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Monday, October 17, 2005
Market Recap
Stocks gained more ground today with a strong performance by the Dow closing up by 60 points on the day and closing near session highs. Volume was weak again so do not be fooled by this move up. Also, most of the move in the Dow was due to good news released by two big Dow components: GM and MO. Without these two performers, the Dow would have only had a small gain. The Nasdaq put in a feeble performance gaining only 5 points with volume almost non-existent. The S&P gained 3 points and closed just under its 50 SMA which should act as resistance.
Avian Flu Plays
I hope many of you took advantage of our buy of SVA on Friday. We wanted to hold a bird flu stock over the weekend betting there would be some type of news on the Avian Flu. Sure enough, there was and flu stocks got a big boost today, SVA included. These stocks will be strong for awhile, but we had to lock in the 23% gain on SVA holding it for one day. These are the kind of stocks we need to look for and be in for the quick breakouts. We want to get in just before they move and ride them up for the quick 1, 2, or 3 day gains. These types of movers are hard to come by but they are out there in this market. Other stocks in this group include CRXL, BCRX, HEB, and NVAX (up 27% today). With the exception of HEB, they are all on our Bulletin for you to monitor and trade. Keep an eye on these stocks and buy them on all pullbacks. Other Bulletin stocks with big gains today were NGAS, ADST, FTO, HOKU, MIVT, and MTRX.
Earnings and Economic Reports
Key earnings releases this week include reports from heavy hitters like YHOO, GOOG, EBAY, and INTC. Also, some big Biotech companies will report such as AMGN, GENZ, and GILD. These results will likely dictate market direction for the Nasdaq. Also, on the economic front this week, we will get September's Producer Price Index (PPI) numbers due out before the bell tomorrow. And on Wednesday, the Beige book is released during market hours. Look for the PPI to mirror last's weeks CPI. The CPI was the highest it has been in 25 years but that of course was due to the high energy costs. Excluding energy, the CPI was contained and we think this ignited the rally on Friday. Look for continued strength in the market this week, if the PPI, Beige book, and earnings from the tech giants are good. Keep in mind, volume needs to drastically improve on the upside or this rally will not be sustainable.
Plaid is Back in Style… ugh
You have to love it when the news media provides us with helpful hints in where to look for the next big stock. We have mentioned trends several times in the past, and how you can use them to help find good stock plays. Your kids are some of the greatest sources for following trends and we have mentioned that before as well. How about that new Ameritrade commercial with the Dad and his daughter? I think Ameritrade must have read our commentary awhile back on listening to your teen for trends. She wants money for a new style of jeans and the dad starts asking questions about how many kids own the jeans and if they are the new fad style. He goes to his account and buys the stock of the jean manufacture after she tells him, everyone is wearing these jeans.
http://www.cnn.com/SPECIALS/2005/back.to.school/bl...
You and I may see these things either in this article, or while you are out and about town, and wonder why someone would dress this way. In fact, many consumers will walk around looking at what seems to be fashionable and be turned off by what many people are wearing or using, and this blinds them to the big picture. When you see one person wearing/doing a particular thing, it may be simply something unique to them and we do not need to pay attention to them. However, when every other person at the mall is wearing/ doing/using the same thing, that is a trend and we need to pay attention whether we like the trend or not. If you can identify who is behind the trend, chances are you have just uncovered a hidden gem. The key is knowing when trends are starting and locating the source ahead of the curve.
We do this exact thing each day when we look for stocks. The key is in finding the stock that is just entering a new trend. Catch the right trend at the right time, and you have got gold. We are doing that now with the flu stocks. These are hot and the trend for these stocks is now up. Who knows how long they will run but my guess is, we are going to hear a lot more about this flu and every time we do, these stocks are going to go a little higher each time. Find a trend or fad and the company behind it and if the chart is starting to set up, and you know that their goods are the hottest thing on the market, you've identified a company with huge potential for gains.
You may not like the way kids are dressing these days but it pays to follow those trends. Even if you think that a skirt made from ties or plaid being back in style is ridiculous it pays to know that it's a hot item.
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