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All,
Here I am almost 80% cash again with only stock positions in AOL
and SMOD and Leap calls on CPQ after being stopped out of BAR and TRV
during the week. I'm having a hard time getting over the feeling that
the market is trying to tell me something <G>. However, looking at
the indices, I still think that being long is warranted. All the
indices are at or just above the bottom of fairly long term up trend
channels. The DJIA, for example, is pushing into the corner between
the top of a short term down trend channel and the bottom of a long
term up trend channel. It will have to break out in one direction or
the other soon, but until I'm shown different, I have to think that
the longer term better confirmed channel will hold.
I am going to slow down with only one new position per week and
make those in the large cap market leaders only, until the short term
trend reverses or the long term trend breaks. This week my pick is
Best Buy Company Inc (BBY). It's a major retailer of computers, other
electronic products, appliances, and entertainment software.
BBY at 52.8125 is in a momentum play in short, intermediate, and
long term up trends. The top of the Short Term Up Trend Channel
(STUTC) is at 63 and the bottom at 46.81. It has been moving up
consistently since early 1997 and broke out of a CANSLIM type cup and
handle formation to a new all time high close on Wednesday. It
continued to move up on Thursday and Friday. RSquared is under the
trigger line, but moving towards it to signal a new trend. The MFI
indicator crossed into positive territory in late July and have been
moving up every since then. S/C is falling back from a peak, but is
still highly positive, so indications are that the new trend will
remain up. The fundamentals are good with the price/sales at 0.55,
debt/equity at 0.33, 59% insider ownership, and strong revenue and
earnings growth. I'll open a position Monday. Since this is a
momentum play with the stock in new all time high territory, I won't
set a target, but will set my stop just under the STUTC at 46 3/4.
Jim
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