| Followers | 698 |
| Posts | 138570 |
| Boards Moderated | 3 |
| Alias Born | 07/29/2006 |
Sunday, March 18, 2007 6:24:03 PM
IBD: Sell On Technical, Not Fundamental, Cues
BY ALAN R. ELLIOTT
INVESTOR'S BUSINESS DAILY
Posted 3/15/2007
Finding the next big winning stock requires a smooth blend of fundamental and technical analysis.
A smart investor will look for superior sales and earnings growth and hefty profit margins as proof that a stock owns the fundamental strength to beat its rivals.
On the technical side, spotting a stock forming a sound base is a must. Grab it during a market uptrend, just as it's breaking out in heavy volume, and you could be on your way to big gains.
But when it comes time to sell, fundamentals rarely play a significant role. In fact, leading stocks will routinely see their price plummet weeks or even months before sales or earnings show their first sign of weakness.
So don't get seduced by a stock with impressive ratings. The view always looks best from the top.
Instead, scrutinize the daily price and volume action. If sell signals such as stalling, high-volume decline or a sharp decline through a key support level start cropping up, it may be time to cut bait.
By April 2006, Connecticut-based railroad stock Genesee & Wyoming (GWR) had mounted a three-year, nearly 500% gain.
In fundamental terms, the firm was still going great guns. Earnings had grown 40% to 52% in the prior three quarters. Sales gains were holding steady between 29% and 36%. The company made the IBD 100 on April 21 with top-shelf ratings.
But G&W's chart showed the stock was in the late stages of its advance, flashing warning signs.
The stock marked new highs on light volume in March 1. During the week ended April 21, shares ran up another 11% in weak trade 2. G&W staged a sharp reversal the following week, shedding 10% 3.
In hindsight, we know the market was headed for a May correction.
Many other stocks were showing clear signs of fatigue, despite still-solid fundamental data. Some of those stocks quickly recovered when the Nasdaq found its footing in July.
Rail carriers other than G&W also righted themselves. Many of those stocks consolidated in fresh price patterns, then bounced back when the market turned higher for another run beginning in July 2006.
But G&W, as the old railroad saying goes, did not make the grade. After a weak rebound try in late '06, it kept struggling. The stock is now 31% off its May '06 all-time summit.
BY ALAN R. ELLIOTT
INVESTOR'S BUSINESS DAILY
Posted 3/15/2007
Finding the next big winning stock requires a smooth blend of fundamental and technical analysis.
A smart investor will look for superior sales and earnings growth and hefty profit margins as proof that a stock owns the fundamental strength to beat its rivals.
On the technical side, spotting a stock forming a sound base is a must. Grab it during a market uptrend, just as it's breaking out in heavy volume, and you could be on your way to big gains.
But when it comes time to sell, fundamentals rarely play a significant role. In fact, leading stocks will routinely see their price plummet weeks or even months before sales or earnings show their first sign of weakness.
So don't get seduced by a stock with impressive ratings. The view always looks best from the top.
Instead, scrutinize the daily price and volume action. If sell signals such as stalling, high-volume decline or a sharp decline through a key support level start cropping up, it may be time to cut bait.
By April 2006, Connecticut-based railroad stock Genesee & Wyoming (GWR) had mounted a three-year, nearly 500% gain.
In fundamental terms, the firm was still going great guns. Earnings had grown 40% to 52% in the prior three quarters. Sales gains were holding steady between 29% and 36%. The company made the IBD 100 on April 21 with top-shelf ratings.
But G&W's chart showed the stock was in the late stages of its advance, flashing warning signs.
The stock marked new highs on light volume in March 1. During the week ended April 21, shares ran up another 11% in weak trade 2. G&W staged a sharp reversal the following week, shedding 10% 3.
In hindsight, we know the market was headed for a May correction.
Many other stocks were showing clear signs of fatigue, despite still-solid fundamental data. Some of those stocks quickly recovered when the Nasdaq found its footing in July.
Rail carriers other than G&W also righted themselves. Many of those stocks consolidated in fresh price patterns, then bounced back when the market turned higher for another run beginning in July 2006.
But G&W, as the old railroad saying goes, did not make the grade. After a weak rebound try in late '06, it kept struggling. The stock is now 31% off its May '06 all-time summit.
_______________________________________________________
If you take anything I say as advice, you're crazier than I am.
Join the InvestorsHub Community
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
