Market Notes (10/6/09)

Posted by Joe Fahmy
on October 7th, 2009

As I mentioned in yesterday’s Market Notes, the only thing I didn’t like about Monday’s action was the lack of volume in the indexes and individual stocks. However, it wasn’t a major concern for two reasons: 1) every market selloff over the past 3 months began its recovery on light volume. For example, the pullbacks in early July, 8/17, and 9/1 all started their recoveries on light volume and eventually climbed higher several days later on heavier volume. 2) After running my stock screens on Monday night, I noticed an increasing number of stocks meeting my fundamental and technical criteria. In other words, there were too many stocks “setting up” that looked like they wanted to go higher, a positive sign.

The result was a healthy volume accumulation day on Tuesday that saw many leaders breaking out. I especially like the strong volume in the Big Cap growth names: $AAPL $BIDU $AMZN $GS $GOOG $PCLN. These are all institutional quality stocks, which shows me that the big funds are putting money to work. Remember two things: 1) many funds are chasing performance and 2) their universe of growth stocks is limited; so if they have to plow into names, these are prime suspects.

Here are some trading ideas (followed by a bunch of quick notes, so please excuse the grammar):

$BIDU – Weekly chart looks amazing. Great support around 368-370. A big institutional stock. Jesse Livermore used to love trading stocks breaking through round numbers such as 50, 100, 200, etc. because “a fast and straight movement almost invariably occurred after such points were passed.” Therefore, watch for $BIDU to break 400 and possibly take out its all-time high of 429 soon.

$AAPL – Held up extremely well during last week’s decline. With the holiday season coming up and possible announcements that the iPhone will be available on Verizon, T-Mobile or China Telecom’s networks, I am expecting more upside from now until year-end. A “must own” stock for big institutions. Support around 178-180.

$GMCR – Acting phenomenal technically. Great earnings and sales growth. Their traditionally conservative management guided higher last quarter so I am expecting a solid upcoming quarter. Strong support around 65-66. Approx. 32% of the float is short. Shorts will get punished, expecting new highs soon.

China stocks – $PWRD (support in the 44-45 area, one of my favorite China plays) $EJ (great weekly chart, huge support at 20, short interest tripled in the past month -click here for data- looking for further upside soon) $HMIN (huge earnings growth last quarter, I mentioned yesterday that I was looking for a break above 30.40, we got that today on strong volume, could see 35 soon) $DGW (thinly traded, cup w/handle formation with a great shakeout in the handle 3 days ago, support at 33, could breakout soon) $KONG (acting strong, great Weekly chart) $CTRP & $UTA (China online-travel ideas) $NTES (waiting for more volume strength, not buyable yet).

Gold – I read over the weekend how every time gold dips below $1,000/ounce, people seem to forget about it (a very true statement because I’m also guilty). My feeling is that gold might surprise everyone and breakout to $1100-$1200 when no one’s expecting it. Stocks to watch include $CDE $IAG $GOLD $AEM and $GLD (the gold ETF).

Biotech – $DNDN (very strong support in the 24-25 area, major institutional accumulation recently) $HGSI (bouncing nicely off the first test of its 10-week moving average).

Internet Security stocks watch list – $BCSI $FIRE $ARST $RAX $SWI

Miscellaneous ideas – $SXCI (support around 44, major acceleration in earnings the past 4 quarters) $ININ (support near 18, looking for a breakout above 20.5) $GFA (major increase in earnings expected next year, strong technical chart with support near 28) $WFMI (support near 28, highly shorted) $ISRG (support around 240).

Please keep in mind that the purpose of this blog is to help people with idea generation. If you trade some of these stocks, PLEASE, PLEASE, PLEASE use stops. In other words, if some of these stocks turn against you and the market doesn’t cooperate…protect your portfolio! Thank you. Good luck trading!

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

Tickers: AAPL, AEM, AMZN, ARST, BCSI, BIDU, CDE, CTRP, DGW, DNDN, EJ, FIRE, GFA, GLD, GMCR, GOLD, GOOG, GS, HGSI, HMIN, IAG, ININ, ISRG, Jesse Livermore, KONG, NTES, PCLN, PWRD, RAX, SWI, SXCI, UTA, WFMI

Market Notes (10/6/09)

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