSCRIPT

Bear Leader: We all know why we are here today. TV wants a bear on every show. Now it is not just Bloomberg and Bubblevision. We also have to cover Fox. Meanwhile, our ranks are thin. It has been tough to be a bear. Some team members have even cut back on appearances. Your job is to change all that! Now let me hear it!

Cubs: Sub-slime! Sub-slime! Housing Led Recession!

Bear Leader: That's the spirit. Now you have all read the Bear's Guidebook, so this session should just be a review. Let's start with the economy. When you get a GDP report that looks good, find something wrong! Say that it will be revised. Find something wrong with the timing. If a quarter is lower than the past quarter, then the economy is "decelerating." This is beautiful because it is a big word that sounds terrible even if the rate of growth is OK. You can milk a bad quarter for months this way.

Cub: What if the next quarter is better?

Bear Leader: Easy. That's backward looking data. We look forward to the next quarter! The same with economic indicators. What is the best indicator?

Cub: Baltic Dry Freight? Dr. Copper?

Bear Leader: NO!! Those are the old indicators. Get the new playbook or you are off the team. We are going with industrial production and housing starts. Those are the only bad numbers recently, so use them.

Cub: What about sentiment, ISM, and jobless claims?

Bear Leader: These are all off their highs. It does not matter if the numbers are OK, just say it is off of the high of eight months ago or whatever. The chartman will keep us all up to date.

Read the entire stuff. It is hilarious but accurate description of popular bearish pundits propaganda skills.

How I became a quant

The quants were in the news for wrong reason recently as their models took big hit in some cases. The quants are major force in market today handling major sums of money for big banks or hedge funds. Some of their strategies are cloaked in secrecy. The book How I Became a Quant: Insights from 25 of Wall Street's Elite gives you a peak at the careers of some of the leading quants on Wall Street.

It has series of interviews with 25 quants presented as first person account. The format for interview is biographical and the focus is clearly on a tracing how they got interested in Wall Street. All the quants interviewed landed up in Wall Street via physics or maths academic paths. Most of this happened in 90's when the focus in investment bank turned to quantitative strategies.

The book gives you a look in to lives of these quants and how their career evolved. If you are looking for strategies, the book is not for that. It is focused on biography and career progression. Some of the interviews are focused and some are average or bad, where the subject takes detour from the theme of book or indulges more in promoting their family life or charity work.

Overall it is a fluff book about quants which gives you a insight in to their personality.

Profit Taking

• A bout of profit taking hit some of the leading stocks and sectors yesterday. Casino's, solar energy and select China plays had healthy dose of profit taking after many weeks of near vertical action.
• Overall it was a mixed day with both upside and downside breakouts evenly matched in my scans.
  
• Gravity does not exist as far as China stocks are concerned. 25% plus daily moves are common amongst these group of stocks in last few days. We all know how such parties end. But you can never time them for down slide with precision.
  
• Dips like these after few weeks of vigorous rallies are not a bad thing as market digests gain and new set of stocks take on leadership.
  

Wall Street Radio Interview

Last week I was interviewed by Dennis Olson of Wallstradio. You can hear the podcast on their site: Financial Blog Watch: Episode 23 - Stockbee

In this week’s episode of “Financial Blog Watch,” Dennis Olson interviews Pradeep Bonde, editor of the ongoing blog, Stockbee. Pradeep discusses how he got into trading after working for large companies in both the U.S. and India for over 15 years, what effect his work experience has had on the way he invests, and the additional content members of his site have access to.

Three blogs I highlighted in that interview are:

1. Trading Goddess
2. Notable Calls
3. Daily Options Report
   

Top 200 Stocks for IBD 200 Traders

This is follow up to my last post about IBD 200. Here is the latest update on the Top 200 stock list. As market is in rally mode, stocks after breakouts move faster. Many times a stock will move 10 to 20% post breakouts in a week. By the time the IBD 200 comes in on Thursday, many times low risk buying point may not be available. So a biweekly frequency helps you get in to stocks faster.

ABCO,Advisory Board (Google Yahoo Earnings Chart)
ACO,Amcol International Corp (Google Yahoo Earnings Chart)
ADSK,Autodesk Inc (Google Yahoo Earnings Chart)
AIT,Applied Industrial Tech (Google Yahoo Earnings Chart)
AL,Alcan Inc. (Google Yahoo Earnings Chart)
AME,Ametek Inc (Google Yahoo Earnings Chart)
AMLN,Amylin Pharmaceuticals (Google Yahoo Earnings Chart)
AMV,Alternative Asset Management Acquisition Corp (Google Yahoo Earnings Chart)
ANGO,Angiodynamics (Google Yahoo Earnings Chart)
ANSS,Ansys Inc (Google Yahoo Earnings Chart)
APKT,Acme Packet Inc (Google Yahoo Earnings Chart)
APOL,Apollo Group Inc Cl A (Google Yahoo Earnings Chart)
ARTC,Arthrocare Corp (Google Yahoo Earnings Chart)
ASEI,American Science & Engineering Inc (Google Yahoo Earnings Chart)
ATAC,Aftermarket Tech Corp (Google Yahoo Earnings Chart)
ATK,Alliant Techsystems Inc (Google Yahoo Earnings Chart)
ATW,Atwood Oceanics Inc (Google Yahoo Earnings Chart)
AVCI,Avici Systems (Google Yahoo Earnings Chart)
AWH,Allied World Assurance Holdings Ltd (Google Yahoo Earnings Chart)
AWR,American States Water Co (Google Yahoo Earnings Chart)
BBOX,Black Box Corp (Google Yahoo Earnings Chart)
BCSI,Blue Coat Systems Inc (Google Yahoo Earnings Chart)
BIIB,Biogen Idec Inc (Google Yahoo Earnings Chart)
BLKB,Blackbaud Inc (Google Yahoo Earnings Chart)
BLUD,Immucor Inc (Google Yahoo Earnings Chart)
BOBJ,Business Objects S A (Google Yahoo Earnings Chart)
BWTR,Basin Water Inc (Google Yahoo Earnings Chart)
CBH,Commerce Bancorp Inc Nj (Google Yahoo Earnings Chart)
CBZ,CBIZ Inc (Google Yahoo Earnings Chart)
CCC,Calgon Carbon Corp (Google Yahoo Earnings Chart)
CCMP,Cabot Microelectronics (Google Yahoo Earnings Chart)
CEVA,Ceva Inc (Google Yahoo Earnings Chart)
CHB,Champion Enterprises Inc (Google Yahoo Earnings Chart)
CHZ,Chittenden Corp (Google Yahoo Earnings Chart)
CIA,Citizens Inc (Google Yahoo Earnings Chart)
CIB,Bancolombia Sa (Google Yahoo Earnings Chart)
CIEN,Ciena Corporation (Google Yahoo Earnings Chart)
CKFR,Checkfree Corporation (Google Yahoo Earnings Chart)
CKSW,Clicksoftware Technlgies (Google Yahoo Earnings Chart)
CRWN,Crown Media Holdings A (Google Yahoo Earnings Chart)
CSCO,Cisco Systems Inc (Google Yahoo Earnings Chart)
CSGP,Costar Group Inc (Google Yahoo Earnings Chart)
CVD,Covance Inc (Google Yahoo Earnings Chart)
CVX,Chevron Corp (Google Yahoo Earnings Chart)
CW,Curtiss Wright Corp (Google Yahoo Earnings Chart)
CYPB,Cypress Bioscience Inc (Google Yahoo Earnings Chart)
DADE,Dade Behring Holdings Inc (Google Yahoo Earnings Chart)
DAKT,Daktronics Inc (Google Yahoo Earnings Chart)
DBTK,Double-Take Software Inc (Google Yahoo Earnings Chart)
DCEL,Dobson Communications A (Google Yahoo Earnings Chart)
DCP,DynCorp International Inc (Google Yahoo Earnings Chart)
DJ,Dow Jones & Co Inc (Google Yahoo Earnings Chart)
DJO,DJO Inc (Google Yahoo Earnings Chart)
DKS,Dick's Sporting Goods (Google Yahoo Earnings Chart)
DRRX,Durect Corporation (Google Yahoo Earnings Chart)
DW,Drew Industries Inc (Google Yahoo Earnings Chart)
DY,Dycom Industries Inc (Google Yahoo Earnings Chart)
ECLP,Eclipsys Corporation (Google Yahoo Earnings Chart)
EGLE,Eagle Bulk Shipping Inc (Google Yahoo Earnings Chart)
EGOV,Nic Inc (Google Yahoo Earnings Chart)
ELON,Echelon Corporation (Google Yahoo Earnings Chart)
EMC,Emc Corp (Google Yahoo Earnings Chart)
EMKR,Emcore Corporation (Google Yahoo Earnings Chart)
ENN,Equity Inns Inc (Google Yahoo Earnings Chart)
ERTS,Electronic Arts Inc (Google Yahoo Earnings Chart)
ESEA,Euroseas Ltd (Google Yahoo Earnings Chart)
ESIO,Electro Scientific Ind (Google Yahoo Earnings Chart)
ESRX,Express Scripts Inc (Google Yahoo Earnings Chart)
EXH,Exterran Holdings (Google Yahoo Earnings Chart)
FCEL,Fuelcell Energy Inc (Google Yahoo Earnings Chart)
FCN,Fti Consulting Inc (Google Yahoo Earnings Chart)
FCTR,First Charter Corp (Google Yahoo Earnings Chart)
FOXH,Foxhollow Technologies Inc (Google Yahoo Earnings Chart)
FRO,Frontline Ltd Adr (Google Yahoo Earnings Chart)
GE,General Electric Co (Google Yahoo Earnings Chart)
GEOY,Geoeye Inc (Google Yahoo Earnings Chart)
GGL,Goodman Global Inc (Google Yahoo Earnings Chart)
GIFI,Gulf Island Fabrication (Google Yahoo Earnings Chart)
GMCR,Green Mountain Coffee Roasters (Google Yahoo Earnings Chart)
GMO,Idaho General Mines Inc (Google Yahoo Earnings Chart)
GNTX,Gentex Corp (Google Yahoo Earnings Chart)
GPRO,Gen Probe Inc (Google Yahoo Earnings Chart)
GTRC,Guitar Center Inc (Google Yahoo Earnings Chart)
HAIN,Hain Celestial Group Inc (Google Yahoo Earnings Chart)
HEW,Hewitt Associates Inc Cl A (Google Yahoo Earnings Chart)
HLF,Herbalife (Google Yahoo Earnings Chart)
HLT,Hilton Hotels Corp (Google Yahoo Earnings Chart)
HMSY,Hms Holdings Corp (Google Yahoo Earnings Chart)
HNR,Harvest Natural Resources Inc (Google Yahoo Earnings Chart)
HNSN,Hansen Medical Inc (Google Yahoo Earnings Chart)
HOKU,Hoku Scientific Inc (Google Yahoo Earnings Chart)
HPC,Hercules Inc (Google Yahoo Earnings Chart)
HPQ,Hewlett-Packard Co (Google Yahoo Earnings Chart)
HSC,Harsco Corp (Google Yahoo Earnings Chart)
HSIC,Henry Schein Inc (Google Yahoo Earnings Chart)
HTCH,Hutchinson Technolgy Inc (Google Yahoo Earnings Chart)
HTRN,Healthtronics Inc (Google Yahoo Earnings Chart)
HUN,Huntsman (Google Yahoo Earnings Chart)
IDXX,Idexx Laboratories Inc (Google Yahoo Earnings Chart)
IGTE,Igate Corporaion (Google Yahoo Earnings Chart)
ILMN,Illumina Inc (Google Yahoo Earnings Chart)
INTC,Intel Corp (Google Yahoo Earnings Chart)
IRBT,iRobot Corp (Google Yahoo Earnings Chart)
IRIS,Iris International Inc (Google Yahoo Earnings Chart)
ISRG,Intuitive Surgical Inc (Google Yahoo