current longs I am holding with total returns since 1st purchase making money on FRI: DAN 102% TEN 50% RINO 47% LAD 22% FIRE 94% FUQI 31% AFFX 43% PTI 46% SMED 40% CAMP 66% CHLN 95% ISLN 21% ENTR 23% OMN 67%
I am still happy to see that the market is trending higher placing us with some nice individual winners here at BigWaveTrading.com. However, I am still very cautious for more than a few reasons. I don’t think this will be resolved anytime soon, unless I see a lower volume pullback. Really quick let me tell you what I love and what I don’t like about this rally.
Unlike ANY rally I have EVER seen before, I have never seen SO MANY BLOWUPS happen right after we get going. This rally only started in March and already we have seen ADY fall 75% three weeks ago to SYNA falling 33% on Friday. Sorry everyone but in 1999 and 2003 or even the start of the bull runs in 04, 05, 06, and even early 07 (during 07 we started to see some reversals hinting toward the 2008 big bear) I did not see this. This is action not quite compatible with other bull runs. However, with this bad news there is some good news.
For the first time in a long time we have seen two VERY NICE charts setup. The first stock is RINO up 45% in 1/2 a month. While the base was ONLY 11 days long (I like 15 days or more for “perfection”), the price action, volume, and BOP were all beautiful. Following RINO was a recent long that was up 9% immediately on FRI. This is an immediate follow through and comes from a stock in a beautiful long pennant formation with tight price action, great volume action, and near-perfect BOP action. Once again, neither one of these stocks are perfect but it sure is nice to see some ‘GREEN’ (my kind of “going green”) charts out there actually setup. Then to work! Finally! I have been waiting since AFSI/TESO of early 2007 (you could call APPY in late 2007 near perfect/perfect that worked; FALC, INXI, and others failed that year however) to see charts like this.
In 2008, PDO, DGLY, and ANCI were the closest we came to what I want to see in my charts. So overall this is a very good condition but the fact that we still do NOT have ANY ‘PERFECT’ charts with bases over 15 days, perfect price/volume relationship, with max-green BOP the whole base and on the breakout is a hint to me to be careful about getting too excited about RINO and the other stocks chart pattern.
Another problem I have is that the crowd is increasing in their bullish stance. According to the AAII the bulls/bears/neutral split into: Bullish:47.67%, Neutral:20.93%, Bearish:31.40%. So as you can see via regular investors, the crowd is bullish. For a real strong bull market, this is OK, however, with almost 1/2 the crowd bullish I have to be careful about thinking about going fully long here. When that number is around 20%-30% and I get nice charts, that is when I feel good. But at this point I have a feeling one more week of rallies will put the bulls near 60% which is getting too high. Also Investors Intelligence after showing bears and bulls deadlocked just a few weeks ago (which was bullish) now shows bulls at 42% and bears at 31%. While these are not extreme numbers and if you study 2003 you can see you can rally the whole way with bulls over bears, it does show that the crowd now believes both pro and non that stocks should be going up.
With the put.call ratio only at .8, it is obvious to me that almost no one is really bearish. People, like me, may be worried, but we know better than to fight the trend. In fact, I am embracing it by buying stocks. However, with the implosions in stocks like IMMU, SYNA, and about another 20 stocks on Friday, it is hard to not be scared. Heck my two biggest longs earlier were ARST and STAR and BOTH of those stocks hit me with scary one-day reversals. If they can do that to new-exciting companies, they can do it with any.
My final problem comes with the action of the Nasdaq the past two days. On THUR and FRI the Nasdaq opened very strong running up intraday only to have a reversal and a lower close than open the past two days. The big worry for me was that the gap up on THUR should have sent the Nasdaq soaring. Instead the stock put in a nasty EOD reversal closing two points lower than the open. Being consistent the same thing, minus the gap higher, happened Friday. The indexes rallied and reversed to close 2 points lower than the open. This also came with all those nasty reversals on Friday. If this is churning, then it is only the start, but it could just be leading us to a consolidation phase where the weak like SYNA and ADY die while RINO and my new long up 9% on FRI rebase and give us an EVEN BETTER entry to go long. We can all wish good thoughts because it is healthier that way. I won’t deny, however, that subtle signs of distribution can be seen, especially when you have reversal like we are seeing in individual stocks the past three weeks during the rally.
Oh yeah, another problem is that out of all of my “best” stocks I still have VERY FEW up over 100%. While I don’t think this is necesarilly a problem and instead is a sign of slower USA growth I have to admit it is disappointing not having any SINA, NTES, SOHU type of stocks that I had at the 2002 bottom that made huge gains fast. It makes me think that I might never hold another TASR long for a 2,300% gain in nine months!!! That position might go down in my history as my best long hold ever for % return. It seems that the huge moves we got in 1998, 1999, 2003, 2004, and 2005 are gone. It started to become apparent in 2006 the gains weren’t as strong but then I got FSLR in 2007 which gave me a 250% gain, along with IHS and MA which gave me long term 250%+ gains. So anything is possible and thanks to some stocks like DAN, FIRE, and CHLN, I do have some stocks that are either up 100% or were just a few short days ago. At least there are some and let’s not forget my best setup so far being up 45% in 1/2 a month so far. More could come with a proper setup and bounce/breakout off the 50 day moving average.
So, in conclusion, overall, based on the trend of the general market I am bullish. But based on recent action in some individual stocks, the Nasdaq, and to see two distribution days (mind you they had very bullish intraday reversals to close well off their lows) in a row on the NYSE raises my ire about being careful. The most important indication that this market isn’t right is the one thing that almost never happens and in fact has NEVER happened to me before this rally. This rally has the overall market BEATING my returns. I continue to lag the market this entire rally. Guys, if you have IBD, look at the IBD 100 and IBD 85-85 compared to the market the past 8 years on the 100 (I think 8 years). You can see leading stocks crush the overall market in uptrends. In this uptrend, however, leading stocks continue to not only NOT lead but actually are lagging. My top Featured stocks are NOT making me the HUGE money unless I focus on China ONLY. The stocks giving me my best gains are those beautiful green charts that I love. Sadly it is all the cheap stocks which makes me nervous besides markets like 99 and 03 that not only didn’t see much distribution at all but had VERY FEW stocks breaking down hard like we are seeing in this rally. This is one WEIRD rally. I will ride it higher with my large longs portfolio but I don’t like not having any LARGE positions in beautiful stocks like some of my top past winners (TASR 03, EPIC 03, HIL 03, HRZ 06, AFSI 07, for instance). When I get a setup like these stocks then I will have NO PROBLEM putting over 20%+ into one stock. Right now, there is not one stock that has more than 5% of my money and it should be obvious that RINO was one of my bigger longs but sadly that new long that was beautiful was only a regular buy. Why? It did not close at the HOD or just slightly off the HOD. Therefore, I was careful with it, since it wasn’t also coming RIGHT OFF the 50 DMA. Big mistake. The beautiful chart should have taken precedence and not only that but I should see by it not closing at the HOD I was getting a GIFT PULLBACK to make a better purchase. Oops. Also while the entire base was green, the whole base was not max-green. However, I am foolish and should acknowledge that this was the best looking chart I have seen yet. Once a fool, always a fool. Thank God I am a master of odds which helps me succeed. Without this ability and discipline, I probably would be a mediocre trader either barely losing to the market or barely beating it. Do you think all of this work is worth that? Do you think I would work THIS HARD EVERY DAY, with a very debilitating disease, if I wasn’t doing very well? I think you know that answer.
Aloha everyone. I love you all and thank all of you that either prayed for me or sent good thoughts my way. I want to thank Joshua Jacobs for sending me a wonderful book on religion. THANK YOU SON! To close I would like to see to be careful out there and if you see ANY KIND of funny action in your stock and you have profits or a small loss cut some out. If you buy a stock and it goes from green to red even in the uptrend, look to get out of it completely. There are too many good charts out there that COULD become great charts to stick yourself in a stock like STAR during the whole rally. Next thing you know you will be holding a SYNA.
Thank you everyone. I hope I am back to normal but I will be honest it seems I am getting really fatigued really quickly nowadays. M.S. strikes like a shark. You can see it but you can’t stop it from attacking. It is going to do what IT wants to do no matter what. Please know that despite all of this, I have still gone out of my way to make sure you make money and keep this site alive. The way I was feeling a LOT of people would have just taken the FULL 3 weeks off. I sometimes wonder if Neil Cavuto EVER has any of these reactions? His must be in better control than mine. I don’t know. Anyways aloha.
PS: Don’t forget subscribers, this is my FINAL year on Maui. After next summer I am out of here. They have taxed me off the island. I am moving to Texas where I plan on beginning to give seminars (online and live) along with attending many investing meetups in the state. Hopefully, we have some Texas residents that read this that would love to get more involved in taking control of their investing life and I can quickly adapt and get myself on stage to be more personal. Living on Maui doesn’t allow me to do this. This is a good move and after 10 years of surfing on a beautiful island, I think it is time to call it quits. I mean that is if you mind paying 40%+ on taxes. I do mind and therefore need to go. This means if anybody wanted to visit Maui while I am here (I have had some great times with subscribers on Maui), you will need to do it during the next year. Aloha means hello and goodbye! Take care everyone, great luck, and let’s make some money this week. Take care partners.
Video one is available for subscribers, in full size, on the forums.
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