Market Talk with Piranha

My Latest Blog Entries

2007-01-13T21:16:00.000-05:00

If you don't know by now - Market Talk with Piranha is now located at www.chrisperruna.com

Here are a few of my latest blog posts:

Intercontinental Exchange (ICE) is HOT

Iconix Brand Group (ICON)

Apple Inc. is Still Green

Medical Properties Trust Inc. (MPW)

Silver Wheaton Corporation (SLW)

The Holy Grail of Weight Loss

Wall Street does Create Something

See you on the other side,
Piranha

Latest Articles uploaded on New Blog

2006-12-12T08:51:00.000-05:00

Latest Posts added to chrisperruna.com:

ICE, BOT and ISE Updated

Super Speculation – Yes – Tips are for Suckers:

2006-12-06T12:21:00.000-05:00

Many of you may have heard of Calpine and how they went into bankruptcy and how they are selling various parts of their business. I was recently having a conversation with someone in the industry (hedge fund) and they mentioned how several traders are going long Calpine (CPNLQ) on pure speculation based on rumors that the company may restructure and move forward. I don’t know if it is true but I took a look at the chart after his request and see that the stock is up several hundred percent on very heavy volume since late October but is extremely extended above the major moving averages for the first time in years. It closed at $0.91 on Tuesday (down from the $1.23 peak) as some people believe it is worth $6 per share.

I have no idea if this is true and I have always been taught that TIPS ARE FOR SUCKERS so please beware if you decide to speculate with extreme risk. I take this information as a tip even though my friend is a childhood buddy but I am curious to watch what will happen.

Again – this is by no means a recommendation to buy and major losses could occur if you were to speculate in this stock (I must make these statements to protect the legal aspect of my words). None of the stocks on this blog are buy or sell recommendations; just equity research based on specific criteria as noted in my disclaimers!

I prefer to buy stocks making new highs and I am not a bottom fisher. The only reason I even present this stock is because a very good friend of mine asked me to look at the chart and I thought I would share since I did the analysis.

Disclosure: I do not own any shares in Calpine (CPNLQ)!

-Chris

Moving to WordPress

2006-12-05T11:16:00.000-05:00

I am finally making the change and it is painful at times, especially since there is no import from blogger beta to WordPress (I should have stayed on the regular blogger platform). I used my RSS feed to get my text over to my new WordPress blog but most of the images and charts do not show up. The charts and images occasionally show through IE7 but not through Firefox 2.0. It looks like I will have to re-enter my 238 posts with images from my new server (MY OWN SERVER –finally) or I can wait for a more advanced import tool from WP. My other problem will be the links to blogger titles in many of my posts. I will keep the blogger blog for a while but don’t want duplicate content on two sites as it will hurt the page ranking of both (from what I understand).

In any event, please bear with me over the next couple of weeks as I make the full transition from Blogger to WP as I am just learning the software and will be testing tools and widgets, etc…

My new blog and future home will be at http://www.chrisperruna.com/. I will continue to blog primarily about the stock market but will add a few more subjects that may interest my readers. Take a look and let me know what you think.

Thanks,Chris

New High - New Low Ratio

2006-12-01T10:15:00.000-05:00

Here’s the latest NH-NL ratio chart with weekly numbers updated to the week prior to the Thanksgiving holiday. I excluded the short week so it wouldn’t skew the chart. Although the week ending on Saturday, November 18, 2006 had the highest average number of new highs (541) for the year, the strength calculation ranked it tenth in 2006 behind many of the readings from January and October. New highs were greater during the week of 11/13-11/17 but the strength was less than three of the weeks in October which saw the number of new lows 30%-50% lower. Both sets of numbers play an equal role in the calculation of this NH-NL strength ratio.

Yesterday saw a reading of 525-35 which equals an 87% rating but the readings were weaker earlier in the week so the total won’t make the top 10 (as long as today is quiet). In addition to the NH-NL chart, I wanted to post the chart of the number of stocks on the S&P 500 that are trading above their 50-d m.a. because it has slipped to its lowest level since August.

To calculate the percentage correctly, use this formula:
(New Highs – New Lows) / (New Highs + New Lows) * 100 = X%

Below is an updated look at the weekly averages for the NH-NL Ratio:
Saturday, January 14, 2006: 500-32
Saturday, January 21, 2006: 348-46
Saturday, January 28, 2006: 516-46
Saturday, February 4, 2006: 449-44
Saturday, February 11, 2006: 229-57
Saturday, February 18, 2006: 306-42
Saturday, February 25, 2006: 420-36
Saturday, March 04, 2006: 399-49
Saturday, March 11, 2006: 162-84
Saturday, March 18, 2006: 459-53
Saturday, March 25, 2006: 312-52
Saturday, April 01, 2006: 441-39
Saturday, April 08, 2006: 481-58
Saturday, April 15, 2006: 150-103
Saturday, April 22, 2006: 540-75
Saturday, April 29, 2006: 353-76
Saturday, May 6, 2006: 503-74
Saturday, May 13, 2006: 384-116
Saturday, May 20, 2006: 64-211
Saturday, May 27, 2006: 57-182
Saturday, June 3, 2006: 119-93
Saturday, June 10, 2006: 72-204
Saturday, June 17, 2006: 41-310
Saturday, June 24, 2006: 56-238
Saturday, July 01, 2006: 127-198
Saturday, July 08, 2006: 143-95
Saturday, July 15, 2006: 74-273
Saturday, July 22, 2006: 66 - 307
Saturday, July 29, 2006: 163-151
Saturday, August 5, 2006: 194-132
Saturday, August 12, 2006: 88-210
Saturday, August 19, 2006: 178-96
Saturday, August 26, 2006: 140-74
Saturday, September 2, 2006: 285-42
Saturday, September 9, 2006: 143-60
Saturday, September 16, 2006: 244-75
Saturday, September 23, 2006: 206-83
Saturday, September 30, 2006: 251-75
Saturday, October 7, 2006: 301-92
Saturday, October 14, 2006: 412-40
Saturday, October 21, 2006: 442-29
Saturday, October 28, 2006: 480-40
Saturday, November 4, 2006: 251-57
Saturday, November 11, 2006: 388-48
Saturday, November 18, 2006: 541-55 - most new highs in 2006 (weekly average)

Piranha

Baby Boomer Bust is BULL

2006-11-29T19:39:00.000-05:00

This article was originally written last summer but I wanted to bring it to the top of the blog after reading Bill's lastest post over at No DooDahs.
“Boomer Bust?” I Don’t Think So!

I couldn't agree more and can't wait to read his full argument!

July 14, 2006:
I want to post about a subject that frequently appears in discussions online in recent years (especially over the past several months). It's about authors and their sheep followers that continue to predict these great depressions and crashes. I am not saying that it can't happen but their readers sure make them rich by reading most of their negative crap. What happened to the predictions from the books in the late 1970’s and early 1980’s? Read the book titles from the 1970’s and 1980’s and then read the book titles from today (listed below). Are you seeing a pattern? I didn’t go back to the 50’s or 60’s but I could find similar titles and then many more in the 1930’s. My point is: don’t believe everything you read and stop panicking by reading books from theorists (talkers, not doers). I must give credit to many of the books listed by Martin Schwartz and his book Pit Bull. I enjoyed reading it over my last vacation as it was very funny and educational (not a “how to” book).

Theorists make money selling books that sell fear while investors and entrepreneurs make money by following their ideas with money and hedging against a possible crisis. I learn from history and history shows us that these “crisis” books will always sell during tough times. Readers eat up this garbage because most people are trapped in the rat race working their asses off just trying to stay afloat. Their attitudes are typically piss-poor and they love to read about huge negative events (especially a crash that may hurt others).

Also notice how the same authors try to write books when the market starts to go back up again. For example, Howard J Ruff was writing about the crisis in 1979 through 1982 but then started to write about how to invest as a serious investor in 1987. Guess what: he was on the wrong end of the crisis in 1982 (the tail end) and the wrong end of the boom in 1987 (crash later that year). These “fools” are always late to the party and sell millions of books to the “average” person that engrosses themselves in fear!

These people, both now and then are not very accurate, they sell garbage in my opinion and I ignore it at all costs! I just hope many of you can do the same and make decisions based on what “YOU” see and not based on book sellers! Invest for now, ignore the garbage but be prepared for worst case scenarios by taking necessary steps but don’t radically change your life based upon the writings of a few authors that probably don’t invest themselves.

Books from the Past:
Crisis Investing: Opportunities and Profits in the Coming Great Depression by Douglas Casey (Hardcover - Jul 1980)

Crisis Investing for the Rest of the 90's by Douglas Casey (Hardcover - Oct 1993) - WOW was this wrong in 1993!

What the smart money is betting on in 1985: By Doug Casey by Douglas R Casey (Unknown Binding - Jan 1, 1985)

The Coming Currency Collapse and What You Can Do About It by Jerome F. Smith (Hardcover - Sep 1980)

Profits from silver by Jerome F Smith (Unknown Binding - 1983)

How you can profit from the coming devaluation by Harry Browne (Unknown Binding - 1970)

You can profit from a monetary crisis by Harry Browne (Unknown Binding - Jan 1, 1975)

How to Prosper During the Coming Bad Years - A Crash Course on Personal and Financial Survival by Howard J. Ruff (Mass Market Paperback - 1979)

How to Prosper in the Coming Bad Years by Howard J. Ruff (Mass Market Paperback - Jul 1981)

Making money: Winning the battle for middle-class financial success by Howard J Ruff (Paperback - 1986)

Howard Ruff's crash course for the serious investor by Howard J Ruff (Unknown Binding - Jan 1, 1987)

How to Prosper During the Coming Bad Years by Howard J. Ruff (Paperback - April 1984)

Books from Today:
The Coming Collapse of the Dollar and How to Profit from It : Make a Fortune by Investing in Gold and Other Hard Assets by James Turk and John Rubino (Hardcover - Dec 28, 2004)

The Coming Economic Collapse : How You Can Thrive When Oil Costs $200 a Barrel by Stephen Leeb and Glen Strathy (Hardcover - Feb 21, 2006)

Defying the Market: Profiting in the Turbulent Post-Technology Market Boom by Stephen Leeb and Donna Leeb (Hardcover - Jun 3, 1999)

Empire of Debt : The Rise of an Epic Financial Crisis (Hardcover) by William Bonner, Addison Wiggin (November 11, 2005)

The Great Bust Ahead: The Greatest Depression in American and UK History is Just Several Short Years Away. This is your Concise Reference Guide to Understanding Why and How Best to Survive It (Paperback) by Daniel A. Arnold (November 25, 2002)

Image courtesy of http://mirrorimageorigin.collegepublisher.com/media/paper144/stills/x5jf138r.jpg

Piranha

Make Money Selling Short

2006-11-28T14:51:00.000-05:00

The headline may sound weak but I borrowed it from the book “How to make Money Selling Stocks Short” By William J. O’Neil. It’s not a book your typical day trader or professional scalper will be interested in reading but it’s ideal for people like me that still trade longer term trends and don’t necessarily do this for a profession. I intend to travel that road one day but now is not my time so I must stick with techniques I believe work and have “actually” worked for me in the past (and present).

I jumped on the potential band wagon early and started to screen for shorts back in early October and I was wrong. More recently, I placed a few positions and was both right and wrong as the market trend was still moving higher and I knew this but I was conquered by human emotion to make the short trades anyway. Luckily for me, two of the trades show a profit while three losers kicked me quickly for smaller losses.

What do I look for when searching for shorts in what I consider reverse CANSLIM? It’s simple; I read the book by O’Neil, study the charts from the past and look for those same characteristics in stocks trading today.

Many traders believe that the most obvious area to place a short would be near the peak of stock’s trading range but I have found this to be untrue.

Characteristics of Longer Term Trend Shorts

Most ideal longer term “trend” shorts take four to twelve months after the peak price to setup on the weekly chart with the majority of these shorts triggering between six to nine months.
Look for stocks that had prior up-trends and support levels that can now act as downward resistance or entry areas.
Once a stock tops and starts to consolidate, you want it to slice through the 50-d moving average and then the 200-d moving average.
A crossover between the 50-d m.a. and the 200-d m.a. is ideal and is graphically presented on each chart in this post
The odds of success increase with each failed attempt for the stock price to recover these major long term moving averages.
Head and shoulder tops can also serve as ideal setups for potential shorts if they take at least five months to develop.
A decreasing relative strength line and a negative pattern on the point and figure chart can also confirm that the stock is rolling over and setting up an ideal short.
Finally, volume should be increasing and the stock should be under distribution as it violates the major moving averages and starts to break former support levels.

No one knows when this market will roll over so study the ideal characteristics now so you are prepared to recognize them when they appear. I have screened about two dozen potential shorts in November on MSW with several of them working while the others have failed. I was early with my analysis but more stocks seem to be building bases like the ones from the bubble burst in late 1999 and early 2000. Compare the three examples from today that I have posted to the four shorts from the past that setup perfectly if you would have recognized them six years ago.

For further reading, see my two part article on shorting and the book by O’Neil – the charts alone are worth the price!

Shorting Stocks – The Basics, Part I of II

Shorting Stocks – The Basics, Part II of II

Piranha

Top 10 Financial Blogs

2006-11-24T13:23:00.000-05:00

This is a list of the top financial blogs I visit each week! They may not be your top picks but they entertain me most and I seem to click on them first. And yes, they are in order of how I click each week! List is strictly blogs!

Trader Mike
Trader Mike trading Diary

The Kirk Report
One pro's view of the stock market

Brett Steenbarger Weblog
In this weblog, I follow research and trading ideas designed to catch short-term moves in the S&P futures market.

Howard Lindzon
TRENDS - Find them, ride them and get off! Stocks, venture and civilization.

Taz Trader Blog
The Swing Trading Guide

BillCara.com
Capital Markets & Social Equity

TraderFeed
Exploiting the edge from historical market patterns

Tale of the Tape
This site is all about moolah, dinero, bread, cheese, cheddar, coin, loot, and bounty. In other words --- MONEY!!!

NYSE Scalper’s Tale
Currently scalp NYSE stocks (hold stocks anywhere from a few seconds to a few minutes) and do not hold positions overnight.

Ticker Sense
Ticker Sense is a blog about everything financial by Birinyi Associates!

Ok, I can’t limit this to just ten; honorable mentions that I always visit each week (multiple times):

Yaser Anwar
Analyzing Investment Ideas that would Outperform the Market. My approach is to dissect Macro Economic Trends, Market Psychology alongside Fundamental & Technical Analysis that shape underlying values of investments from time to time.

Self Investors
Empowering the Self Investor - Growth Stock & Market analysis

Trader-X
Views from a distorted mind. Charts and more charts. Plus sporadic thoughts on the stock market, trading, politics, entertainment, sports, and everything else.

Uglychart
Ugly is doing what many traders would love to do - trade for a living. He trades with a proprietary trading firm (or “prop firm” for short). A prop firm gives you several times your money to trade and then you keep part of the profits.

StockTicker
Stocktickr is free "social investing" site and it's the easiest way to store a watchlist on the web.

Many more excellent blogs live on my blogroll, so take a look as a few of these may move into my top 10 in the future!

Piranha

Listen to your Wife, KNOT

2006-11-22T09:23:00.000-05:00

The next time your wife is so engrossed into something, pay more attention. I was married in 2004 and my wife planned basically everything on The Knot.com and was addicted to the site (the same way I am addicted to the market – ok, she's not as bad as me). If you speak to my wife, I am actually addicted to the computer; not the market.

Anyway, she used The Knot every day and told all of her friends how great the site was and they too started to use it (many of them became addicted). I am not embellishing the story as they were all extremely addicted to the tools, gadgets and services that The Knot had to offer.

I realized that the company had public stock after if popped up on a CANSLIM screen in 2005 (long after we were married) so I started to study the chart and the financials. Everything looked great and I was ready to buy but am skeptical of stocks trading below $10 per share. To me, I wanted the stock to prove itself before I could place a sizeable position when it was still trading below $20 per share without much institutional attention. I told my wife that I would use some of our speculation dollars to place a position for her. We would essentially call it her stock. She agreed but isn’t very interested in the market so I put it on the backburner but started to cover the stock heavily on MSW. Financials were and still are solid, the chart was and still is trending higher and it kept making new 52-week highs – my bread and butter (the CANSLIM way).

So what is The Knot? (from their site):

The Knot (http://www.theknot.com/) is the most comprehensive resource for couples seeking information and services to help plan their weddings and their future lives together.

The Knot Inc., Weddings for the Real World, is one of the world's leading wedding media and services companies, providing today's to-be-weds with comprehensive wedding planning information, interactive tools, and resources. With a fresh voice and real-world sensibility, The Knot has extended its brand to every venue brides and grooms turn to plan their weddings -- online at the #1 wedding website, TheKnot.com, and on newsstands and in bookstores nationwide.

Shortly after securing seed financing from America Online, The Knot Inc. secured additional rounds of funding from industry giants Hummer Winblad Venture Partners and QVC, Inc. In December 1999, The Knot raised $35 million in its initial public offering. And in February 2002 The Knot received additional backing from The May Company.

With over 2 million unique members and more than 4,200 new members a day, The Knot has the largest audience -- bar none -- of wedding-obsessed, cash-wielding brides.

Each year approximately 2.4 million couples get married in the United States, generating approximately $70 billion in retail sales annually. Presumed to be a once-in-a-lifetime occasion, a wedding is a major milestone and, therefore, consumers tend to allocate significant budgets to their weddings and related purchases.

The average amount spent on a wedding is approximately $20,000, excluding the honeymoon. (I wish my wedding only cost $20k; I could have taken the other half and placed it into The Knot and paid for everything and then some, all for a long term capital gain.)
*********End************

Since my initial coverage in August 2005, I actually placed the KNOT onto the MSW Index on 10/28/05 at $11.37 for a current 13 month gain of 142%. The stock is up 192% from August 11, 2005, the first official day I studied the stock and placed it on a MSW daily screen. I never bought the shares for my wife and regret every minute of the decision because I was only using speculation dollars and the risk wasn’t too bad as the stock was trending higher. I admit that I am uncomfortable buying low priced stocks and could have cut it if it reversed but it never violated the 200-d moving average so I would have held the entire time (for her).

She found and used a great service, a product that makes brides-to-be extremely addicted and I missed the opportunity when it stared me in the face! I knew it, I talked about it and even recommended it to a community of hundreds of investors but didn’t pull the ultimate trigger myself. The stock hit an all-time high yesterday at $27.53 and has been increasing volume since early 2005 as I would assume that institutional investors are finally jumping into a stock that makes money from a cash happy demographic. They fill a niche and turn a healthy profit so I consider them a solid stock. It is currently extended for an entry but I will continue to monitor the shares into the future.

Listen to your wife, especially when everything makes complete sense (it’s not too good to be true)!

Here are some of the analysis entries from MSW in 2005:

8/11/05:
Interesting Stocks forming bases:
KNOT – 9.41, deep cup shaped base that has shot up over 20% in the past two weeks. I was married not too long ago and I’m familiar with this company, due to my wife. Look for a handle to form on the right side of the base.

9/26/05:
KNOT – 11.30, the Knot has made five daily screens and I told many of the husbands or husbands to be to ask their significant others about this website and company. They are creating quite the buzz in the wedding world, especially here in the metro NY area. The stock is not perfect but the company is starting to turn a nice profit on brides-to-be. Up 20% since our first Daily screen on 8/11/05 at $9.41.

10/24/05:
KNOT – 13.50, up 4.09% on volume 220% larger than the 50-d m.a. We have been screening the Knot Inc. since it crossed $10 per share. It is now extended but it is still in a solid up-trend.

10/25/06:
KNOT – 13.84, up another 2.52% on volume 126% above the average but I do see a pullback in the near future. The stock is moving up too high too fast to sustain this type of advance. A pullback should present a new buying opportunity back near $11.50 to $12.

10/29/05 – Weekly Screen Debut
KNOT – 11.37, I have been following the stock on the daily screens for two months as the stock became extended. With the recent move back to the 50-d m.a., the stock is now on our watch list.

11/17/05:
KNOT – 12.35, I have screened the stock several times over the past two months as it holds the 50-d m.a. support. Today’s move on volume 158% larger than the average shows that this small company has some punch. Trust me guys (that aren’t married), brides to be can spend a lot of money and the industry seems to be recession proof for the most part. Today was a triple top breakout on the P&F.

Removed on 1/7/06 from the weekly screen! – What a mistake (it wasn’t too good to be true)!

Blog Mentions in 2006:

7/17/06:
http://marketstockwatch.blogspot.com/2006/07/msw-market-overview.html
Looking at the MSW Watch list from last week, we see one solid stock:
KNOT: -1.29% (down less than the major averages)

1/26/06:
http://marketstockwatch.blogspot.com/2006/01/mini-daily-screen.html
KNOT – 14.44, as you know, we cut the stock from the MSW Index when it fell below the 50-d m.a. but it has since reversed, gathered strength and moved to new highs. It will not be back on the Index but I thought it deserved some notice.

1/8/06:
http://marketstockwatch.blogspot.com/2006/01/recent-msw-index-results.html
Another stock has been removed (KNOT) but it was showing a 2% gain when it was cut yesterday. I decided to remove the stock before the very small gain turned into a loss.

12/4/05:
http://marketstockwatch.blogspot.com/2005/12/using-stock-research-and-stock.html
Our double digit gainers over the past two weeks include: AAPL, NWRE, CUTR, ESRX, OXPS, KNOT, HANS, & LMS. Three of them were priced within the $60-$100 range as these impressive gains accumulated over the Thanksgiving holiday.

Piranha

Secondary Indicators telling Stories

2006-11-20T16:03:00.000-05:00

The New High – New Low ratio (NH-NL) had its highest average number of new highs last week with a final tally of 541-55. It was only the fifth week of the year that had new highs average 500 or more stocks per day. It was also the highest new highs weekly average since the spring of 2005 (prior to me publishing the breakdown with the NH-NL chart). Daily new highs topped 613, 756 and 620 during the middle of last week for the best three day run of 2006 with Wednesday, November 15, 2006 giving us the strongest one day total since Wednesday, April 19, 2006 when the ratio finished at 759-61.

That was the second strongest week of the year with an average ratio of 540-75, just one new high per day less than this past week (new lows averaged 20 less last week than they did during that week in April). Even though the market averaged more than 500 new highs per day, the weakest total came on Friday as new highs dropped considerably as you can see in the table below:

New Highs vs. New Lows - Daily Breakdown, 11/13/06-11/17/06:
Monday showed a ratio of 423-59
Tuesday showed a ratio of 613-71
Wednesday showed a ratio of 756-58
Thursday showed a ratio of 620-40
Friday showed a ratio of 291-46

The accompanying chart shows us the up-trending fashion of new highs on the NASDAQ over the past six months. June and July were very sloppy with mixed results as separation became very clear in mid-August as new highs accelerated their advance while new lows decreased considerably and maintained a low profile.

The NASDAQ completed the 100% retracement that I have been following since August here on the blog and has blasted higher on above average volume. As you can see, the index stalled briefly at each retracement level before moving higher and did so in perfect Fibonacci fashion. I am not a complete Fibonacci buff but I do watch for these levels as they seem to apply in longer term weekly charts more often than not.

Viewing the daily chart, we can see that the NASDAQ is still trending above the support line that dates back to early August with one slight violation earlier this month. I thought that was the trend reversal but the market quickly proved me wrong and forced me to cover a couple short positions. I also covered a few long positions that actually went higher but I can’t complain because getting out on top is not the objective when trading. Trading the signals and making a profit is my sole objective (picking bottoms and tops are great for blog stories but don’t translate well to portfolios – at least not mine).

The number of stocks trading above their 50-d moving average in the chart titled $SPXA50R is flirting around the extended area of 80 for the first time since November and December of last year. The lesson we can learn here is the fact that the market didn’t roll over until May of 2006 which means that this secondary indicator is a warning of what may come in the future. I can say this with confidence because the indicator also bottomed a full month in advance of the NASDAQ bottom in July but predicted the move perfectly. Again, this is only a secondary indicator but we are now one month removed from the first peak above the 80% level which could be the start of the warning bells and red flags that the up-trend is winding down. The last topping warning took almost five months to materialize so keep that in mind.

Another of the interesting secondary indicators we have been following on this blog is the relationship between large cap and small cap stocks. Small caps have been beating up larger caps in terms of performance since June 2000 with a few slight down trends from time to time. This was a year where large caps took the lead and were outperforming their smaller cap peers until the past two months. Small caps started to gain strength heading into the election and bounced off of the imaginary trendline on the chart below and have started to catch up in gains with their large cap friends. Many of these smaller cap growth stocks can capture sizable gains in shorter periods of time versus their large cap peers and this is why the overall trend has been higher for the greater part of this century. I wrote about the strength among large caps several times this year but I am firmly invested in smaller cap companies such as the ones listed on the MSW Index.

Some of the recent top performers from the MSW Index are listed below. As you can see from the numbers posted at the end of the day last Friday, the NASDAQ is quickly catching up to the performance of the DOW and S&P 500 in 2006. The NASDAQ was once down about 10% for the year and is now up over 10% and only 5% behind the DOW. How quickly things can change.

Where do the Major Indexes stand in 2006?
NASDAQ: +10.91%
DOW: +15.16%
NYSE: +14.74%
S&P 500: +12.25%

Top Performing MSW Index Stocks last week:
ICE: 18.90%
LRCX: 8.46%
ISE: 5.09%
LVS: 3.91%
JLL: 3.39%
GILD: 3.10%
AB: 2.28%

Here are the total gains of the current crop of MSW Longs:
LRCX: 19.88%, since 9/30/06
BLKB: 34.52%, since 8/5/06
LVS: 59.99%, since 4/1/06
GILD: 11.12%, since 7/29/06
ICE: 37.33%, since 9/23/06
EZPW: 29.39%, since 6/24/06
AB: 16.23%, since 7/29/06
ISE: 17.31%, since 8/19/06
JLL: 9.29%, since 9/9/06
NEU: 32.66%, since 7/29/06
DIOD: -5.75%, since 10/21/06 *currently the only down stock among longs

*11 Stocks (longs) have been cut for slight gains and/or small losses over the past couple of months which gives the index a 56% win-loss ratio in 2006. Twelve short candidates live on the MSW Index with two of them recently covered for losses.

Piranha

Tuesday's MSW Daily Screen

2006-11-15T10:59:00.000-05:00

Since I posted my first completely positive (longs only) screen last night (in November), I decided to share it with everyone on the blog. I still view the market as extended but it is trending higher and until that trend is snapped, shorting stocks will carry risk (at least shorting them the way I do – following the O’Neil approach from his book on shorting). I will post a list of stocks with charts tomorrow that show similar characteristics to the ones highlighted in O’Neil’s book on shorting.

Many of the market’s leading stocks powered higher Tuesday including several MSW Index members such as:
LVS, ICE, ISE, LRCX, JLL

As explained below, a couple of these MSW Index stocks clearly vaulted past their pivot points which were highlighted on the weekly screen over the weekend. The NASDAQ is now up 1.71% for the week and is far above the former 100% retracement level that was established back in April 2006. If you pull out on the charts and look at a two year weekly view of the NASDAQ, you will see the deep v-shaped pattern with handle and pivot point breakout to new highs (the highest point since 2001). The NASDAQ daily chart clearly shows how the index is climbing along the trend-line I have highlighted in red. Remember, I have been screening shorts over the past several weeks but none of the major indexes have reversed the trend even though they are all extended. Until the trend snaps, we must tread carefully when placing shorts. Due to the extended nature of the market, we must also tread carefully when placing longs or adding shares to current positions.

All major indexes moved higher in above average volume as the recently weak retail sector decided to take some leadership. Looking at my charts through the link below, we can see that small caps are gaining strength versus their larger cap peers. Along with these small caps, many growth stocks are starting to come to the head of the class and flex their muscle just as IBD stresses in tonight’s eIBD edition. IBD mentions how the S&P 600, the small cap index, is within 1% of an all-time high. One of the most impressive numbers of the day was the NH-NL ratio finishing at 613-71 as advancing issues beat declining issues (6,314 to 3,657).

REMEMBER THE ‘M’ IN CANSLIM!
Current Environment: Short term plays (long or short)! The market is extended but trending higher.

Interesting Stocks making New Highs:

ICE – 96.55, the MSW Index stock blasted 9.10% higher today on big volume and now has a 31% gain on MSW since 9/23/06. I called for a new buy above $88 this past weekend
LVS – 92.00, up another 4.75% today for a 62% gain on the MSW Index since April of this year. The stock is now up almost 30% in the past two weeks. Now in the final stage of the $60-$100 run (lock in all gains above $89 or 75% of the run)
TM – 124.82, a six month cup shaped pattern that should form a handle before grabbing new shares. Toyota was screened daily several times near the 200-d m.a. above $100 earlier this year
NTY – 33.19, a double top breakout on the P&F chart on above average volume (a 12.32% gain today)
EDU – 31.85, an interesting young stock that is trending higher that may be entering extended territory. The support/resistance zone stands at $28
CTSH – 79.55, a gap-up to new highs that almost erased during the day before trending higher during the afternoon. The ideal trend buy is still near the 50-d m.a.
GROW – 39.64, now up over 8% this week as the stock continues to make new highs. “stocks that make new highs typically continue to make new highs until the major trend is snapped”.
NICE – 32.58, the second consecutive gap-up for a total weekly gain of 9.18%. The previous triple top breakout took the stock from $29 to $33 which now acts as the ceiling for the potential double top breakout
LRCX – 55.04, up 3.36% today for a total weekly gain of 9.86% on above average volume. The stock blasted past our pivot point of $52.53 and is now up 21.42% on the MSW Index since 9/30/06
CTRP – 58.88, the former MSW Index stock is making new highs after becoming a 200-d m.a. play last month. It is up over 20% since mentioned as a 200-d m.a. play in October.

Interesting Stocks within 15% of New Highs:

FFIV – 72.07, a very deep seven month base without a handle formation at this point in time. An ideal pivot point will develop after the proper handle formation
WCG – 62.20, a trading range between $57 and $64 will determine a buy or sell but note that some heavy distribution weeks cast a dark cloud near new highs
ISE – 50.49, the stock has formed the handle to the long term cup shaped base and has a pivot point of $55.23 and support above the 50-d m.a. Up over 4.51% for the week and up almost 17% on the MSW Index
TWGP – 33.56, the former MSW Index stock is back above the 50-d m.a. on strong volume. The 200-d m.a. is still the long term support and the up-trend indicator
ININ – 18.75, the stock is approaching the $20 level which typically acts as resistance when making new highs so be careful not to chase it into extended territory
RVSN – 21.20, a nine month cup shaped base that has completed the right side as it is within cents of the 52-week high (the left side of the base). Look for a handle to form with a pivot point before grabbing shares
HWCC – 23.78, a double top breakout has setup on the P&F chart with a short term entry above $25

Piranha

How the Poker Craze can Help you Trade

2006-11-10T09:07:00.000-05:00

As promised, I have uploaded the excerpt of my article from the latest edition of The Trader’s Journal.

The article explains on the basis of position sizing and expectancy and how poker has made me a better trader.

Enjoy:

How the Poker Craze can Help you Trade

Piranha

Wall Street Journal Online Mention

2006-11-06T22:36:00.000-05:00

I noticed that my traffic was up today but the source was new:
The Wall Street Journal Online edition.

I was mention by David A. Gaffen in the Market Beat section at 10:30am this morning. Market Talk with Piranha was added to the box “Blogs We’re Reading” at online.wsj.com. I am honored to be mentioned by such a large publication and thank David for following my analysis. I also want to thank Yaser for the screenshot!

Piranha

Market Snapshot

2006-11-06T09:43:00.000-05:00

I will start with the NASDAQ and will focus on the Fibonacci Retracement chart as the Index is having trouble moving through the 100% retracement level. The index has reversed from highs over the past three weeks but did not flash distribution (as a week) this past week. The NASDAQ has flashed four distribution days over the past month which is enough to signal a major market reversal according to CANSLIM rules.

One could also view the weekly chart of the NASDAQ as a deep six month V-shaped pattern with a handle formation. As humans, we can’t argue which chart is correct (the Fibonacci or V—shaped) so we must focus on signals and trade according to those signals. If the market breaks out above the handle, it is telling us to place long positions just as it is giving us the green light to place shorts or buy put options with a continued Fibonacci reversal.

Take a look at the second Fibonacci chart provided which shows where the NASDAQ may reverse if it can’t regain its footing. The logical area would be near the 200-d moving average which is also near the first 38.2% retracement level of 2,239. This same area also serves as the original drop back in May 2006 near the 200-d m.a. Nothing is guaranteed but the signals and setups are there so trade them and cut a loss if you are wrong. It’s not very difficult.

Please remember that Fibonacci retracements are still secondary indicators when compared to price and volume; so don’t make your ultimate decision on a secondary tool. The daily chart of the NASDAQ still shows a trading zone between 2,325 and 2,375 as highlighted in blue on the charts provided. The trend line was snapped as the index is moving sideways with the recent distribution days. Price and volume along with several secondary indicators now point down for the NASDAQ.

The DOW has gained more than 12% over the past four months with an almost straight-up pattern without many breathers. The index reversed from its highs two weeks ago and dropped 0.86% last week on below average volume. The S&P 500 is following the same pattern as it too trades near all-time highs but the weekly down volume continues to come on less than average volume. I have added a Fibonacci graphic on the DOW chart to give you an idea where this tool believes the market will correct. Ironically, the first 38.2% retracement level sits exactly where a handle should have formed before the index moved higher (according to CANSLIM setups).

Other secondary indicators that tell us that the market wants to move lower is the NH-NL ratio which has weakened considerably for the first time in five week as new highs dropped below an average of 300 per day for the first time since late September as new lows have increased to their highest total in a month. We had 688 new highs and only 46 new lows two weeks ago Thursday but had a completely different story told this past Thursday with only 148 new highs and 87 new lows. That’s a 78% decrease in new highs and a 90% increase in new lows. Subtle clues like this can and will paint the picture of what’s going on with the strongest stocks in the market (the leaders). I use the NH-NL ratio as my number one secondary indicator and actually consider it my 1a indicator since it has proven to be so reliable after basic price and volume.

Another indicator is the percentage of stocks trading above their 50-d moving average which spent the past several weeks in overbought territory but has dropped considerably over the past five days (down 13.40% for the week). It took the NASDAQ three months to reverse after this specific indictor gave its signal earlier in the year but the market wasn’t climbing at the extreme angle it is today. It only took the market one month to reverse to the up-side after this indicator gave the over sold indicator in June. Look at the charts page and focus on the light purple line that is plotted behind the chart to see when the NASDAQ was making its move up and down in 2006.

Crude oil is still trading in the range highlighted on the weekly chart and is actually showing more weakness but I have been saying that the elections would probably hold the price down. Gold broke out successfully above the triangular formation that I highlighted last month on the weekly chart and was up over 4.5% for the week as it is trading back at its highest level in two months.

Piranha

Published for the First Time

2006-11-02T22:11:00.000-05:00

I am proud to say that I will be published for the first time next week in a magazine titled:
The Trader’s Journal

"Asia Pacific's Pre-eminent Trading Magazine is a product of DPR International Pte Ltd based in Singapore and distributed to Hong Kong, Malaysia, and Australia. Our primary focus is to research and educate you. It can be easily argued that it is the educated trader that will survive in the markets and we want to be a large part of your education.

The publisher, Dickson Yap, has a long history in the industry. Prior to launching the Trader’s Journal magazine, he worked in the Dow Jones Singapore office doing advertising and circulation. His businesses serve thousands of customers around the world in every time zone."

Some very prominent authors, traders and educators have contributed and still contribute to the magazine so I am honored that they published my article. Here are some of the names you may be familiar with:

Van Tharp
In the unique arena of professional trading coaches and consultants, Van K. Tharp stands out as an international leader in the industry. Helping others become the best trader or investor that they can be has been Tharp's mission since 1982. Dr. Tharp offers very unique learning strategies, and his techniques for producing great traders are some of the most effective in the field. Over the years Tharp has helped people overcome problems in areas of system development and trading psychology, and success related issues such as self-sabotage. http://www.iitm.com/

Tom Bulkowski
Thomas Bulkowski is an author and private investor. Before earning enough from his investments to “retire” at age 36, he was a hardware design engineer working at Raytheon on the Patriot air defense system and a senior software engineer for Tandy Corporation. http://mysite.verizon.net/resppzq7/

John F. Carter
John F. Carter grew up the son of Morgan Stanley stockbroker, and was introduced into trading as a sophomore in high school, and has been trading actively for the past 19 years. He studied international finance at the University of Cambridge in England before graduating from the University of Texas at Austin. In 1999, he launched www.tradethemarkets.com to post his daily trade setups in futures and equities. More recently he launched www.razorforex.com to focus on forex trading research and trading strategies. He’s a Commodity Trading Advisor with Razor Trading, and manages a futures and a forex fund.

Brett N. Steenbarger
Brett N. Steenbarger, Ph.D. is Associate Clinical Professor of Psychiatry and Behavioral Sciences at SUNY Upstate Medical University in Syracuse, NY and author of The Psychology of Trading (Wiley, 2003). As Director of Trader Development for Kingstree Trading, LLC in Chicago, he has mentored numerous professional traders and coordinated a training program for traders. An active trader of the stock indexes, Brett utilizes statistically-based pattern recognition for intraday trading. http://www.brettsteenbarger.com/

NOTE:
Brett has just released his latest book which I have not read (yet) but have provided a link since he will also be published in the November issue of The Traders Journal.

Enhancing Trader Performance: Proven Strategies From the Cutting Edge of Trading Psychology (Wiley Trading) (Hardcover)
by Brett N. Steenbarger

http://traderfeed.blogspot.com/2006/10/finding-your-performance-niche.html

Price Headley
Price Headley is the founder of BigTrends.com, which provides investors with specific real-time stock and options strategies and investment education to profit from significant market trends. He has appeared on CNBC, Fox News, CNNfn, Bloomberg Television and a variety of print and online financial news outlets, including The Wall Street Journal, Barron's, Forbes, Investor's Business Daily, USA Today, and Bloomberg Personal. http://www.bigtrends.com/

Jim Wyckoff
Jim Wyckoff has been involved with the stock, financial and futures markets for more than 20 years. He was born and raised in Iowa, where he still resides. Wyckoff became a financial journalist with Futures World News for many years, cutting his teeth as a reporter on the futures trading floors in Chicago and New York, where he covered every futures market traded in the United States at one time or another. http://www.tradingeducation.com/

Robert W. Colby
Robert W. Colby is managing director of Colby Research in New York and the author of The Encyclopedia of Technical Market Indicators, which has become the standard reference work throughout the world for technical indicators and trading systems design http://www.tradingeducation.com/

For a complete list of contributors, visit their site: http://www.traders-journal.com/issues/contributors.html

Piranha

p.s. - So what am I writing about?

How the Poker craze can Help you Trade
It’s a 2,800 word article that compares the detailed similarities between trading and poker which have helped me become better at both. I will upload the entire article to this blog after it has been released in the magazine.

What is a Point and Figure Chart?

2006-10-30T09:53:00.000-05:00

According to Investopedia, a point and figure chart is:
“A chart that plots day-to-day price movements without taking into consideration the passage of time. Point and figure charts are composed of a number of columns that either consist of a series of stacked Xs or Os. A column of Xs is used to illustrate a rising price, while Os represent a falling price. This type of chart is used to filter out non-significant price movements, and enables the trader to easily determine critical support and resistance levels. Traders will place orders when the price moves beyond identified support/resistance levels.

Additional points are added to the chart once the price changes by more than a predefined amount (known as the box size). For example, if the box size is set to equal one and the price of the asset is $15, then another X would be added to the stack of Xs once the price surpasses $16. Each column consists of only one letter (either X or O) - never both. New columns are placed to the right of the previous column and are only added once the price changes direction by more than a predefined reversal amount.” - Investopedia

I couldn’t have written a better definition myself so I feel comfortable using the one from Investopedia.com. I use point and figure analysis every night while scanning my charts because I can easily determine important support and resistance levels. As with any type of chart, many indicators can setup to offer buy and sell signals but I stick to the basics and only trade a few patterns that the point and figure charts offer.

Please understand that I use point and figure charts as a secondary technical analysis tool behind candlestick charts (both daily and weekly). When I find an interesting stock that has already passed my fundamental criteria and peeked my interest on the candlestick chart, I then view the point and figure chart (will be referred to as a P&F from this point forward). Support and resistance levels can be found using basic candlestick and bar charts but P&F charts eliminate the unimportant noise by setting-up the critical levels and breakouts or breakdowns with the more important (larger) moves.

My favorite pattern setup is the Triple Top Breakout which occurs when a stock hits a certain level of resistance on three separate occasions, telling me that a move above this zone has some meaning. Not every triple top breakout will be successful but the odds of a breakout above this setup increase dramatically. As with all trading, you must take the signal with proper position sizing and set your stops without thinking like a human. Become mechanical and trade the setups; don’t trade your thoughts and don’t ever trade for pure money. You will be a lot more successful if you learn to trade the setups rather than everything else. The NASDAQ recently broke out of a triple top breakout but has since reversed (near the 100% retracement level on my Fibonacci chart – seen in other posts on this blog). Tower Group (TWGP), a long time favorite of MSW has recently confirmed another triple top breakout and has successfully moved higher since forming the resistance.

So what is the true definition of a triple top breakout?
According to StockCharts.com

A triple top breakout occurs when prices rise to a certain level and then retreat because the supply outstripped the demand at that level. Prices must rise back to the level on two additional occasions at which they retraced before. If prices continue to carry through that level, a triple top breakout has succeed and given a buy signal. Since this level previously acted as resistance, we now know that demand is currently exceeding supply and an entry area is born.

A triple bottom breakdown is similar to a triple top breakout except we reverse the rules and look for a breakdown where the price has retraced from the same area two times before (see the example of RHAT). This implies that the price level is a significant area of support and is an area where buyers are willing to buy the stock and create demand that outstrips supply. The breakdown below this level implies that the sellers are now creating more supply than there is demand and therefore the prices are breaking down.

A quadruple top breakout is similar to a triple top breakout, except that the prices break out after retracing from the same level three times. The fourth time the demand was able to outstrip the supply at the price level, and prices broke out with a quadruple top breakout. I have provided an example of this breakout with the chart of FDS (it actually setup five levels of resistance instead of four).

A quadruple bottom breakdown is similar to a triple bottom breakdown, except that the prices break down after retracing from the same level three times. The fourth time the supply was able to outstrip the demand at the price level, and prices broke down with a quadruple bottom breakdown.

Now let’s look to some further basics of the P&F chart (all explainations are provided by StockCharts.com):

Point & Figure charts consist of columns of X's and O's that represent filtered price movements over time. Their distinctive look may be alien at first to people who are more familiar with traditional price bar charts but once people learn the basics of P&F charts they usually become hooked.

There are several advantages to using P&F charts instead of the more traditional bar or candlestick charts. P&F charts automatically
Eliminate the insignificant price movements that often make bar charts appear 'noisy,'
Remove the often misleading effects of time from the analysis process,
Make recognizing support/resistance levels much easier,
Make trend line recognition a 'no-brainer',
Help you stay focused on the important long-term price developments,

On a P&F chart price movements are combined into either a rising column of X's or a falling column of O's. If you are familiar with standard chart analysis, you can think of each column as representing either an uptrend or a downtrend. Each X or O occupies what is called a box on the chart. Each chart has a setting called the Box Size that is the amount that a stock needs to move above the top of the current column of X's (or below the bottom of the current column of O's) before another X (or O) is added to that column. Each chart has a second setting called the Reversal Amount that determines the amount that a stock needs to move in the opposite direction (down if we are in a rising column of X's, up for a column of O's) before a reversal occurs. Whenever this reversal threshold is crossed, a new column is started right next to the previous one, only moving in the opposite direction.

It sounds much more complex than it is, trust me!

In a nutshell, as long as a stock is in an uptrend and it doesn't move down more than the 'reversal distance' (i.e., the box size multiplied by the reversal amount), the P&F chart will show a growing column of X's. Similarly, a stock in a downtrend will cause a descending column of O's to appear. Only when the stock changes direction by more than the reversal distance will a new column be added to the chart.

Traditionally, the box size is set to 1 and the reversal amount is 3 (this is exactly what I use when viewing my charts each night)

It is important to remember that a P&F Box does not represent a single value. Instead, it represents a range of values that is equal to the box size. The number on the vertical axis represents the value of the "floor" of the box. The "ceiling" of the box is equal to the floor plus the box size. If prices move anywhere inside that range of values, the box is filled in with an "X" or and "O" (keep reading for details).

It is important to remember that P&F charts do not show time in a linear fashion. Each column can represent one day, or many days, depending on the price movement. Because P&F charts filter out the noise associated with more traditional charting methods, every mark on the chart is significant. The spacing between months, for example, will not be the same from month to month. Numbers and letters inside the chart itself indicate when a new month has begun. For instance, the number '2' shows where February started. The letters 'A', 'B', and 'C' are used to indicate October, November, and December. (I highlighted the months on the FDS chart where the number 5 is May and the letter A is October).

One of the best places to visit to start learning about P&F charts is through this link at StockCharts.com:
Understanding Point & Figure Charts

I also recommend the book Point and Figure Charting: The Essential Application for Forecasting and Tracking Market Prices, 2nd Edition by Thomas J. Dorsey

It was expensive in the past but the price has come down on Amazon to $37.77 but I would recommend buying it used for $19.99 or visit your local book store. The book is not on my recommendations page due to its former price of $59.95 which I felt was not worth my value. However, at $20, I highly recommend the book to anyone interested in learning about P&F charts.

Piranha

YTD Performances

2006-10-24T16:27:00.000-04:00

In the charts below, I have grouped together the performance in 2006 of the three main indexes, major world currencies, commodities, specific industries and some sector spdrs in the charts below. I have always found it interesting and sometimes useful to watch the performance of major market indexes, sectors and industries. Charts like these can serve as macro views of the general market but don’t ever use these types of charts to pinpoint potential market tops and bottoms. I use them to help confirm action among the individual stocks that I am looking to buy or sell. Secondary indicators is all they are in my opinion.

Major Indexes:
$INDU – Dow Jones Indu., 13.16%
$SPX – S&P 500, 10.33%
$COMPQ – NASDAQ, 6.35%

Commodities:
$GYX - GSCI Industrial Metals, 57.87%
$GPX - GSCI Precious Metals, 14.35%
$GOLD – Gold, 12.74%
$WTIC - Crude Oil, -3.65%
$GJX - GSCI Energy, -8.06%

Currencies
$XBP - British Pound, 8.97%
$XEU – Euro, 6.09%
$XSF - Swiss Franc, 3.88%
$XJY - Japaneese Yen, -1.82%
$USD - US Dollar, -4.85%

US Industries
$XOI – Oil, 14.96%
$DRG – Drugs, 12.73%
$RLX – Retailers, 9.45%
$HCX - Health Care, 6.69%
$TRANQ – Transport, 6.42%
$SOX – Semiconductors, -7.31%

Select Sector SPDRs
XLU – Utilities, 16.25%
XLF – Financial, 13.39%
XLB – Materials, 11.77%
XLI – Industrial, 10.97%
XLK – Technology, 9.12%
XLV - Health Care, 7.66%

Piranha

Strongest NH-NL Ratio Reading in Months

2006-10-23T09:17:00.000-04:00

The NH-NL ratio surpassed its strongest weekly level since May 6, 2006 when it closed at 503-74. This was the tenth consecutive positive weekly ratio with new highs closing at 442 and new lows dropping below 30 for the first time in 2006. The weekly lows averaged 29 per day which gives us the lowest reading since the week ending July 30, 2005 when the market averaged exactly 28 new lows per day. The NH-NL ratio chart shows that last week gave us the highest reading (87.69%) since the week ending January 14, 2006 (87.97%). The past two weeks have spent time above the positive 80% calculation that I have explained on past blog entries (links below). The NH-NL ratio has gained strength for the past 10 weeks according to the number of new highs versus the number of new lows and is looking like a similar pattern to 2005.

Monday had a total of 636 new highs, the most new highs in one day since Monday, May 5, 2006 when the daily ratio closed at 745-38. The ratio continues to gain strength and individual leaders are moving higher (stocks on our MSW Index and the IBD 100) but many secondary indicators are suggesting that the market is still extended. The main secondary indicator that I follow is the number of stocks trading above their 50-day moving average on the S&P 500. It closed at 80.80% after reaching an intra-week high of 85.20%, the highest reading since the January 2006. The market didn’t peak for another four months after reaching the level above 80% in January and this is why the indicator remains secondary. When the NASDAQ finally turned, the percentage of stocks above their 50d- m.a. was closer to 65% in early May (it dropped below 50% the following week while the market took a plunge).

To calculate the percentage correctly, use this formula:
(New Highs – New Lows) / (New Highs + New Lows) * 100 = X%

Where do the Major Indexes stand in 2006?
NASDAQ: +6.21%
DOW: +11.99%
NYSE: +12.23%
S&P 500: +9.64%

Below is an updated look at the weekly averages for the NH-NL Ratio:
Saturday, January 14, 2006: 500-32
Saturday, January 21, 2006: 348-46
Saturday, January 28, 2006: 516-46
Saturday, February 4, 2006: 449-44
Saturday, February 11, 2006: 229-57
Saturday, February 18, 2006: 306-42
Saturday, February 25, 2006: 420-36
Saturday, March 04, 2006: 399-49
Saturday, March 11, 2006: 162-84
Saturday, March 18, 2006: 459-53
Saturday, March 25, 2006: 312-52
Saturday, April 01, 2006: 441-39
Saturday, April 08, 2006: 481-58
Saturday, April 15, 2006: 150-103
Saturday, April 22, 2006: 540-75
Saturday, April 29, 2006: 353-76
Saturday, May 6, 2006: 503-74
Saturday, May 13, 2006: 384-116
Saturday, May 20, 2006: 64-211
Saturday, May 27, 2006: 57-182
Saturday, June 3, 2006: 119-93
Saturday, June 10, 2006: 72-204
Saturday, June 17, 2006: 41-310
Saturday, June 24, 2006: 56-238
Saturday, July 01, 2006: 127-198
Saturday, July 08, 2006: 143-95
Saturday, July 15, 2006: 74-273
Saturday, July 22, 2006: 66 - 307
Saturday, July 29, 2006: 163-151
Saturday, August 5, 2006: 194-132
Saturday, August 12, 2006: 88-210
Saturday, August 19, 2006: 178-96
Saturday, August 26, 2006: 140-74
Saturday, September 2, 2006: 285-42
Saturday, September 9, 2006: 143-60
Saturday, September 16, 2006: 244-75
Saturday, September 23, 2006: 206-83
Saturday, September 30, 2006: 251-75
Saturday, October 7, 2006: 301-92
Saturday, October 14, 2006: 412-40
Saturday, October 21, 2006: 442-29 - This Week

Tuesday, September 19, 2006
NH-NL Ratio still Neutral

Monday, September 04, 2006
Looking at the Market through the NH-NL Ratio

Monday, August 14, 2006
New Highs and New lows telling a Story

Piranha

Comeback Kids?

2006-10-20T10:37:00.000-04:00

Due to last night’s loss by the Mets, I am going to call today’s screen the comeback kids. I am disappointed today as a baseball fan but I will get over it and look forward to next season with a young group of comeback kids (I also have my Giants playing the Cowboys this Monday night).

Are the stocks below a bunch of comeback kids?

Many of them are only a few years old and are gathering some support near their 200-d m.a. as the market looks to be forming its first pull-back or high handle. The market is overbought and extended so I am cautious with this type of a screen but it is important to look for stocks that can gain support above their 200-d moving average.

Many of these stocks are recovering or gaining price strength above their 200-d moving averages but their volume is not cooperating on the weekly chart which does raise a red flag. The stocks screened are ones that made positive gains yesterday, have respectable relative strength ratings and earnings ratings greater than 70% of their peers. Keep in mind that I may have left some solid candidates off of the list because the screen was only looking for stocks making gains during the day Thursday. All prices quoted are from the end of day Thursday.

Comeback Kids?

STLD – 58.69, nice support along the 200-d m.a. with increases in volume. The next short term buy is a move above $60
DRQ – 37.84, back above the 200-d m.a. as the stock is gaining some support with increased volume on the daily chart
FTI – 60.25, this chart is very similar to the first two stocks listed today as the 200-d m.a. recovery is underway but weekly volume is not above average
BRG – 65.84, after five months of consolidation back to the 200-d m.a., the stock is moving higher on increased volume. Could be a $60-$100 setup
GPI – 50.16, the stock corrected about 30% from its high and is now trending back above its long term moving average. Short term buy is a move above $52
BUCY – 49.40, the recent and former MSW Index stock is back above the 200-d m.a. but volume is lower than the distribution weeks.
ANDE – 38.30, the stock has corrected by 50% since its high above $62 and is now gaining support along the 200-d m.a. with a possible deep cup pattern forming
EXPD – 48.11, another one of those CANSLIM type stocks that corrected to the 200-d m.a. after a nice run and is now trending higher. The trend buy is along the moving averages
VMC – 84.20, building a five month cup shaped pattern with recent support at and above the 200-d m.a. Volume has been light so be skeptical.
AEM – 33.25, riding the 200-d m.a. with a short term entry on a move above $34. Once again, I would like to see volume increases to confirm the move
NTG – 32.72, the stock fell below the 200-d m.a. for the first time in years but is fighting to get back above (volume has been light)
OXPS – 30.19, the former MSW Index stock is back above both moving averages and is gaining volume strength on the daily chart but not the weekly chart.
DB – 123.58, a cup with handle base above the 200-d m.a. with a pivot point of $125.42
MDR – 44.36, a long time superstar that has been riding above the 200-d m.a. for the past couple of years with its first challenge of support in September. The stock caught support and is looking to recover its 50-d m.a. but daily volume is low. I would wait for a new 52-week high before becoming interested.
DAKT – 22.42, the stock took a hard fall in August back down to the 200-d m.a. but has since caught its footing. The trend buy would be now with proper sell stops in place
TTI – 25.95, the stock has consolidated through out 2006 with recent support near the 200-d m.a. and is now attempting to stay above the long term average. Volume has dried up, so watch the RS line carefully
HSC – 82.20, a strong stock from 2005, Harsco has consolidated in 2006 and is looking to gain some strength here above the 200-d m.a.
ADM – 37.90, a great stock from late 2005 until mid-2006 with a recent correction back to the 200-d m.a. It seems to be getting some support at the long term support line but must recover back above the 50-d m.a.
TS – 37.71, one of the top performing stocks on the MSW Index in 2005 and early 2006 but was recently removed due to lack of strength and a declining RS line. It has since recovered the 200-d m.a. and will stay on my radar.

Piranha

Let's GO Mets GO!

2006-10-19T08:55:00.000-04:00

Game 6 was awesome (almost as good as game 7 of 1986, I was there) - now we need a big win in game 7 of the NLCS!

LET'S GO METS!

Piranha

Is BOT the Next CME? - March 1, 2006

2006-10-17T16:20:00.000-04:00

I wrote a blog post one week ago today reviewing the CBOT case study I did back in March 2006 which was originally titled:

Is BOT the next CME

After today, BOT is now part of the Chicago Mercantile Exchange Holdings Inc. (CME)!

The world's biggest financial exchange announced on Tuesday it would acquire rival CBOT Holdings, Inc. (BOT) for more than $8 billion in a deal that would combine the two largest U.S. futures exchanges.

It’s funny and ironic that I also just posted up a thread on Tuesday, October 10, 2006 titled: Exchange Stocks: ISE w/ ICE & BOT

When your hot, your HOT!

Piranha

p.s. - This could be a great story over at WallStrip - What do you think guys and gals?

Calling the NASDAQ Bottom

2006-10-17T08:29:00.000-04:00

I‘ve had a question through e-mail about my Fibonacci retracement charts and how they were late to calling the bottom of the NASDAQ market. That is fine because I don’t need to spot the "exact" bottom of a market, I just need to spot the reversal and hop on. Those of you that follow MSW and this blog on a weekly basis do know that one of my strongest talents is nailing market reversals when they happen because it’s something I have done for years while investing in CANSLIM type stocks.

So, I invite everyone to visit this post titled: Déjà vu on the NASDAQ? posted up on Wednesday, July 26, 2006 and determine for yourself if I did see the bottom developing.

Here is some of the text from that blog entry and the chart I posted almost three months ago (July 26, 2006) and an updated chart from my annotated stockcharts file:

7/26/06: “As I was researching my archives on MSW (the archives from 2004 and 2005 are open to everyone) I found some interesting data that correlates the NASDAQ in 2004 and 2006. So far in 2006, we have had 15 down weeks and 14 up weeks. At this time in 2004, we had 19 down weeks and 10 up weeks and the NASDAQ was at a nine month low (very similar to now as we are near 10 month lows). In 2004, my daily and weekly screens started to turn south on May 9th; in 2006, they started to turn south on May 15th (about the same time).

If you look at the two charts presented in this blog entry, you will notice how the market started to weaken in May and June and with a bottom near the end of July into early August. This summer is not over but I am wondering if the pattern will turn out to be similar to the one from 2004. The old saying: “sell in May and go away” has held up over the past couple of year with opportunities resenting themselves during the fall (towards the end of October).

Several of things I was saying back in 2004 are very similar to what I have been saying over the past two months. The similarities are amazing and the current NASDAQ chart may be forming a pattern that could take a similar route as it did in August of 2004. Only time will tell but history repeats and traders are always learning from history.

NOTE: when I say history repeats; I am not saying that it repeats exactly but the charts do resemble similar formations and seasoned traders and investors can capitalize on these situations.”

Click the link for the rest of the post! Déjà vu on the NASDAQ?
Piranha

NASDAQ followed the Fibonacci Levels

2006-10-16T08:31:00.000-04:00

While doing my research this week, I really highlighted how the NASDAQ weekly chart has briefly stalled for one week at each of the three Fibonacci retracement levels. I have been covering the chart since mid-August here on the blog as the index has continued to push higher and stall briefly at the 38.2%, 50.0% and 61.8% levels. With the next recognizable level at 100%, the index has moved higher for three consecutive weeks without a stall.

Is this coincidence or is this human nature in action?

I have highlighted the three brief resistance weeks in color while the NASDAQ regrouped before moving higher. It’s an interesting chart that shows how the market corrected at each level on lower volume than the previous week which gave us a clue that the NASDAQ wanted to move higher.

Let’s wait and see what will happen when it reaches the 100% level. Will this be the final push higher and the first major signal of a market reversal?

I covered the chart on the blog in these posts as it materialized in real-time:

8/16/06:
NASDAQ looking for Retracements

8/17/06:
NASDAQ creating Trading Opportunities

8/24/06:
Using Fibonacci Retracements

8/31/06:
Current Market Temperature

9/15/06:
Weekly Market Review

10/04/06:
Talking Heads at it Again!

Piranha

Am I a Stock Picker?

2006-10-12T10:49:00.000-04:00

I’m a little late to this party but I was reading the blogs debating the issue of posting stock picks and not posting stock picks. My thoughts on the subject tend to agree and disagree with some of the points and comments on those blogs but I can only explain what I do.

Here were the original blogs to debate the subject:

Taz Trader Blog: 6 Reasons Why There Are No Stock Picks

FallondStockPicks.com: Why stock selection *is* important

I write this Market Talk with Piranha blog as an add-on to my main equity research site MarketStockWatch.com. I don’t provide “stock picks” at MSW but I do supply my members with daily and weekly screens and an MSW Index. Maybe I am taking the easy way out but my screens are designed to do the actual research work for investors that don’t have the time to compile the research or some members that are just learning to invest. I integrate specific screens with educational aspects that I have learned while trading my own accounts. I do list individual stocks and I place pivot points, entry areas and sell stop areas but I don’t highlight specific stock picks for them to buy (that is up to each individual investor). One of my main goals is to teach novice investors how to develop their own method of screens by using some of the things I currently do. This will enable them to invest for themselves for the rest of their life and become their own “stock pickers”.

A typical daily screen may contain anywhere from 5 to 20 stocks in one night that meets the criteria of the screen. A couple of my favorite and most successful screens for finding winners is “Interesting Stocks making New Highs” and “Strong Stocks within 15% of a New High”. I run several computerized fundamental screeners to narrow down approximately 7,000 stocks to about 100 candidates and then perform the technical analysis. My service derived from the actual research I performed for myself each night when trading my own account using a modified CANSLIM approach. I shared this research on a weekly basis for a couple years on several free internet forums and then decided to format it and charge a fee for doing all the tedious work (after the idea was given to me by a reader). I trade and we all know that trader’s income isn’t consistent so a research service made complete sense since the work was already done each night for me. I am also an entrepreneur so the idea of an additional income stream made complete sense for me and my family and I did not feel selfish for charging a price. I perform work while filling a niche and I do expect to be paid as long as it benefits the people using it. They wouldn’t pay me if it didn’t benefit them and I would close shop if the service was no longer in demand.

However, I am seriously considering moving to a free platform in 2007 while using advertisements in the form of Google Adsense and the like to cover my expenses and time for formatting my research. This would eliminate charging members and would allow me to expose my work (which I feel is excellent) to a wider audience. Over 600 people have signed-up for MSW since officially opening in January 2005 and I am extremely proud of the fact that I created this business from thin air. Whether I charge membership fees or post up my work for everyone, I don’tmake specific stock picks for anyone. I give them research based on a set of criteria that includes fundamental and technical analysis.

Essentially, I make stock picks each night but its’ up to each individual member and investor to make their own choices based on the stocks presented. I will not and do not form an opinion or bias towards any one stock (at least I try). Members ask me questions and I tell them what I see based on my own beliefs about the market. One of the most important rules I teach to my community is the use of money management rules and the fact that many of the trades they put on will actually be losers. I do have a section titled “All-star stocks” to help promote the service (it is a business) but that by no means indicates that I only screen winners. I always admit when I am wrong and eliminate losers on a monthly (and sometimes) weekly basis and explain why they are being removed. The toughest aspect to teach new investors is the fact that they will have to accept losers. This is by far the toughest idea for novice investors to comprehend and integrate into their system. By teaching position sizing techniques and expectancy, most people come to realize that it is okay to lose but you will always find a few people that want winners at all times and always want to be invested.

So, do I support stock picks?

What ever floats your boat! Do what you love to do and do what you feel help others. Some people like stock picks and some don’t. I like to provide researched screens that take both fundamental and technical criteria into consideration and I love the fact that every stock that ever makes one of my screens was studied by my own eyes on the charts.

My modified CANSLIM screening strategy can be found though this link:
Buying and Screening Strategy

I’ll attempt to teach you about investing and provide you with opportunities you wouldn’t otherwise find!

I guess I am a stock picker but I will never tell you what to buy or sell.

Piranha

Can CANSLIM be Programmed?

2006-10-11T15:32:00.000-04:00

What exactly is CANSLIM? And can it be mechanically programmed?

Here is the brief definition from their website:

C= Current earnings per share should be up 25% or more and in many cases accelerating in recent quarters. Quarterly sales should also be up 25% or more or accelerating over prior quarters.

A= Annual earnings should be up 25% or more in each of the last three years. Annual return on equity should be 17% or more.

N= A company should have a new product or service that's fueling earnings growth. The stock should be emerging from a proper chart pattern and about to make a new high in price.

S= Supply and demand. Shares outstanding can be large or small, but trading volume should be big as the stock price increases.

L= Leader or laggard? Buy the leading stock in a leading industry. A stock's Relative Price Strength Rating should be 80 or higher.

I= Institutional sponsorship should be increasing. Invest in stocks showing increasing ownership by mutual funds in recent quarters. IBD's Accumulation/Distribution Rating gauges mutual fund activity in a stock.

M= The market indexes, the Dow, S&P 500 and Nasdaq, should be in a confirmed up trend since three out of four stocks follow the market's overall trend.

So, can this be programmed? Sure it can but I would urge some changes to fit exactly what you are looking for! Here is how I would simply break CANSLIM down to enter it into a mechanical system:

C= quarterly earnings 25%+ versus last quarter, sales should also be up 25%+ versus last quarter
A= Annual earnings 25%+ for three consecutive years, ROE must be 17%+
N= within 15% of new high
S= minimum daily trading volume is set to 40,000 shares*
L= RS rating of 80+
I= Increased institutional support along with net positive shares**
M= NH-NL ratio must be positive for longs (my criteria)

This can be programmed (of course itis still simplified)!

*Volume should exceed 150% average volume on breakout days and strong accumulation days (up-days)

**Just because more institutions own the stock doesn't mean that the net number of shares bought versus sold was positive! Criteria can be set for this level (maybe you want an increase by 5% or 10%)

Piranha