Joe Fahmy The Next Big Move » GMCR

Relative Strength Webinar Recording

Joe Fahmy — Thu, 19 Jan 2012 16:54:14 +0000

Thank you to everyone who tuned into my Webinar on Relative Strength. In case you missed it, here is the link of the recording:

http://www.traderinterviews.com/webinars/RSWebinar.html

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The Market Still Needs More Time

Joe Fahmy — Thu, 22 Sep 2011 03:43:06 +0000

As the market started to climb last week, I moved from 100% cash and decided to test the waters with some light positions. The reason for using light positions is simple: If they work out, then most likely stocks will continue to setup, and you can use the profits you have to fund additional stock purchases. If you get stopped out, at least you contain your risk by only taking a small loss.

Now before you start saying: “But Joe, you recently put out a blog post talking about why you continue to sit out,” keep one thing in mind…MY OPINION OF THE MARKET CHANGES FREQUENTLY. Why? Because the market is extremely dynamic and can change its character very quickly. You have to be open-minded and flexible. Being stubborn and sticking to an opinion gets you nowhere, especially when the market is proving you wrong. That is why I run screens and go through approximately 1,000 stocks every night. It’s the only true way I know how to evaluate the market’s overall health. When I find an abundance of setups, I feel more positive about the market. When the ideas dry up, I become more defensive.

Last week, I started to find a few decent setups. The end result: I took profits on some stocks ($V $MA $CMG $HANS) and got stopped out of a few others ($BIDU $ACTG $WYNN). I took quick profits because I don’t trust the market yet, and I took small losses because my number one rule is to protect my portfolio. The bottom line: I made very little progress, further telling me the market is not ready to start a SUSTAINABLE uptrend yet.

I realize that many big caps are holding up well ($AAPL $AMZN $GMCR $PCLN), however, as we start to bottom, I would prefer to see leadership broaden out. Currently, it seems very narrow to me. In other words, everyone’s watching the same 5-10 stocks! Historically, that does not bode well for the market.

Wednesday morning (9/21/11), I returned to a 100% cash position when my trading instincts told me to be defensive. As a result, I dodged the subsequent decline on Wednesday afternoon. Going forward, I feel the market needs more time to correct before we will see a sustainable advance. My advice is to remain cautious and keep positions light if you trade. An even better suggestion is to simply sit out, as traders tend to get “chopped up” during these volatile times.

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A Few Words of Caution

Joe Fahmy — Wed, 27 Jul 2011 03:08:37 +0000

Every night, I go through my stock screens and look at approximately 1,000 stocks. Why? Because this is the way I was taught to evaluate the overall health of the market. If I find tons of strong fundamental companies building sound technical bases, breaking out on strong volume, and holding their gains, I feel confident about exposing my capital to the market. If I find few quality setups, I raise cash and wait patiently for better opportunities. Here are some thoughts while reviewing my screens tonight:

1) I am finding very few quality setups. Many of the stocks I got stopped out of recently have traded lower, and most of the stocks on my watch list have failed to breakout…all these observations make me cautious for now.

2) When I tweeted these thoughts earlier, many people responded: “You’re in the wrong stocks.” I realize that a few stocks such as $AAPL $GOOG $BIDU $PCLN $LULU $AMZN $GMCR are acting well, but the leadership seems to be narrowing.

3) The narrow leadership reminds me of Sept/Oct 2007 when the market was being driven higher by 3 stocks: $AAPL $GOOG and $RIMM. I’m not saying that we are topping here, but I would prefer to see more “broad-based” participation. In addition, most of the big cap stocks mentioned above are getting “later-stage” in their moves and are extended from proper buy points. Keep in mind that I look for the best “low-risk, quality setups” that I can find.

4) The debt ceiling issue is not a factor in my stock trading. Why? Because after it’s done, the media will find something else to scare us. Remember Egypt, Greece, Libya, the earthquake in Japan, all the nuclear waste that was headed our way, Italy, Greece again, etc. That’s why I pay attention to the price action of stocks and ignore the news.

5) I always keep an open mind and realize that my analysis can be wrong. Therefore, I constantly maintain a watch list of quality stocks. If they begin to act better, I will be ready to pounce on the long side. For now, I remain in 100% cash. If I’m wrong, I’m not worried because I can always get back in.

I suggest being a little defensive and trading lighter-than-normal positions until conditions improve. Keep in mind that I trade with an EXTREMELY defensive posture and I use tighter stops than most traders. I live by the Paul Tudor Jones quote: “Play great defense, not great offense.” Although the major averages are holding up well, my trading instincts are telling me to be defensive for now.

$AAPL $AMZN $BIDU $DIA $GMCR $GOOG $IWM $LULU $PCLN $QQQ $RIMM $SPY

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The Market Tends to Fool the Majority

Joe Fahmy — Tue, 23 Mar 2010 00:45:35 +0000

In my weekend blog post, I mentioned 3 possible scenarios: 1) The market could continue to be resilient and scream higher 2) The market could correct before heading higher or 3) We could possibly see an overall top. I thought we would see scenario #2. After my post, I received several emails in which everyone said we would see scenario #2 or #3. VERY FEW people thought to buy the open on Monday and that we would finish strong. As Jesse Livermore said: “The stock market is never obvious. It is designed to fool most of the people most of the time.”

First, I have to give credit to Jim Gobetz (@aiki14 on Twitter). In his Pre-Market Take on StockTwits TV Monday morning, he said to buy the open and that we would finish positive on the day. You know why that scenario made complete sense? Because as Jim said: “It was not the real popular opinion.” In fact, he said he took abuse for making that call. Congrats to Jim for making the contrarian call, and ultimately the correct one!

This morning reminded me of February 18, 2010. After the close that day, the Federal Reserve surprised the markets by raising the Discount Rate. I remember tweeting that: “One possibility is that the market shakes off the rate hike news and continues to show incredible resilience.” The same thing happened to me. I got angry emails and replies telling me that the market was going to crash. The next morning, the futures were barely down and the market finished strong that day. A very similar event happened this Sunday night. After the HealthCare Bill passed, everyone expected a huge market selloff. Once again, the futures were slightly down on Monday morning and the market proved its resilience by finishing strong!

I would like to stress 2 points: Don’t fight the tape and don’t think like the majority! We’ve had several excuses to selloff over the past 3-4 weeks but the market continues to march higher. Part of this resilience is due to the masses thinking this rally is going to end any day now. I still expect higher prices over the next 3-6 weeks, as the market will most likely continue to fool the majority.

Some stocks on my watch list include: $AAPL $PCLN $CERN $GMCR $VECO $BUCY $DNDN

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Some Stocks to Watch

Joe Fahmy — Tue, 16 Mar 2010 01:30:02 +0000

The market continues to act well. In the following video, I go over some of the constructive signs I saw on Monday as well as some stocks to watch. For best results, I recommend maximizing your screen and watching the highest quality video setting (720p) so the charts are clearer.

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A Good Entry Point is Everything!

Joe Fahmy — Sun, 14 Mar 2010 21:41:40 +0000

Whether you are a short, medium, or long-term trader, having a good entry point on your purchases is very important. It can help you sit through corrections in your stocks, many of which could be normal pullbacks or retracements in an overall strong uptrend.

In the following video, I go over some keys to look for when buying a stock and some examples of recent purchases. For best results, I recommend maximizing your screen and watching the highest quality video setting (720p) so the charts are clearer.

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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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