Joe Fahmy The Next Big Move » CLNE

Just When We Can’t Go Higher…

Joe Fahmy — Mon, 29 Mar 2010 22:22:52 +0000

One of my favorite stock market sayings is: “Just when you think something can’t go higher, it usually does, and just when you think something can’t go lower, it usually does.” A perfect example of this is the price of oil over the past few years. When oil went from $40 to $100, many market participants said it couldn’t go any higher and it eventually climbed to around $146. On the way down, when oil fell from $146 to $90, many thought the price would stabilize around $80 to $100, only to see it fall to $35!

This example applies to today’s stock market. Many people are expecting this rally to end any day now, but I wouldn’t be surprised to see the market “fool the majority” and continue higher over the next 3-6 months (with corrections along the way, of course). I’m not only basing this on psychology, but also on the strong market internals. I continue to observe a large number of stocks that are acting well. Specifically, stocks breaking out on strong volume and consolidating on lighter volume.

What amazes me is vast number of sectors represented by these stocks. Examples include: Semiconductors $CREE $AIXG $VECO, Restaurants $CMG $PNRA, Retail $LULU $DECK $SHOO, Machinery $DE $CMI $BUCY, China $BIDU $CTRP, Big Caps $AAPL $PCLN $AMZN, Biotech $DNDN $HGSI $JAZZ, Natural Gas $CLNE $WPRT. The scary thing is that I could keep giving more examples.

Bottom line: I still see healthy signs overall and I continue to recommend being invested in this market. Don’t forget to take profits on the way up keep and, as always, look to cut losses on your weakest performing stocks.

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Market Wants Higher

Joe Fahmy — Thu, 11 Mar 2010 19:53:16 +0000

I see two scenarios from here: 1) The market goes higher or 2) We have a quick pullback and the market goes higher. My point is…I feel the market will continue higher over the next 4-6 weeks. I am basing this on the following observations:

1) Stocks are acting very strong technically. Over the past 3-4 weeks, I have suggested to slowly scale into this market. The majority of stocks that I recommended have worked out well and they are now either barely correcting or they are pulling back orderly on light volume. Examples include $GMCR $ISRG $NETL $LULU $IPXL $NFLX $CLNE $ATHR $CAGC $BCSI.

2) The major indexes continue to climb on strong volume and consolidate on light volume, a positive sign in my view.

3) The big institutions continue to put money to work. If you are a large mutual fund or hedge fund, your universe of growth stocks is limited. In other words, you have to buy Big Cap stocks with liquidity. Even if you do not trade these names, it is worth observing them to see what the big boys are doing. The price action in $AAPL $ISRG $GOOG $BIDU $AMZN $PCLN $V $GS is very constructive. The majority of these stocks are breaking out or building new bases to possibly break out over the next 4-8 weeks.

4) The stocks that continue to show up on my fundamental and technical screens cover a wide range of sectors showing me that this recent rally is broad based. Examples include: Tech, Retail, Energy, Semis, Restaurants, etc.

5) Everyone seems to fall into one of two categories. They either hate this rally or they are a cautious bull. I would consider myself the latter. My point is that VERY FEW people are in the crazy bull camp and feel this market has any legs left in it. Keep in mind: “The markets tend to fool the majority.”

A word of caution: I realize the markets have had a nice run over the past few weeks. I am not saying to jump in right now if you are not invested because we could see a pullback. If you did get in recently, hopefully you have decent entry points on your stocks and you have “room” to let your winners ride. If you did not get in, don’t chase extended stocks but rather look to buy them on pullbacks to logical support areas. Overall, I remain positive on this market because of the strong signs listed above.

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Healthy Signs

Joe Fahmy — Thu, 04 Mar 2010 05:32:03 +0000

After two big volume accumulation days on Monday and Tuesday, it was nice to see the market consolidate on low volume Wednesday. I always find it constructive when indexes make strong progress and barely give any of their gains back. Hopefully, you were able to take advantage of the abundance of breakouts the past few days, many of which were highlighted recently on this blog: $GMCR $CMG $NETL $ATHR $CAAS $ISRG $CTRP $CAGC $IPXL $HGSI.

Another positive sign is that many of the stocks listed above broke out on strong volume and pulled back today on lighter volume. If you missed some of these breakouts, I feel you can buy them on pullbacks to logical support areas such as their 10-day or 20-day moving averages.

My advice remains the same: If you are not invested in this market, SLOWLY get back in by buying 2 or 3 stocks. If you are invested, SLOWLY increase your market exposure by adding to your positions. The key is to do this SLOWLY! Why? Because if you jump back into the market all at once and chase extended stocks, you increase your chances of getting stopped out of your positions. In fact, I wouldn’t be surprised to see the market pullback over the next day or two. If this happens, I plan to take advantage of the opportunity by increasing my investment levels. Why? Because I’m currently finding a large number of stocks that meet my technical and fundamental investment criteria and these stocks could propel the market higher over the next 2-6 weeks.

I also suggest keeping a watch list of strong fundamental companies that are building sound technical bases. Some examples on my watch list include: $CLNE $JAZZ $VPRT $GMCR $MLNX $SHOO $HGSI $SOA.

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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Market Continues to Strengthen

Joe Fahmy — Tue, 02 Mar 2010 01:37:02 +0000

On February 11th, I wrote that the market pullback of late Jan/early February had the feel of an 8-12% intermediate-term correction rather than an overall top (click here to read). Since then, I recommended to SLOWLY get back into the market and increase your investment levels as you begin to see a profit. Assuming you followed this advice, IT IS NOW TIME TO INCREASE YOUR MARKET EXPOSURE ON THE LONG SIDE.

Here is my reasoning and some observations over the past few weeks:

1) The most important criteria I use to gauge the market’s health is the action of its leading stocks. Right now, THERE ARE TONS OF SOLID FUNDAMENTAL COMPANIES BUILDING AND BREAKING OUT OF STRONG TECHNICAL BASES!

2) Market Resilience: On Thursday, February 18th, the Fed raised the Discount Rate by 50 basis points but the market shrugged off the news and finished higher the next day. On Thursday, February 25th, the market ignored poor US economic data and fears about Greece’s debt problems to once again rally and close near the highs of the day. The market’s ability to rally in the face of bad news is a “subtle tell” that it wants to go higher.

3) Sentiment indicators shifted from extremely bullish in mid-January to extremely bearish in mid-February. The recent heavy put buying shows there is still plenty of doubt out there.

4) The major market indexes are back above their 50-day moving averages, a sign of health from a technical perspective.

5) Oh yeah, did I mention the number of stocks that are breaking out across several sectors??? Semis: $NETL $ATHR, Big Caps: $ISRG $BIDU $PCLN, China: $CAGC $CTRP, Retail: $DECK $ANN $SKX Miscellaneous: $SNDK $CMG $CTSH $RDWR $SMCI.

Here’s my best advice: I would SLOWLY begin to add to your positions (assuming you’re at a profit on new purchases over the past few weeks and that you have a cushion to work with). DON’T CHASE EXTENDED STOCKS and DON’T JUMP BACK INTO THE MARKET ALL AT ONCE! Why? Because you will just get stopped out on any normal pullback. Keep a list of stocks building sound technical bases and buy them as they begin to breakout. Examples of stocks on my watch list include: $ARST $CLNE $DNDN $VPRT $GMCR $PLXS $HGSI. As always, keep your winners and cut your losers.

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Market Resilience

Joe Fahmy — Mon, 22 Feb 2010 05:10:28 +0000

When the futures were down -1% last Thursday night, I mentioned that the market would “shake off” the Fed’s discount rate increase. My reasoning was based on the strong price action of leading stocks and the number of stocks looking to complete the right side of their bases over the next 2-4 weeks. In other words, if the market was going to collapse in response to the Fed’s actions, stocks would not be “setting up” technically and looking like they want to go higher soon.

I must admit that even though I expected the market to be resilient, I didn’t think that the futures would recover by Friday morning and finish positive by Friday’s close. I thought the Fed news would give the market an excuse to sell off over 2-3 days, and then we could look to buy the stocks that held up well during the decline. Instead, THE MARKET’S ABILITY TO SHRUG OFF THE DISCOUNT RATE HIKE COMBINED WITH THE NUMBER OF STOCKS I SEE SETTING UP SHOWS STRONG MARKET RESILIENCE AND TELLS ME THAT WE MIGHT SEE HIGHER PRICES SOON.

I still expect a “choppy” environment over the next few weeks; however, if more stocks breakout of sound bases on strong volume, I would look to increase investment levels. In the meantime, I recommend keeping position sizes light until the market continues to prove itself. Friday’s strong action is a great sign of the market’s improving health. As always, I suggest maintaining a watch list of stocks that are holding up well and forming proper bases.

My current watch list includes: $GMCR $HGSI $ISRG $NFLX $DNDN $CLNE $TSTC $IPXL $RDWR $CTRP $VPRT $NETL $ATHR $PAY.

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Stocks to Watch

Joe Fahmy — Thu, 18 Feb 2010 02:54:25 +0000

As I continue to wait patiently for the market to prove itself, here are some observations:

1) The light positions that I took over the past week have worked out well so far: $NETL $CAGC $ISRG $GMCR $NFLX.

2) I took some profits on $NETL into strength on Tuesday and it pulled back on light volume Wednesday. It’s always a good sign when stocks breakout on strong volume and pullback orderly on lighter volume.

3) The NASDAQ Composite rose on higher volume on Friday 2/12 and Wednesday 2/17. They were not big up days, but still a subtle sign of accumulation.

4) Steady put buying shows me that sentiment remains negative. I always pay attention to investor psychology because “the market tends to fool the majority.”

5) Many stocks are trying to build the right side of their bases. I’m not recommending to buy them now but to keep them on your watch list if they “setup” and offer decent low-risk entry points. Examples include: $V $AAPL $ATHR $CLW $FIRE $ARST $IMAX $INFY $CLNE.

6) My stronger ideas that could breakout soon include: $IPXL $EVVV $HGSI $GMCR $MNRO.

I still suggest to remain patient as the market needs time to carve out proper bases. I wouldn’t be surprised to see a “choppy” environment over the near-term for two reasons. First, the NASDAQ may run into some resistance now that it has rallied back to its 50-day moving average. Second, part of base building involves volatility and shakeouts. That’s why I would rather wait for more stocks to continue to build their bases and buy them at the proper “low-risk entry point” rather than buy them now and possibly get shaken out. My best advice is to continue to keep positions light, cut losses on your weaker performing stocks, and wait for more signs of health before increasing your investment levels.

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Stocks Holding Up Well

Joe Fahmy — Tue, 02 Feb 2010 18:26:54 +0000

I constantly use the phrase: “Don’t get too bullish or too bearish.” It doesn’t make sense to always be Bullish or Bearish because the market is not always in an uptrend or a downtrend. I prefer to look objectively at both the positive and negative signs, and invest accordingly.

Although I feel there may be more downside to this correction, I am keeping a close eye on the stocks that are holding up well. I actually don’t mind when the market corrects because that’s when the strong stocks stand out. For example, over the past two “down” weeks, I’ve been paying special attention to the stocks holding “up” well with the theory that when the market is done correcting, these stocks should continue higher. In other words, the recent correction is acting like a “spring” compressing these stocks down. Once the market relieves this tension, these stocks could breakout to new highs.

This is one of my favorite ways to use Relative Strength. You can read more in my blog post from last October titled: The Three Ways I Use Relative Strength.

Here is a current watch list of stocks holding up well: $GMCR $DNDN $CLNE $EVVV $ISRG $BEXP $SWM $ASH $PRX $RUE $MAPP $PAY $IMAX $PNRA.

I am not saying to go out and buy these stocks right now. I am simply encouraging you to keep an open mind and to maintain a watch list of stocks that are holding up well during this correction. Again, I still feel there could be more downside, but be ready to pounce on strong ideas as soon as the selling pressure is finished.

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