DJIM #4, 2007

We can't block out all the noise, all the negative noise hitting the wires, the bobble heads on CNBC as its venom is in front of you on your screens...the abundance of red, 3 out of 4 days!.  But it is possible to turn off the excess, the actual stuff making the noise...click..it's off!!.   If you want to dwell on the macro, we can refer you to 1000 places that will discuss the possibilities till they and you are blue in the face.   It is so easy to get involved in the hype, even if it is reality in many respects and get a tad depressed and sit on your hands.    You could fall into this trap and sit ideal or you can jump a bubbly, new opportunity to make some mo'.    DJIM is ' stock picking',  it is not to evaluate a macro situation and decide to take a position in a stock that could be affected by the goings on 3 months from today and make you 10% down the road...Why should we wait 3 months, a year for a 10% gain when the possibility to make that much in a day or two is granted almost every day....This is especially true during earnings season!....No matter what the 'big boys'..INTC, IBM's are telling for the future....Small caps for the most part are only telling you what they did for the past 3 months with no outlook.  This gives us all of us an opportunity to collect points, here and now on the PAST..in most cases it's easy money as it tends to bring in momentum and an excellent trading environment.   But if you're shacked away, clinging to stocks stuck at the 'hub' with no immediate flight plan...well, then you are also missing opportunity after opportunity if you do not have excess cash to use.    Procrastination... is something best left in bed or on the potty in the morning,  if you're going to trade successfully.   The ability to differentiate between stocks and understanding what has the most potential to move out of the gate the fastest is so important in our and your success.   You have seen what momo can do recently...good and bad as in VOL.   If you do not recognize momo and jump in day 1 or 2 and procrastinate till day 4, you are left at the summit.  Bet there are more waiting for a move from these prices than ones who got in the first move of a max. of 12-13 points from DJIM time on it.   Basically, those admired the move from a distance so much that they think it can be replicated once they're ready days later.    Why let it slip through your fingers the first time and be left hoping for sloppy seconds!.  To a lesser extend, this holds true for a USAP and it's potential following earning last week.  Like CENX (if you want some aluminum in your diet),  if you want a steel play with a connection to Boeing etc there is not a better longer term hold in this sector.  They are a little volatile but also give a better bang for the buck.  Again, we are not here to make predictions on commodities or anything else...so we are here with the flow.  Right now, its a little positive.

USAP, you saw this stock here before most likely.  It had stellar earnings last Q and this Q beat all expectations handily even if you take the nickel pricing that added about 10c to the EPS.  The 97c was 80% growth and guidance is nothing to sneeze at either.  How to differentiate a stock and its potential for a fast move.  Compare a stock like VE with a 200mln float and USAP with a tidy 4.2mln and 80% instit ownership.  This smells like a possibility of a fast move and volatility, so if you want to the chance of a 3-4 5pt move, stop procrastinating if the signs are there...VOLUME is always one... Why not start with a starter like we did below $37 and then add as you see the momo come.   So, if you watched like many watched VOL, Monday might not be the best time to enter but on the other hand you might want to take advantage of the profit taking end of day and price decrease as a new start.   Again, we are not here to figure out and suggest if a pullback is sufficient for you to enter...our gig is to introduce you to a potential move and in this case tell you our entry.   Now is where you might want to use charts in your decision process.  Of course, we took some points off the table during the nice run, we all should heading into a weekend with a fast gift when its given.  There is nothing not to like here,  but it does not mean you don't take the points.  You're in the market to make money and nothing else.   We will follow closely to take back a full position.

VNDA, here was another opportunity in a stock we know from our own experience the power it can generate.  We know its bloodline, we know this can be that thoroughbred sprinter.  The history of a stock is simply the chart, so if you missed the DJIM run before... a quick glance at the chart and the previous 2 moves should have made you to put this on top of your trading list to watch after our mention of the funny biz in the 350k lot at highs(Wednesday), the snap back action to highs Thursday was another clue to something fishy, yet smelling good.    An offering at the highs of a stock is always positive, it is not the offering with no price that we are seeing from MR and EDU that make the investor apprehensive or even scared that it will be quite lower and also cause dilution.  In a up and coming biotech with at least 2 promising drugs,  dilution is the last thing on anyone's mind.  VNDA will have to partner with a major as they said again Friday, we feel  this should continue to keep the stock steady in anticipation of the inevitable event of a hook up with a major.   What has always been impressive about VNDA is its ability to hold gains after the initial big run.  The finish was strong as it pressed the days highs. We noted our intraday sell and the potential to pick it up back with a break of the days high.  We ran out of minutes to see if this occurs on Friday and will take it minute by minute Monday to see if we add back what we sold.  Remember, we fear the 'negative' news that might come overnight in a biotech,  so use caution and only sleep with what won't break you.  Look at it this way, you could have played VNDA 3-5 days so far and slept fine in between the big days.

What else for the week ahead?.

9EMA..you can make a list off the charts posted of the stocks below this short term support line.  Starting with the Chinese stocks like EDU MR and others like DLB and know what we have no interest in now.  No need to list them all.  Then look at those stepping above this point like the Russian telcos ROS VIP MBT to put back on your potential trading list. Just watchin now more closely.

OIL, really hate to turn to ALY, BTJ if need be, but they do still offer nice trade potential.  MTRX has been incredible through the massacre and considering we have held some through, we'd definitely like to see it move with any sector move.  This is the safer bet and one you can hold through the night.

ATNI was one of those HUB stocks as it did nothing but wait for a flight plan after the initial  BIG run!. It got grounded!. We discussed these tired plays may be a waste of cash at their recent high levels.  Well,  ATNI finally collapsed late last week, but might be a buy opportunity again at 50 day.  More than any other reason is ATNI made it to 2 publications as a 'top' small cap (motley and street.com), Friday.  Just a hunch, if the market is good.

MFW AMK MEND, 3 buys we have listed here on the Journal in 2007, have been steady performers yet do provide some swings and dips to buy before continuing back to highs.  We continue to hold small.. adding/subtracting as we go along depending on the trend.  Trying to catch a bigger move here.  CCOI is another that seems to have staying power, best to look at it again if it comes to highs as 9ema area is still a possibility here.    CCF, a one dollar move in a stock like this is .20 cents on another, so take that into consideration when dealing with thinsters and be prepared to stick it out if you buy these types.  The earnings are not going away, even though the buyers are not lining up last week.  Maybe a few will at the 9ema area.

VE, moved a $1 after our alert on a hunch it might move because of news relating the Suez. Seeing the float, you know this won't be a quick mover. If the news is not substantial and doesn't put the stock in a uptrend soon, we will release that starter position.  A break of $70 is what we would like to see, if it doesn't come soon...we'll say good-bye.

EBS, introducing this IPO to consider for a potential trade tomorrow or one to keep on radar for future events.  This is a recent IPO that is profitable for a biotech, it provides an anthrax vaccine contract for the stockpile .   It moved late Friday and we want to see if there's any follow through or any news.  The OS is 80% is controlled by one big head in the company.  There is not much left for you and us, so there is potential for more moves.  We could be at the beginning of a move, or we could be at the end of a short one.  If we take a starter position early and it turns against us, we won't let it go too far in the red before selling.   

Look at IPGP, as an example of what could be a 2 day run and the potential to get in too late as some did here in the 27's,  instead of buying the 25's and the potential break we spoke of before and after it started to move.

NDX..the market vs. DJIM

Since the MLK holiday, we have seen the NDX go from 1847 to a touch of 1771 today.   Despite this treacherous ride, the heavily followed DJIM stocks have shown not only resiliency but power to go forward.  This divergence with the market only escalated today with 7 DJIM names hitting a NCH and some even had higher highs intraday.  They include USAP CFF VNDA MTRX MBT VIP AMK.   If this was a public space we could probably find something to say on these tonight, but considering it's not...we won't bore you more and hopefully find you in a good mood following some of these recent moves.   If anything use tonight to read back the recent Journals, the alerts to see how this all came to be and the strategy involved in adding/subtracting these positions.   Also, if the market continues to slide, this divergence with DJIM stocks won't last forever and you should be prepared with an exit strategy.  A look over on the charts should help you create a line of support, every stock is different in respect to floats, volumes and should not be treated equally.  A CFF is not a VIP, a AMK is not a VNDA, so some need more flexibility than the other on your part.  The line of support could be a recent breakout price, to some it might be just leaving if the stock drops below the previous open, low or high.  It all depends on the individuals entry price, their time frame, how much they want to pocket etc.  Remember this is just the start of earning season and new opp's are coming up almost daily, so don't get a crush on a stock that turns on you or is lagging.  We've just started and a MTRX CCF USAP have already proved to be quality DJIM earning plays...there will be more!!. Anyways...just a few things

MTRX!!...finally!!...who came out with earning today, MTRX or BTJ?..lol.  Take away the gap in BTJ and MTRX was the better trade to add to today.  Guess BTJ EPS, the Oil spurt and MTRX getting to 17.30's area( see the 60min) all had the makings of the stars lining up for MTRX.  Considering, we've been complimenting this stocks strength through the massacre of the oils since its earnings...todays "interesting" point in alerts was a potential bust out in the making and a holder of MTRX should have been adding to their position once it was clear.  As far as BTJ, the earning is stellar and by sounds of it the growth is to continue in the next Q's...unfortunately the action was quite boring considering all the positives in this secl.  Our concentration turned to MTRX early and BTJ never really gave reason to add just yet.

The point of the alerts/ updates is to catch a potential move.  It could be the start of a hold or just a trade once in.  Lately..all the big moves have originated from that page...CFF USAP, VNDA and the Russian telcos, MBT,VIP yesterday.  The important thing to see in respect to these moves is in many of the moves buying on the next weakness has been very profitable.  So, it's not about the chase, wait for some confirmation, you need to see some momentum.    Also,  ROS, GLDN waited till today to get on MBT, VIP's back.

ENR, we added a bit today in the afternoon.  Prud added 6% to its eps estimate for '07 late in the day. Energizer beats by $0.20, beats on revs (ENR) 75.60 :Reports Q1 (Dec) earnings of $2.12 per share, $0.20 better than the Reuters Estimates consensus of $1.92; revenues rose 8.7% year/year to $959.2 mln vs the $921.4 mln consensus.  We've seen this bunny hop, so we're not worried about getting at these levels. 

CHDX,  just mentioned this one in the Journal last Tuesday as one to watch.  "CHDX, this one was in play a month or two ago and today it broke out apparently on good volume.   Keep an eye on this one for potential follow through or not, it's not the most consistent day to day performer".   Today, it had another big day. The question...can it do two positive days in a row without the usual give up.   We think this might be the start of some attention into ISRG's eps on Feb. 1st,  if ISRG continues to act as if a good report might be in the cards.

EBS,  hanging in nicely after a couple of big days.

Resiliency

There's really no need to talk about the overall market today.   Dow notched a new high and Naz followed with an impressive gain.    We are not going to delve into why and how of the overall market behaviour.    As a trader, you cannot battle against the overall market trend.   Rather, you can use the market sentiment to gauge the behaviour of individual stocks.    We couldn't help but noticing that across the DJIM land,  most if not all of the stocks on our watch list ended up in the green.   This is actually not rare considering how the market performed today.   What we find most encouraging is to see the resiliency of some of our stocks,they performed well on a good day like today but also just as well last few days when market wasn't as "hongy dorry"!     We have quite a few stocks making new 52 week highs and some making fresh break outs.    This is definitely a sign of a good market here, but we know this can change on a dime.  Here are some stocks that we thought are worth noting...

VIP MBT, incredible strength for the comrades the past 3 days..7 to 9 points on each.  The short term RSI is almost out of this world and we think this is unsustainable for a 4th day.  We sold most and will likely finish doing so early on tomorrow. These two charts are a great study on a breakout on earnings, the pull-back and then the higher high breakout we just witnessed.

AMK, volume has been a little slow last couple of days so the momentum is not as strong as we would liked.   The price action however, is pointing to the right direction and we are still sticking with our thesis for a pre earning runup.

CCF, we really like this one's steadiness and basically are not overplaying it.   

USAP, is holding steady after earning and is using the strength of the steels in holding these levels.

CCOI, the leading secs today were the internet related issues, couple this with a Lehman upgrade on another Clec and Merriman's bullish comments on the CLECS and CCOI  put the shelf offering from last night to the side.  See the chart for the possible break and/or resistance point.  As per our update/alert, we added and will take the chance this breaks out with some pop soon.

EBS, not a bad day for the other biotech in DJIM land introduced this weekend.  Volume speaks volumes today, you could say. Oh yeah and VNDA, just keeps inching higher..

HMIN, as if we are tired of seeing this play popping up on this journal. lol    This one again broke out today and closed at a triple high(intraday high, 52 week high and all time high).   This combination coupled with a good market and a strong base it's had usually indicates a very bullish trend.   But of course, we have been tricked by this one before so we will keep a close on it tomorrow for any sign of weakness.  One thing to watch out for is the China stocks doing offerings, it seems the price starts to bounce to old highs and then the news hits. Sneaky.

Bulls, Bears on a dime..

So the market pulled back and gave up pretty much all of the gains it had from yesterday.  It changed on that dime!   We didn't want to be Rah -Rah yesterday, we don't want to be Blah -Blah today.  The question we have is, did we give up all of our gains from yesterday?   Hardly!   Even if you are reckless on a day like today, you still wouldn't have that bad of a day, as long as you traded DJIM stocks.    The point is, don't get caught up with this battle of bulls and bears.   We really don't need to be concerned about the interest rates at this point.    We really don't want to be the casualties at the expense of the institutions' inability to making up their minds.    What we really mean is that since none of us have billions or even multi millions to trade, we should not trade as if we are the market movers and shakers.   They are the Bulls and Bears and we are the Mice coming out for chunks of cheese!.  As long as we stay selective and take profits more often than not, we should all stay intact in this volatility and make some money!  What we should be doing instead is to be smart and be alert, and keep an eye on what stocks are the casualties of the market weakness and what stocks are performing irrelevant of the market action.

Our conclusion for the last few days is that we HAVE TO stick to earning plays, and more recent the better.    If you look at all the DJIM stocks that were green today, most of those are the ones that just recently came out with strong earning report or the ones that came out with good reports today.     Yes, it may just be that simple but it takes lots of discipline to stick to the same winning strategy.  There are hundreds of reports coming out now with stocks beating estimates, raising guidance...we are trying to pick out the ones we think have potential even after a 10% move.   Many times, we are simply trying to challenge ourselves as a trader,  but more importantly, we should be challenging ourselves to stick to a winning trading strategy.    Here's the rundown..

USAP, despite the pullback, we thought today's a good day to add some to our positions.   From previous journals, we've noted that for a couple of days USAP has extended itself and pullback might be inevitable and today we got our wish.   In fact, if it's gonna pullback, we are glad that it pulled back today, as opposed to yesterday.   Why?   It's natural that an extended stock pulls back on a bad index day.   Volume is relatively light and action is reasonable.   We added some back.

CCF,  couple of days ago, we noted that CCF had a better setup than USAP.   It showed everyone that point today.  Market is down big and this stock held up really well and notched a new closing high.   Even though the gain is so tiny, but it's still impressive that it did on a day where the major indices took a tumble ..did we mention a new 52 week high? lol

EBS/VNDA, these two had similar action to USAP and their extended action just could not keep up when the indices getting trounced.  But, before they backed up nice new highs were reached especially on EBS to 17.75.  We are not in a rush to buy back but will wait until they stabilize before re-entering.  If you recall, we exited a portion of VNDA and then returned as recent highs of $30.30's were reached, at this point we alerted to buying back in.  This is similar to what we want from here.  We turned our attention to picking up some fresh EPS stocks instead.

HMIN, ok so the close was not as encouraging as expected.  You've heard that before and seen this stock at work ; lately, so this action is nothing new to any of us...good or bad market.  The intraday move is enough for anyone to make a point or more though.   Basically, we have learned our lessons way too many times with this one.   If there's gain, we'd take it.   Tomorrow is another and different day.  Pullback on this one is just way too common.

RESP VARI,  again some of you may have remembered us saying this phrase from before, "the actual earning report of a company is one thing, more importantly it's the reaction of an earning report is what we care the most"!   We like the action and we followed steps with many others.   Based on the reaction, we assume that there's plenty of ppl who liked their reports.    One thing we've learned from our early trading career is that we just can not disagree with the collective force of ppl, right or wrong.

TRCR, we are definitely putting this one back to the top of our trading list again.    So there's this visibility problem, right?   Well, the problem is that the visibility issue won't be a problem for us next few days or weeks.     We are sure that when the visibility issue comes into play come this summer Q2/Q3, we probably won't even remember what this company does anymore or this Q4.   Again, following the stock action here and we think this one will get its playing time for the next little while.  Yesterday,  we addressed this in the forum on a post regarding TRCR.   Basically the earning will give the stock a base, a new base and traders will play off it..its cheap and float is small.  The CEO also said this Q is a "quantum leap" for the company and Q2/Q3 is seasonally slower, so its about now!!.. The sell off yesterday was the briefingcom chasers, first chasing the juicy plug and then the CC follow up printed...really.. they don't really read..what this created was a possible 2 trades, one yesterday and another today for some nice change. Chances are better this comes to recent highs than the lows printed the last few days.

Again, the key for us is to follow the individual action, not the market action.   You may end up with a basket of funky names or wacky business' on your watchlist, but the bottom line is that they NEED to perform, and that's the only thing we all should care about.