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All,
A busy week with a lot of portfolio changes. I opened a FDX position
Monday. I was stopped out of NSOL Monday, SCH hit my target Tuesday, and
both RDC and SLB were stopped out on Wednesday. Finally I opened a C
position Thursday. Even with all those changes, it was a good week for my
portfolio.
We're going on vacation Friday to see my parents in Texas and spend
some time at the beach on South Padre Island so there won't be a weekly pick
the next two weeks. This week I want to add another market leader momentum
type stock. I narrowed my list to Home Depot (HD), WalMart (WMT) and
WorldCom (WCOM). I finally decided on HD because they are entering their
prime spring sales season which I think gives them a little better short
term potential.
HD at 67.31 is broke out of a small, month-long cup formation on good
volume to a new all time high Friday. This is a classic CANSLIM type buy
signal. It's in a long, intermediate, and short term up trend channel. The
Intermediate Term Up Trend Channel (ITUTC) is a Trader Vic type channel with
the bottom formed from the 10/8/98 low to the 4/5/99 low and extended to the
right. The top of the ITUTC was made by drawing a parallel line through the
12/30/98 high. The top of the ITUTC is at 78.32 and the bottom is at 61. I
drew a standard deviation Short Term Up Trend Channel (STUTC) from the
4/5/99 low to Friday's high and the bottom with a deviation of 1 is at 65.
The Binary Wave Composite is barely positive and flat, the QStick is more
positive and rising slightly rising. That's bullish, but not strongly
bullish. The fundamentals are good with the price/sales 3.48, debt/equity
at 0.16, ROE at 19.4%, 25% annual sales growth and 35% annual earnings
growth. I'll open a position Monday. I'll set my target just under the top
of the ITUTC at 78 and my stop just under the bottom of the STUTC at 64 3/4.
Speaking of targets, I'm thinking about changing my system slightly.
The last several stocks that I've closed when they hit their targets have
gone on to much higher levels. They have either gone on up by paralleling
the top of their channel or have broken out of their channel to set new
steeper channels. I want to take a profit near the target if the stock does
turn down, but still allow it to run if it continues higher. What I'm
thinking about is instead of closing the position, I'll just tightening my
stop to a trailing three day low and stay in the position until the stop is
hit. If the stock does go on to set a new steeper up trend channel, I'll
eventually revert to a target and stop based on the new channel. Any
comments?
JimG
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