New Buy:(ACM)

Today I bought (ACM) again. I felt that it formed a handle with a $31.15 buy point and my order was executed at $31.19. The handle was not ideal as volume didn't drop as the handle formed, however the shape is good and it's formed in the upper part of the overall cup pattern.

I think what keeps bringing me back to (ACM) is the overwhelming strength it's shown for the past five weeks - all up on heavier than average volume. This is the kind of quality in a stock that will cause me to overlook characteristics like a flawed handle or a weak industry group rating.

I also see the overall market showing strength one day after another. Again today the indices dodged a distribution day following the accumulation day yesterday on the news of the Fed lowering rates to 0%. If I looked purely at the indices and ignored the daily news (which is what I'm training myself to do) I'd think we're in a solid bull market.

There are however some caveats. For one thing, volatility remains extremely high. This factor alone can frustrate even the most seasoned investors. In times of uncertainty I react by using tighter stops on my buys, increasing the likelihood they will fail, creating more uncertainty (fancy word for fear). Certainly it's prudent to limit my risk when the market is unsettled, but I wonder at times if keeping such tight stops creates a self-fulfilling prophecy.

The other issue I see is a lack of quality stocks breaking out of sound bases. This may take some time to develop but for the time being I don't see any obvious market leadership.

I'll continue to evaluate these factors, but I think when you cut through all the crap the bottom line is investing is tough in a bear market and less tough in a bull market. It's easy to look dumb right now. I don't mind taking chances when I feel the market warrants it, as I do now. However, if I stop out again I will put myself in the penalty box for three weeks - barring myself from any new buys during this time period. I've read about similar strategies and feel it's an effective move. Whether the problem is me, the market, or dumb luck, if I'm striking out it's time to step away and get a new perspective.

Anyway, it would help me to relax and enjoy the holidays.

-Geoff

Stopped Out (THOR) and (ACM)

Stopped out of both of my positions yesterday, I had moved the stops up a bit so I took about a 3 to 5% loss on each.

This market continues to whipsaw, yet it doesn't roll over. As I'm typing this it's absorbed the news that the auto bailout was voted down and is now trading positively.

I can't predict the market and I won't try, but I'm still seeing evidence of a rally here. Whether or not it's tradeable remains to be seen - my results have been poor so far.

I've got one stock left on my watchlist that is setting up for a possible buy point next week. If I have another failed buy however, I will put myself in the penalty box for three weeks. I've heard of this strategy and I like it. No matter what the market is doing, if I fail on three to five trades in a row something is wrong and I need to take a break and re-evaluate.

New Buy:(ACM)

I added (ACM) to my portfolio today. This stock comes from a weak group (builders) but it's an infrastructure play. I like the chart a lot, it's had heavy accumulation the past 4 weeks or so. It's close to a 52 week high and after that an all time high, and it IPO's within the past few years which is also good.

On the downside, I probably bought a little high. IBD described the ideal buy point at $27.30 based on a cup with handle pattern. If it did form a handle, it's flawed. I actually think this stock can be purchased when it clears the whole cup pattern at $32.51.

Once again the market had an alright day, down but on lower volume and the volatility seems to still be easing down. The holidays might help that to come back to normal levels.

New Buy:(THOR)... and a Confession

I have to admit I purchased and stopped out on a stock last week: (EBS). It's a great stock I had no business buying. It was nowhere near a buy point and I basically just took a stab at it, stopping out the very next day. I didn't post about it because I was so disappointed in myself - but of course that's not the right way to handle a mistake. Instead I'll post it here and use it to remind myself not to be such a dope next time.

I do see a real change in the market the past week and think we could have a tradeable rally here. Suddenly the market is acting well, shrugging off bad news and powering higher.

My problem is that work has me so busy right now I probably don't have the time, attention, and emotional fortitude to be in the market. I've had 4 days off in the past 5 weeks, and I'm exhausted. It's taken a toll on myself and my family. I'm doing what I can to change the situation and believe I'll be in a different organization early next year, but for now life is very chaotic. This is not the ideal scenario for investing.

It's hard enough for me to keep a level head under normal circumstances, now I find emotions dominating my investing actions. I have a nice watchlist but I was plagued by doubt and missed the buy point on (ACM) while I purchased (THOR) at $29.68 only to see it close slightly below the $29.60 buy point at the end of the day.

Sticking with the theme that the system is where my success will come from, not some grand stroke of genius on my part, I'm going to have to find a way to handle this market without emotion or just stay out altogether.

Sell Stop:(MYGN)

Stopped out of (MYGN) today at $68.20 for about a 3% loss on my total position.

Not too much to say, this was a probe buy in case the rally took hold, I knew it was risky and kept a tight stop - which worked.  Probably should not have added to my position with a second buy in this climate, but I kept my risk of capital roughly the same so it didn't cost me much more.

I believe today's action effectively ends this rally, I'm back in cash and it seems the market has more work to do before we see a tradeable uptrend.

-Geoff

Add On Buy:(MYGN)

Today when (MYGN) dipped down to $68.50 again I put in a buy at the original $69.24 buy point which was executed.  My cost basis is now $70.20.  It's a risky business averaging down, but stocks often come back to the buy point I don't mind getting some shares closer to the true buy point as long as the stock is moving in the right direction at the time I buy it.  I also use a tight stop in that situation so I won't compound potential losses.

As a rule it's poor practice to ever make a second buy at a lower price than the first, and with the negative action of the market the past two days I may regret it.  I've moved my stop up though so my risk exposure has increased only slightly.

-Geoff

New BUY:(MYGN)

I made an initial buy today of the stock that I saw breakout yesterday - (MYGN). It was a small initial buy at $70.70 with a 5% stop loss. If I suffer that loss it will make up less than 2% of my total capital.

This stock made my screen yesterday as it staged a powerful breakout to a new high on earnings news (just the way I like it). The ideal buy point was $69.24, and it traded below that point for a time this morning. However, the market opened poorly, and I wanted to wait to see how the volume was tracking before making the purchase. I'm remaining cautious and would rather pay a couple percent more for a stock than buy it as the market is logging it's second distribution day in a week.

As it turned out, volume was running lower than yesterday so I went ahead with the purchase. This stock is in a strong group, is newly profitable, is in a 'recession proof' business (if there is such a thing and the chart looks strong. Growth forecasts are good as are the fundamentals.

Of course, none of this guarantees my a profit. However, I think it's a good candidate and my risk is managed as well as I know how so I feel comfortable with the buy. In the current climate I will continue to focus on risk management and capital preservation as my primary goals.

-Geoff

Signs of Opportunity

I found today's market action positive.  I viewed the distribution day immediately following last week's follow through day as an end to that rally attempt, as something like 90% of the time rallies fail if they suffer a distribution day one of the first three days after a follow through day.  I don't like those odds.

Therefore I started tracking the market anew last Thursday, when it began what I considered a new rally attempt.  Based on that view, today was a follow through day on all three major indices.

I think there are some compelling reasons to market can mount a successful, if short term, rally now.

First, the election is over.  For better or worse, the issue is decided and the market hates indecision.  Now that we will know who we have in Washington, the market can get on with pricing the new establishment in.

Second, volatility has been steadily declining from it's historic levels.  The market is calming down.

Third, the S&P 500 retook the 1,000 level - there could be psychological support here.

Finally, and probably most importantly, there are some quality stocks breaking out of decent bases this time.  Worth watching is that most are related to the medical field - typically defensive - but that doesn't mean some money can't be made from them.

I had a nice candidate come up on my screen tonight and I'll have a look at it tomorrow.  If it acts well and I can get in near the buy point (it would need to pull back some) I'll take a run at it.

-Geoff