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Monday, October 18, 2004
Market Recap
The market forged ahead with a late day rally, pushing the Dow up +22 points while the S&P gained +6 points. The real news was the NASDAQ gaining +25 points. I mentioned yesterday that the Dow and S&P charts looked a little bit worse off than the NASDAQ chart. Today the NASDAQ confirmed its chart superiority by out gaining the other indices. Oil took a major hit today dropping $1.28 a barrel. This is a large one day drop in oil prices. Is this the start of oil falling back to respectable levels? Or is this just a pullback in a very strong Oil market? I believe it is just a pullback on the way to $60 a barrel but please don't shoot the messenger.
Two Monster Movers
There are some amazing moves happening in a couple stocks that we cannot ignore. GOOG made another 52 wk high today, reaching nearly $150.00. This is an incredible run from its IPO price of $85. The stock is up almost 100% in its first two months of trading. ISON is another stock on a tear lately, running up over 200% in just six trading days. These are two stocks that got away. I will be the first to admit I would liked to have bought both of these stocks, but when looking at the chart from the extreme right each day, it is tough to know what a particular stock will do. Looking at the chart from the extreme left tonight, it is easy to see we missed these runners. Try looking at the chart from the extreme right also, then try to predict where these stocks will be six days or two months from now. Not quite so easy.
Goog – No Fear of Lock-up Expiration
GOOG got away from us, why did I not buy? The reason I never bought GOOG was because of the 15 day lock-up expiration. The chart looked great from day one and has never looked bad. It could have been a buy based on chart alone. It was the 15 day lock-up expiration that cast doubts in my mind that the stock could keep rising. I figured there would be selling pressure from insiders on a stock that was very over valued. I was wrong. So far, there is no selling pressure and the stock keeps going up. If you are long, I would hold it and place a trailing stop to cash in on your profits. You have made a great trade.
ISON – Gap and Run
ISON is a different story. This stock was mentioned on our board by one of our members, and I immediately put the stock on my watch list after reviewing the chart. The chart looked good; the problem was, the very next day it gapped up above $2.00 at the open. For swing trades, I very rarely buy gaps in the first 30 minutes. (Day trading is different). I was waiting for the stock to retreat a little but it kept going – it is called a gap and run. It closed the day at $2.40, up almost 50% that first day. I do not buy stocks that are up 50% in one day because the majority of the time, they will fall back down. This stock was a rare exception and kept going the next day to above $3.00. By this time, the stock was up 90% in two days. You need to have some hair to buy a stock up that much at that point. If you do buy and it continues to run, I will tip my hat to you. But more times than not, buying such lofty run-ups will result in severe pullbacks, and you will most likely get stopped out of your trade with a loss. ISON did just that. The next two days ISON sold off back down to $2.00, the initial breakout point. That was an excellent chance to buy because the volume on the sell off was low compared to the up volume. This was our best chance but I was not sure if the run was over at that point. We have seen so many stocks run-up only to fall back below the breakout point (failed breakouts), so I did not pull the trigger and buy it. I have a chart of this stock tonight to illustrate these points. It bounced off the $2.00 area on Thursday and went above $6.00 today rising 200% in two days. An amazing run but who could have known?
A Final Thought
There will always be stocks we miss, I wish we could catch everyone like ISON or GOOD but we cannot possibly do that. The positive point here is that both of these stocks were mentioned on our message board by members before their monster moves. If you bought with these members, you made a great trade. This is just another example of our TWPD members helping each other on the board. TWPD missed these two movers but many of our members still bought them after reading the message board. It is members like this that make our trading family the best anywhere. A big thanks goes out to everyone participating on our message boards.
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