Welcome. The contents of this blog comprise my personal observations on the stock market from the perspective of using both fundamental and technical analysis by reviewing market data and stock charts based on the methodologies of William O'Neil of Investors Business Daily and his books, from Stan Weinstein's books, and most of all, through lessons learned over the years by listening to Gary Kaltbaum's "Investor's Edge" radio show on Business Talk Radio.

Criteria of stocks include first researching sectors to determine which are strong and which are weak using the ADX indicator (>40 = increased volatility); focusing in on a leading sector and buying leading stocks on a high volume
breakout (minimum 2x average) above a base; stock prices are higher than $25/share with daily average volume higher than 300K; positive and increasing PVT (indicating institutional ownership), positive and increasing RSI (indicating relative strength compared to other stocks in the market).

Please keep in mind that
I am by no means an expert, nor are my posts intended for anything other than to share my opinions of what stocks are doing for the purpose of getting feedback. Thus, please do your own research before taking action on what you read here. I will be adding posts on topics of interest as I learn about them.

Monday, July 13, 2009

Hornstein Capital Update

This was an e-mail I received this afternoon from Hornstein Capital, a group I trust. They can be found at http://www.hornsteincapital.com; their address is 53 East 34th street, Suite 207, New York, NY 10016.

In my last missive, I discussed that the market has been in a normal correction that began on June 11. I noted that while there were a few distribution days since June 11, most of them were benign and occurred on relatively low volume. I also noted that the correction was allowing the market's leading stocks to form constructive bases. I summed up my thoughts by stating the following:

"In summary, the leading stocks I outlined above hold the key for the market's next major move. Should they come under distribution and break their ten-week moving averages on heavy volume, the correction we have seen likely will deepen and become much more severe. However, at this point in time, the evidence at hand shows a picture of leading stocks simply forming constructive basing patterns without much distribution. Until this changes, I choose to remain a bull on the market."

While the indices continued to correct throughout the early part of last week, the market found a low on Wednesday, July 8th. The Nasdaq traded down to 1727, but closed at 1747, and put in a positive reversal, as did the other major indices. That day constituted day one of an attempted rally for the market, and for the remainder of last week, the indices held Wednesday's lows. Today, on the fourth day of an attempted rally, the Dow, S and P 500 and Nasdaq all staged technical follow-through days.

Today's action signals that the correction COULD be over and that it is time to start looking to accumulate leading stocks breaking out of bases. Here is an update of how the leading stocks I outlined last week are currently acting.

AAPL- Continues to act well, as the stock found support at its ten-week moving average last week and closed the week at the top of its range, a constructive sign. The stock lifted off today and continues to act quite constructively as it attempts to finish a flattish base. Earnings next week should provide the impetus for a move up, should the company provide earnings the Street likes.

BIDU- Also found support at its ten-week moving average last week, and closed near the top of its range. Like AAPL, the company reports soon, but for now, the flattish base continues to look constructive.

GMCR- The stock has pulled back to its 50-day moving average on low volume. Today, it had a nice shakeout below the 50-day moving average, but managed to close above it, a bullish sign.

AMZN- As I noted last week, the stock was sitting slightly below its 50-day moving average, but volume had been light on the decline. Today, the stock got back above that line on increased volume. Like AAPL, earnings should provide the impetus for a move up, should the company beat.

STEC- Last week, I noted that this could be "the real potential monster stock" and that it "could be forming a bullish high-tight flag." As soon as the market's correction appeared to end today, the stock broke out of a high tight flag on huge volume. While the stock is very extended from its 200-day moving average, it certainly looks like and acts like a monster stock

TSRA- Continues to trade well in a flattish tight base and moved up today, although volume was not huge. Look for a high volume move to new highs.

Star- Looks like a bullish ascending base, as the stock held tight while the market corrected. A huge volume accumulation day could get the stock going again

RVBD- Good looking pullback to its ten-week moving average.

VPRT- Continues to base into earnings

SYNA and CREE- Both of these stocks broke their 50-day moving average on average volume. Sometimes stocks will dip below that moving average on light or average volume to shake out weak holders, only to rip back above the average. Look for a high volume move above the 50-day moving average in the next few days.

The Chinese gaming stocks (NTES, SNDA, CYOU, PWRD) continue to form bases, though they are somewhat wide and loose. NTES looks the most constructive of these four.

In addition, Chinese company CTRP appears to be carving out a constructive double bottom. After coming under massive accumulation in the spring, the stock pulled back in extremely benign volume, and now looks poised for a move higher should the market continue to ramp.

NFLX also retook its 50-day moving average today on good volume. The stock is now attempting to form the right side of what appears to be a cup-like base that started in late April.

Restaurant stocks are attempting to form the right sides of new bases. BWLD and PNRA both found support at their 200-day moving averages and are attempting to get back above their 50-day moving averages. PFCB, DIN, CMG, and YUM, are all forming constructive bases as well.

Other stocks that appear to be forming constructive bases include CPA, FFIV, RAX, SNX, LL, HGG, MVL, CPA, QSII, CERN, ARST, MFE, CML, MR and SWI.

In addition the banking stocks may attempt to move out of recent consolidations. By way of example, GS has formed a bullish double bottom pattern, and a good earnings report tomorrow could lift this stock into new yearly high ground, which should help the broad market. Of course, if the stock comes under distribution on earnings, it likely will impede the broad market's progress.

In summary, today's follow-through day signals that the correction we have witnessed COULD be coming to an end. Should the leaders I outlined gap out of their bases on positive earnings, it will signal that the uptrend is definitely resuming. While the bearish sentiment remains high, and the shorts continue to get run over, I remain a bull on the market until the leading stocks breakdown. At the moment however, they show no signs of doing this.

This email was sent by Hornstein Capital Partners, 53 East 34th street, Suite 207, New York, NY 10016, using Express Email Marketing. You were added to this list as rzcashman@gmail.com on 12/1/2008.

1 comment:

tuna said...

Hello I can I receive Hornstein Capital updates by email?