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Thursday, December 02, 2004
Market Recap
The markets were on hold waiting for the mid quarter update from chip bellwether Intel. After the bell, INTC came out with a very positive update and stocks were up big in after hours trading as a result: http://biz.yahoo.com/bw/041202/25726_1.html. ... markets were up mid-day but failed to hold the gains. The Dow dropped -5 points while the NASDAQ gained +5 points and the S&P lost -1 point. The NASDAQ broke into new highs for the year at one point today by just a point or two and then backed off. I showed a chart of the NASDAQ last night with this possible double top forming and a possibility it may retreat when it hits around 2158. Today's high was just over 2156. Indices rarely break through resistance on the first test, and today's break through was no different. It hit the old high and went just above it before turning back. However, with tonight's great news from INTC, the NASDAQ should easily blow right through today's high and keep running tomorrow. I would not rush in tomorrow at the open and chase these gaps but if buying persists after the first hour, you may want to try and find something to buy. If you are like me, you are already long you will not have to worry about being left behind. We have been advising for a few weeks now that the bull is back and the position to be in is long. I hope you took heed of this advice, if you did, you are sitting in great shape right now and even better shape at tomorrows open.
Chart Critique of TASR
It has been a while since we have done any trading critiques, and we have had some requests to do so. Our trade tonight is TASR; this example shows the power of momentum and what it can do with good charts when the bull starts running. This is the type of powerful movement we can expect to see more of if the bull is indeed here to stay. Let's take a look at TASR and see what a powerful stock can do in a powerful market. There will be no chart to follow tonight with this critique because the stock has split since our trade and our prices will not match up, but you can bring up the chart yourself and follow along with the commentary. Next time I will make sure we critique a trade that has not already split adjusted on the chart.
We started watching TASR with earnest on October 19th. The stock was basing for quite some time just under $40. We were watching for a breakout above $40 resistance to start a new advance so that was our price level to key in on. We opened a position just two days after it was placed on our watch list. At that time, the stock broke above $40 and that old resistance was setting up to be new support. The stock could have faked us out and dropped back below $40 just as quickly as it took that level out. In fact, if you look back at the comments from roughly 1 week after we entered the trade, we were set up for just that possibility. Stops were set just below $40 for a break even trade if our stop was taken out. Fortunately that was not the case and the powerful news that came within days moved the stock much higher.
Great news was released the first few days into November. TASR announced another stock split. That news fueled a massive short squeeze and propelled the stock higher. (TSAR had 85% of its float shorted at one time, which is a lot of buying to cover). What was odd about this move was that it started to become somewhat erratic just after taking off. We moved our stop loss up to $45 on November 5th after the stock started showing weakness in the pre-market. Once again, the stock moved in our favor and those stops did not get filled. A great fake out took some shares from the panicked herd before the stock started to move up again.
Three days after that, we exited the trade with a 40% gain. The stock had just gapped up out of a minor pennant on the charts and was looking slightly over extended at that point. We exited the position at $56.49 and immediately started to look for a new entry point. That entry point came the very next day. The stock was shaken all the way down to below $50. The low volume was our clue that this was only a shake out and that it was a good chance to get right back in. Once it came back up over $50 we were into a very safe area for re-entry. A drop below $50 and we would have exited right away with a minimal loss. This position was sold the very next day at $54.90, just off the high. We were able to lock in another 10% gain on a stock that looked to be nearing a short term top.
Once again, after the fact, reading the charts from the extreme right, we missed the next move up to over $60. That also goes to show the power of a stock in a strong market. TASR is unique in one sense. It is extremely volatile, partly due to a lower float. That is starting to diminish with all these stock splits. (I believe it is their third split this year for a total of 8 to 1). Eventually TASR will slow down and trade in a more normal range. We locked in average profits of 25% on two consecutive trades within days of each other. These are the kind of moves we will be looking for in the coming months. They are out there, and as the markets improve and more buyers come in, we will begin to see more stocks trading like this.
OTC BB Watch List
- UGNE still looks great.
- VSNI
Stockcharts Listing
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As always, thank you for your support past, present, and future! Have a great night everyone; we'll see you all Sunday evening.
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