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Monday, July 05, 2004
Good evening friends,
Some Early Fireworks
I hope you all had a “blast” on this 4th of July holiday weekend, celebrating this great nation's independence. Lately, we have had some fire works of our own on the TWPD message board, but all is well as far as I am concerned. Hopefully we can put our differences aside and continue to make our message board one of the best trading communities on the web.
Market Recap
The Dow suffered another down day on Friday, slipping -50 more points after losing -100 on Thursday. The NASDAQ is holding up fairly well after dipping below the critical 2000 level intra day Friday but coming back to close above 2000. This close was crucial in my opinion. The NASDAQ must stay above the key psychological 2000 level for this index. If that level should fail, the next support should be down around the 1960 area.
The NASDAQ also suffered a key technical negative last week when the 50 SMA crossed below the 200 SMA. This negative crossover does not sit well for technicians, and it is a bearish sign. I am still bullish, but I am finding more stocks to short than new stocks for our long list. When this happens, it is usually an indication of things to come. However, I have updated charts of the big three tonight, and after reviewing them, you will see that things are still looking good. There is no need to change our outlook yet.
Patience, Patience, Patience
Just before the fed announcement, many charts were looking very strong and setting up well for advances. These last couple of days has inflicted some damage on these charts, and it will take a little time before they set up again. Sometimes the market presents many good chart setups and other times it does not. The greatest challenge in times like these is patience. Patience is one of the most important and difficult lessons that the inexperienced trader will ever learn.
Remember, impatience can and will cost you dearly – I have been there before, so please trust me when I say, “You must be patient”. It is tempting to jump into the market every day and try to make some money but sometimes staying out of the market can save you money. It takes years of experience to gain enough insight to know the markets and how they work. In order to take consistent profits out of any market on a daily basis, you must learn, and that takes time. For now, it is best to be patient and learn as much as possible.
If we trade at all, we will continue to look for stocks with the potential of making 10-20%. If you do not feel you can make a minimum of 10-20% on a trade then do not take the trade. Cash is king and limited trading is recommended until something stimulates buyers to rush in and move this trend less market higher.
The Week Ahead
We have another interesting week on tap. With the markets closed on Monday in observance of the July 4th holiday, we have a short trading week. We are coming full force into earnings season again starting this week.
Yahoo is reporting earnings on Wednesday. That should prove to be very interesting. The stock was downgraded last week AND at the same time the price target was raised. I am still baffled by that call, but anyway, let the games begin. Yahoo has already guided higher and should be posting some very solid numbers. With the Google IPO still pending and with Microsoft getting into the search engine race, YHOO will be a hot stock to watch over the next few months. YHOO will remain on the bulletin, because I feel it will be a big winner going forward.
We will also be seeing numbers from General Electric and Alcoa. This conglomerate is one of the biggest companies on the planet. They are involved in many different parts of the economy so their earnings can be used as a gauge for the general economy. If particular sectors are hurting, GE will tell us where the pain is being felt.
Alcoa will help determine the direction of the commodities market. We can also look to their numbers as a bit of a gauge for the general economy. If there is an increased demand for metals, chances are there will be some production ramping up at some point in the future. Manufacturers would be buying in the 2nd quarter for production in the 3rd quarter and delivering in the 3rd and 4th quarters. Strong numbers now point to a brighter future.
How To Play These Earnings
This week's trading should be interesting since everyone will be out positioning themselves for the coming earnings season. Earnings season is always a very tough call. Do we hold through earnings or not? That is a very popular question I am asked.
If we were right in the middle of a very strong bull market, I would be much more likely to hold stocks through earnings but with the markets being so very hard to predict right now, it is a case by case basis. It is a risk no matter how we play it. Hold a stock through earnings, and we could get caught in a gap down if the numbers fail to impress. If we sell into earnings, we risk not being in a stock that rockets up on some very solid numbers and/or a strong forecast. Given these choices it is not a hard decision. If we hold, we stand to lose real money. If we choose not to hold, we will only miss out on opportunity.
Remember the snowflake analogy (see ‘Catching Snow Flakes' in the Topic Index). If we miss something next week with earnings, do not look at that stock and ask “why did we miss it?” Keep your head up for the next opportunity. There will be plenty coming our way in the future, especially when the Bull begins its run.
When I miss a big winner that gaps up on earnings, I ask myself, “Is there anyway I could have known? What was the chart pattern? Was it set up for the run?” If the chart was set for a run, then I just plain missed it. But if the chart was not set up, then there was no way to predict that a stock would run-up on news. Instead, I look at the positive side of things. I look at the tickers of stocks going by that have gapped down on disappointing earnings or a negative news release and thank God I was not holding any of those. Missing opportunity is a whole lot better than losing my money gambling on earnings.
Please tell a friend about our service. We would like to become a referral service only. With your help, we can be. As always, thank-you for your support past, present and future! Have a great night everyone; we will see you all Tomorrow evening.
OTC BB Watch List
- HIET
- WTER
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